The U.S. has been crying foul. The Chinese yuan is undervalued. Let's force the exchange rate so it will be more favorable for exchange. Then and only then will the trade imbalance be rectified...they say.
I say - no way! When they forced the Japanese to revalue the yen in the 80's, nothing happened to the trade imbalance.
And now, finally someone important agrees with me.
The IMF managing director said "that countries should "try to coordinate certain policy actions," but he added that "this is not, of course, any more a world of exchange rate coordination."
Regarding the appropriate level of China's currency, the yuan, de Rato said that market forces should be the determining factor.
"In the case of China what we have insisted more is not so much a question of the currency going up but a question of the currency being determined by market forces," he said. "And that is what we believe is really at the center of the Chinese future evolution."
Regarding the appropriate level of China's currency, the yuan, de Rato said that market forces should be the determining factor.
"In the case of China what we have insisted more is not so much a question of the currency going up but a question of the currency being determined by market forces," he said. "And that is what we believe is really at the center of the Chinese future evolution."
Let the market decide. When and only when the US begins making products that the Chinese want and can afford and start to buy, then and only then will the trade imbalance begin to shift.
What do you think?
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