Europe, the US, and China: Comparing Geoeconomic Size

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[A shorter version was published by Project Syndicate, October 26, 2026.  Thanks are due Sohaib Nasim for excellent research assistance.]

Oct. 29, 2026 — Paul Krugman gave a talk last month at an ECB research conference where the subject was Geoeconomics, the weaponization of economic power for geopolitical ends.   China’s ability to cut trading partners off from its exports of rare earth minerals is an example.

Krugman’s talk, titled “Economic Size and Economic Power,” rightly emphasized that country size matters for geoeconomics. Canada, for example, has more to lose from a rupture of trade with its larger neighbor, the United States, which can be expected to use its size to coerce the former.  But I don’t buy Krugman’s way of comparing economic power across countries. read more

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Oligarchy is a Symptom, Not the Cause

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September 28, 2026 — The American political system is broken.  We should ask how it got that way and should hope that the answer could contain a clue as to how it might get back on track.

Of course, many factors are at play.   The long list includes things that cry out for reform, like gerrymandering of Congressional districts.  But most will not bear the weight of being identified as a single fundamental exogenous cause of all the others, nor explain why this has happened now, in the early decades of the 21st century. read more

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Undervalued Asian currencies

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August 17 – Observers of international monetary economics have shifted attention back to the exchange rates of Asian currencies.  The concern is that China’s yuan, Japan’s yen and Korea’s won are undervalued.  All three countries run trade and current account surpluses, at a time when the US is running corresponding deficits.  But given the fundamentals that keep US interest rates higher than the three Asians’, foreign exchange intervention is unlikely to be helpful.

  1. Three Asian currencies

Brad Setser has recently argued that, “The world should not ignore China’s undervalued currency”, while Gopinath, Gourinchas and Rey have responded that the US-China exchange rate is not the root cause of current account imbalances and does not warrant action by other countries.  Should Beijing be internationally pressured to push its yuan upwards, as Donald Trump has long argued?  (The People’s Bank of China used to intervene in the foreign exchange market to impede an appreciation. It stopped doing that in 2014, and started intervening to impede depreciation.) read more

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