The Treasury Department Has Spoken. Kind Of.

Well *I* (an American in Beijing) listen to your podcast regularly. I would like to comment on the currency manipulation issue. Yes, the Chinese manipulate the Yuan, not to keep it from rising against the dollar, but rather to control the rate or rising. China has about what? A trillion or so? of US dollars invested in US treasuries. If the Yuan were to change tomorrow to 6 vs. the dollar rather than the 7.7 or so it now is, guess what? The Chinese have just lost that much in their dollar investments. And guess what #2? Prices would rise in the US for everything we purchase from China. The exchange rate IS moving - about 18 months ago when I first arrived the Yuan was 8.2 to the dollar. And the Chinese keep the rate of movement per day confined, but like water seeking the sea, the Yuan will find its own level eventually. What the politicians ignore is the drastic effect that a forced Yuan float would have on the US economy. Inflation out the wazoo...
Everyone is lying, though. The truth is that it is in everyone's interest to allow the Yuan to gradually seek it's own level, rather than bomb the dam and let all that water out at one time.

I love your show - Rough Cuts podcasts - and your web site. Keep up the excellent work.

Sent by Bob Cummings | 2:37 AM | 6-18-2007