Treasury Secretary Geithner is on his way to Beijing, where he will meet with Chinese Vice Prime Minister Wang. The trip is in relation to US demands for a massive up valuation of the Chinese currency, the renminbi or yuan. This announcement has unleashed much gloating at the Associated Press and other pro-Wall Street news outlets, so it is important to issue a caveat at the very beginning: trips do not equal agreements. Obama made a personal visit to Afghanistan last month, and bilateral US relations with that country have been deteriorating in an alarming way ever since.
The question of the Chinese currency is this: for about 20 months, since about the beginning of the world economic depression in the late summer of 2008, China has been maintaining a peg or approximately fixed parity in relation to the dollar at a rate of about 6.8 renminbi per US greenback. Before that, the renminbi had been allowed to rise by about 21% between 2005 and 2008, largely in response to US pressure. The relatively fixed parity between the dollar and the renminbi has been an element of stability in a generally chaotic panorama of floating rates which characterizes the wreckage of the Bretton Woods system, which was demolished by Nixon and Kissinger almost four decades ago.
Fixed parities among currencies promote world trade, because they allow exporters and importers to accurately anticipate the value of trade deals that take 6, 12 or 24 months to come to fruition. A rational US policy would be to maintain a negotiated fixed parity with China, and then invite the Japanese yen, the Russian ruble, the euro, and the Latin American regional currency to join such a system of fixed parities. This would amount to restoring one of the positive features of the 1944-1971 Bretton Woods system, which produced the highest rates of economic growth in human history before or since. Instead, the Wall Street puppets of the Obama administration are determined to destroy one of the few areas of stability which still persist.
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