Thursday, November 23, 2006

Ben goes to China

The NY Times reports:

Fed Chief’s Help Enlisted for Trip to Press China

Treasury Secretary Henry M. Paulson Jr. has enlisted Ben S. Bernanke, the Federal Reserve chairman, to join an unusual delegation of cabinet members to China next month that will press for changes in Chinese economic policies long criticized by the administration and Congress, officials said Wednesday.

The trip in mid-December, to be led by Mr. Paulson, a former Goldman Sachs chairman with extensive experience in China, escalates the pressure on the Beijing leadership to crack down on piracy, open up its economy to outside investors and allow the value of the Chinese currency to fluctuate more freely, Treasury officials say.

This is a dicey decision for Ben. On the one hand, if he can help Paulson keep the protectionists in Congress at bay, his presence on the trip is all to the good. On the other hand, if Ben is seen as lending support for the economically questionable argument, so popular among Beltway mercantilists, that China is harming the United States by buying its debt instruments, he risks his credibility. I am confident Ben will handle the balancing act well, but he has to be careful.