Kudlow on the Yuan Revaluation

Larry Kudlow has a great post on the Chinese currency revaluation of its yuan, courtesy of pressure from protectionist pressures in the U.S. While I am in favor of free markets and free-floating currencies, I agree with Kudlow that playing with currency valuations are often counterproductive to a country's intended purposes. This is particularly true for developing (and communist) countries.

Every decade, we see examples of depression-like disasters in countries precisely because there is no currency stability such as a dollar peg (think Russia, Thailand, Argentina, and just about every developing economy over the past 15 years).

There are some benefits to balancing a trade deficit with a free-floating currency, but I hardly doubt that the benefits counterbalance the potential risks to both China's economy and thus, our own. Congress and the Bush Administration got its wish - now it will have to live with the consequences, for better or for worse.