“If discussion of Chinese currency policy seems confusing, it’s only because many people don’t want to face up to the stark, simple reality — namely, that China is deliberately keeping its currency artificially weak.”

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Let us just pause for a moment to reflect on those words by the New York Times columnist Paul Krugman. He offers that sentence today in a column calling for the Obama administration to put up tariffs against the Communist Chinese. This is what Mr. Krugman wants to do. As the American economy is teetering on the edge of what would be a catastrophic double-dip recession, the Nobel-Prize-winning economist wants the Obama administration to do what Herbert Hoover, Senator Reed Smoot, and Congressman Willis Hawley did in 1930 to precipitate America into the Great Depression.

That in and of itself would be an astounding development, but feature Professor Krugman’s reasoning. He argues that we need the tariff to counter a “subsidy” that the Red Chinese are giving to their export industries by maintaining the yuan as a “weak” currency. China, he asserts, is “deliberately keeping its currency artificially weak.” One can only ask: about what in the world is he talking? The chart above, available on Kitco, clearly shows that the Yuan has been weakening. Indeed, its value over five years has plunged to less than a 8,400^th of an ounce of gold from a bit more than a 4,000^th of an ounce of gold.

It turns out, however, that the People’s Republic is not the only regime running what might be called an ever-weaker currency. It seems that the American dollar has been weakening at an even faster pace than the Communist scrip. A dollar of American scrip was worth a bit more than a 500^th of an ounce of gold five years ago, whereas today it is worth less than a 1,200^th of an ounce of gold. So the question is: who is really deliberately keeping their currency weak? And why does not Professor Krugman reference the classical measure of value of a currency — gold — even once during his column? It’s almost as if he was “deliberately” wanting to obfuscate who is running a weaker currency than whom.

If one thinks the dollar is weak now, imagine what it would be like were Professor Krugman to get his way. He says that one reason his proposal for a tariff to offset Chinese “subsidies” has never been on the table is “fear of what would happen if the Chinese stopped buying American bonds,” meaning lending us money. He mocks the fear as “completely misplaced” because the Federal Reserve “could and should buy up any bonds the Chinese sell.” In other words, he wants the Fed to flood us with more dollars. What that means is that he would be prepared to see a wipe-out in the value of the dollar, just the sort of currency collapse that Congressman Ron Paul, among others, have been warning about for years.

Mr. Krugman admits that it is “true” the dollar would fall. “But this,” he argues, “would actually help the U.S. economy, making our exports more competitive.” He taunts the American administration and the Congress this way: “Will U.S. policy makers let themselves be spooked by financial phantoms and bullied by business intimidation? Will they continue to do nothing in the face of policies that benefit Chinese special interests at the expense of both Chinese and American workers? Or will they finally, finally act?” By which he means a race to the bottom to see if the dollar that has, by law, been America’s money of account since the founding of the Republic can be completely destroyed.