Paul Krugman: The "American Hooliganism" on Which China and Russia Rely

Vladimir Putin thinks we’re hooligans.

Remarking on monetary policy in the United States, the Russian prime minister said earlier this month, according to The Wall Street Journal: “Look at their trade balance, their debt, and budget. They turn on the printing press and flood the entire dollar zone — in other words, the whole world — with government bonds. There is no way we will act this way anytime soon. We don’t have the luxury of such hooliganism.”

The funny thing is that Russia, like other emerging markets, is suffering from inflation precisely because it doesn’t want to let the United States reduce its trade deficit. Capital wants to flow to the emerging markets, with the counterpart of that flow being a move on their part into trade deficit, while the United States reduces its trade deficit. But the necessary counterpart of that move is a real appreciation on the part of the emerging markets — a rise in the relative prices of their goods and services. They could let their currencies rise; if they won’t, the real appreciation will take place via inflation, which is what is happening.