Chinese Investment Mistakes

Sorry to keep the theme of economics going if people are tired of it, but I found this funny.

Krugman had this to say today:

Our trade with China had turned out to be fair and balanced after all: They sold us poison toys and tainted seafood; we sold them fraudulent securities.

Then goes on to say how, joking aside, China has made recent calls for us to work with them on currency issues because:

But they are, apparently, worried about the fact that around 70 percent of those assets are dollar-denominated, so any future fall in the dollar would mean a big capital loss for China...

So what Mr. Zhou’s proposal actually amounts to is a plea that someone rescue China from the consequences of its own investment mistakes. That’s not going to happen.

And the call for some magical solution to the problem of China’s excess of dollars suggests something else: that China’s leaders haven’t come to grips with the fact that the rules of the game have changed in a fundamental way.

Two years ago, we lived in a world in which China could save much more than it invested and dispose of the excess savings in America. That world is gone.

I have heard a lot of complaining by people on both sides of politics about how much of our money/securities/whatever go to China. It just may be that China will take the damage for this.