In an earlier post, I shared some persuasive analysis from one of my favorite readers.

As you point out, the issue of macroeconomic imbalances have gotten a lot of attention. They do seem implicated in all sorts of issues ranging from asset bubbles to Greece’s implosion. However, taking action by, say, fighting China’s currency peg raises issues of its own. Countries like Germany see themselves as behaving responsibly and making tough sacrifices.

This is particularly salient now that China seems to be onboard with the idea of strengthening the RMB slightly. Dani Rodrik has written at length about the dangers involved in strengthening the RMB. To oversimplify, the consensus view is that the RMB is undervalued relative to the dollar by roughly 25 percent. Rodrik maintains that correcting this overvaluation would reduce growth by over 2 percentage points, a result that could have consequences for China’s stability and for domestic consumption in the U.S. The latter consequences is, of course, the main reason why U.S. policymakers want RMB revaluation. The former is why China is proceeding very slowly and deliberately. Any rebalancing that involves a shift towards higher consumption in the big emerging markets will take a long time, and there’s little sense in thinking that U.S. policy levers can help that process along all that much. To that end, my reader continues:

That’s why targeted imported oil–one of the largest sources of imbalances–is also one of the few feasible mechanisms for dealing with this problem. Oil also represents one of the largest sources of aggregate risk in the economy. The oil spike a couple of years ago actually led to quite substantial and devastating effects on the economy, and you could back out much (but not all) of the economic stagnation afterward just due to the effects of oil. All of this I think points to a need to massively reduce dependence on imported oil, regardless of environmental or national security concerns.
Nuclearization/electrification is I think is the optimal approach, but retrofitting cars to use natural gas is a quick fix. Of course America now has an abundance of that gas. Many other countries–including Pakistan, India, Egypt, and several South American countries–not typically noted for far-sighted, effective government are moving very quickly into that area.

I strongly agree. This is another reason, in my view, to regret the huge spending increases in ACA.