[Plymouth Sentinel]

Jib,

You're mistaken, and so is Tamny.

The current account deficit, of course, is a liability on our economy, as is the misunderstood capital account.

It is wholly true that a current account deficit can be a sign of a healthy economy, but it is not a decidedly favorable condition, as Tamny asserts.

Frankly, I'm surprised that Kudlow, econ editor of NRO buys into this. It's one thing to be a supply sider, another to make wild assertions.

These disequilibrious conditions must correct. The problem is we don't know when. Much more important is that in most cases (under floating exchange regimes), corrections have been orderly, not precipitous as under fixed regimes. Still, the Asian economies hold vast dollar reserves. Any decision to revalue, especially by China, will least to a faster, more precipitous decline.

Last, but not least, this type of information gets used by investors, who are fooled by the bold assertions of a man like Tamny. It's bad information, and shouldn't have made it to the NRO.

[The Great Yazoo]

Any decision to revalue, especially by China, will least to a faster, more precipitous decline.

I guess I don't understand how China, for example, can unilaterally decide to revalue U.S. dollars.

China could decide, for example, not to take any more U.S. dollars, and that may (would) impact the market value of U.S. dollars. But that doesn't impact dollars the Chinese already have or the dollars China has invested in the U.S. economy.

In fact, declining market values of U.S. dollars would reduce, not increase, the value of China's dollar and dollar-denominated portfolios. And China would not have an immediate and easy exit from its existing dollar assets.

Moreover, China's decision not to accept any more U.S. dollars would put out-of-business those Chinese industries dependent upon U.S. consumers' buying Chinese products because my local Super Wal-Mart won't accept yuan.