Dr. Samwick continues the conversation:
Greg Mankiw characterized one part, appropriately in my view, as xenophobic. PGL at AngryBear responded with other parts that were, in his view (and to a lesser extent, mine) appropriately critical of our current macroeconomic policies. The main problem with Clinton’s argument is that there is no particular connection between the amount of U.S. debt that China and Japan hold and what happened last week.
I agree with the last sentence and I’ll add an analogy. When the US stock market crashed in October 1987, some pundits who know nothing about financial economics blamed this on Reagan’s fiscal policy. Of course, we all knew about Reagan’s fiscal policy for years before the October 1987. I guess some pundits do not get that changes in market values depends on changes in the perceived fundamentals.
But I have a question for Andrew, which goes along with my frustration with Greg’s post. Let me do this by analogy. I owe a fair amount for my house. If I decide that I should also run up my credit cards for expensive meals and vacations and purchase a very expensive car, I might start getting letters from my banker asking why my payments are so late. And this banker has the power to reclaim my car as well as my house if my financial troubles continue. Is making this observation equivalent to me being xenophobic or somehow racist? Before anyone answers, consider the fact that I’m a white dude and so is my banker. So pray tell – where does anyone get from Senator Clinton’s speech that she’s being xenophobic? We’ve be in the same position had it be the Europeans that purchased all of this U.S. debt. Right?