The American media is in combative mood: A year and a half after Lehman's collapse, the pundits are finally waking up to the fact that China bears a significant share of the blame for the current financial crisis. And so, the Krugmans of this world are calling for the US government to 'punish' China through a variety of protectionist measures.
I have been writing about China's role in creating the current crisis for a long time. And still, I think it is wrong to blame China for America's pains - namely, a collapsing credit bubble, rising unemployment, and a ballooning government debt.
Yes, the Chinese are manipulating their currency. By doing so, they make it easier for Americans to buy Chinese goods for less and make it harder for Chinese citizens to increase their purchasing power. They are also making it more difficult for Chinese companies to move up in the global supply chain and produce better, more innovative products for higher prices. China's currency manipulation, on its own, damages no one other than the Chinese people.
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