Doug Irwin on exchange rates and trade policy

Doug Irwin provides a nice account of the historical links between exchange rate and trade policy here.

Trade policy humour

The festive season is almost upon us and we all need a bit of cheering up. I have always found Swiss trade policy to be good for a giggle myself, and apparently their Finance Minister agrees with me. Bündnerfleisch: an old one but a good one.

Irwin on Smoot-Hawley

This is a very useful primer on interwar protectionism by the leading historian of US trade policy. (I had never heard of ‘Smoot Smites Smut’, which is worth the price of admission alone.) Although Doug could have usefully mentioned that the biggest costs of protectionism then were geopolitical, and those ended up being fairly catastrophic.

Economists sometimes assume that the right way to talk about protectionism is to moralize. I prefer analyzing the causes of protectionism: it may be a very bad idea, but sometimes, in democracies, it becomes inevitable. Doug, in a manner reminiscent of Adam Posen, argues that expansionary monetary policies in the US are a good way of keeping the protectionist wolf at bay there right now. The same logic applies to Europe as well.

Trading and Investing in a Smart Economy

The government’s latest strategy document is Trading and Investing in a Smart Economy. Apparently, the strategy is going to create 150,000 jobs directly and a similar number indirectly. Sounds good, though how exactly it’s going to achieve that was a bit unclear to me. Admittedly, my persual of the document was a bit brief as I’m suffering from glossy strategy brochure burnout.

FT article on German growth

This FT article is well worth reading. It asks a question I had been idly wondering about: is German growth just a reflection of Chinese growth? If so, then the issue of whether Chinese (or more broadly, perhaps, Asian) growth can become self-sustaining, or will continue to largely depend on sales to over-indebted American households, is a question with major implications for the European economy.

Update: I have just come across this piece by David McWilliams on similar themes. I guess the hope for Germany is that their growth is based on more, ultimately, than Chinese exports to the likes of us.