International Law

China's RMB. Ain't Gonna Be No World Currency No How.

By Dan

I often write how irritated I get when I see pseudo-economists write on China's economy. Whenever I do that, I get comments and or emails asking me what constitues a real economist and who I consider to be a real China economist. A real economist is someone trained as an economist who works as an economist. Though many seem to think they qualify, there are damn few who meet these two rather basic criteria and study China's economy and write about it in English. Michael Pettis is one of the few.

What also greatly irritates me is how some people act as though an economist is an idiot simply because some prediction or another he or she has made did not prove to be. That is one way to judge an economist, but just one way. The best way is to look at their analysis and judge them on that, rather than their conclusion/prediction. The prediction matters, but so often the analysis can be right on, but some totally unforeseen event can intrude and change the outcome. Was the analysis wrong? No. Was the prediction wrong? Sort of, but really what happened was that something nobody could have predicted came along and changed the result.

I mention all this because I just read a great analysis by Michael Pettis, in his post, "The dollar, the RMB and the euro?" on why China's currency will not be the reserve currency for a very very long time, if ever. I totally buy it. He also makes the very valid point that being the world's reserve currency is not necessarily all good. For the rare piece on China's economy by someone who actually knows whereof he speaks, I urge you to read Pettis's most recent piece.

What do you think?

Full post as published by China Law Blog on March 14, 2011 (boomark / email).