If China were to decide to spend less of its earnings from exports to the U.S. buying our debt and more buying our goods, interest rates would not go up--remember, the Federal Reserve is pegging short-term safe nominal interest rates at zero--but production and employment would.
Paging Rob Portman to the white courtesy phone, please.
The fact that Republican High Politicians do not get briefings teaching them basic income-expenditure macroeconomics is one of many, many, many reasons not to vote Republican. And it is a reason to ask senior Republican economists--I'm looking at you, Glenn Hubbard, Greg Mankiw, John Taylor, Marty Feldstein, Eddie Lazear--what the f*&$ they think they are doing.So, if the economy were to pick up steam (whether due to Chinese buying more American products or not) the abnormally low interest rates prevailing in America today would not rise?
We are tempted to ask, WTf*&$ are they teaching at Berkeley these days?