An economist smackdown! Or, at least, one economist talking about smacking a colleague down.
In an interview with Bloomberg Television, Stephen Roach, Morgan Stanley's Asia chairman blasted Nobel Prize-winning economist Paul Krugman over the latter's stance on China's economic policy.
Here's the gist of the dispute: in comments earlier this week, Krugman said that the U.S. needs to get tough with China over its currency policy. According to Krugman, China is intentionally devaluing its currency in order to boost its booming export sector. Specifically, Krugman argues that a properly valued Chinese yuan could add 1.5 percent to global economic growth. (You can check out video of his comments here.)
Roach wasn't having any of it. The U.S. needs to increase its savings rate, remake its economy and "handle its own business." And, Roach told Bloomberg TV, the U.S. needs to stay out of Chinese affairs:
Here's Roach:
I think we should take out the baseball bat on Paul Krugman. I think the advice is completely wrong. The US has had a conscious policy here of maintaining, quote, a strong and stable dollar. China is saying basically the same thing in terms of its stable currency. Isn't it the height of hypocrisy for America to articulate to articulate a particular position in its currency but the Chinese are not allowed to do that, especially since they as a developing economy - with an embryonic financial system - need a currency anchor probably a lot more than a sophisticated, quote unquote, economies like the United States."
Bloomberg called Krugman for comment:
"I'm a little surprised at Steve for saying that. What I said is actually based on pretty careful economic analysis. We have a world economy which is depressed by China artificially keeping its currency undervalued."
Krugman also responded on his blog and accused Roach of going "batty."