William J. Holstein

The U.S. Case for China’s Revaluation is in Trouble
MAY 21--Some 200 top Obama administration officials are arriving in China including Secretary of State Hillary Cliniton and Treasury Secretary Tim Geithner. It is excellent that the Americans are spending this much time and money to understand what is happening in China.

But the oft-repeated intention to persuade the Chinese to raise the value of the renminbi is headed for trouble. The problems in Europe's financial markets are just one piece of it. Essentially, the intellectual case to open and liberalize financial markets has been badly undermined. In the United States, the government believed in the magic of supposedly all-knowing investment bankers and look at the chaos that created. The same bankers, with their hedge fund buddies, are the ones betting against Greece and Europe.


So the Chinese, and other people in the non Anglo-Saxon world, are looking at that and saying to themselves, "We've been pretty smart to keep a tight grip on our financial markets."

The other take-away for the Chinese is that the Americans and Europeans are running low on real wealth or else the vultures wouldn't be attacking. No one is attacking the currencies of China, Japan, Singapore, Hong Kong, etc. partly because of their different systems but also partly because they are sitting on trillions of dollars. They can punish speculators. We in the West are letting them get away with destabilizing our financial markets. Shame on us. If we ever want to promote open, freer financial markets in the world, we have to demonstrate that it can be done without allowing unacceptable instability and profit-mongering.