Yuan a Do Something About the Chinese Currency

The Chinese announced that they are allowing their currency to be adjusted against the dollar. In part they are taking this step in advance of the G20 Summit to avoid being isolated from the other nations in attendance and thereby being pressured to yield to international pressure. But the Chinese are still rigidly controlling the ‘floating’ of the yuan within narrow limits that perpetuate the de facto pegging of the yuan to the dollar. So the question I have is: why do the leading world economies wait for a trading ‘partner’ to participate with them in a free-trade, level playing field, open markets system?

If I recall and understood correctly a principle of Milton Friedman’s economic theory or principles it was that if someone wanted to sell you something for less then it cost you to produce yourself or particularly if for less than it actually costs to produce that you should take advantage of their offer. Now the currency exchange problem is that if the US or any country keeps buying more and more from China and selling them less and less is that China will eventually hold an excessively large quantities of dollars (or other currency) which could render the value of that currency vulnerable to manipulation by China. This is part of the problem that the US has today, with the large trade imbalance with China.

So it would seem that what the G20 really needs is a way to deal with the yuan being controlled independent of the global markets and with passively permitting the Chinese to gain increasingly large leverage against their respective currencies. What then prevents these economic leaders for taking some pro-active policy or approach, although by now it would seem it would have to be considered re-active, that would limit their vulnerabilities from a non-cooperative global partner? The most likely answer is either being innovative enough to actually conceiving of one, or not having the “will” required of true leaders to face the responsibilities that they owe to their individual countries and to the global community as a whole.

And as the self-thought leader of the free world, what does America bring to the table? I really don’t know.