The recurring discussion about US-China trade deficit and the resultant "currency war" left me wondering about a different solution. Can we link trade and currency openness?
The principle is simple, a country should be allowed as much freedom in trade as it allows freedom in pricing exchange rates. If a country has restrictive exchange rates, it should have trade restrictions as well. In a sense, this should prevent countries creating too-big-to-fail currency problems like China has.
With its asset boom, ghost cities, empty offices, China should have eased up a lot earlier. Given the artificial controls on its currency, the markets could not (or did not) adjust the balance accordingly. The question I pose, essentially a hypothesis, is, doesn't this indicate that the two freedoms, that of currency and trade, be complementary?
My book "Subverting Capitalism & Democracy" is available on Amazon