Should The U.S. Take A Harder Stance On China's Currency? (Part II) by Joe Gagnon

Federal Reserve Chairman Ben Bernanke recently said that Chinese currency manipulation "is blocking what might be a more normal recovery process." In fact, the problem goes beyond China to include many other emerging economies and even a few advanced economies. All together, governments in these economies are spending about $1.5 trillion per year on currency manipulation.

Currency manipulation occurs when governments purchase foreign currency in order to hold up its value relative to their own currency. Manipulation makes a country's exports cheaper and imports more expensive, artificially raising the trade balance. The evidence suggests that currency manipulators jointly have increased their trade balances by about $1 trillion relative to where they would have been in the absence of manipulation. Europe and the United States have suffered the corresponding decline in trade balances.

(via Thoma)

American Republicans (and Fed board members like Lacker), the Chinese Communist Party, and German conservatives are the Axis of fools, all denying the American economy full employment and adequate demand to close the output gap. Germany however is mostly damaging Europe, though. The Chinese are screwing their consumers.

DeLong gives an early sketch of the Brookings paper he's working on with Larry Summers, titled "Fiscal Policy in a Depressed Economy".

Persistent high transitory cyclical unemployment is transforming itself into permanent structural unemployment as the labor market recovery continues to delay its appearance.

Government polices by the American, Chinese and German governments are actively delaying its appearance. Its not choosing to be fashionably late itself.