Sunday, August 1, 2010

Yuan Put on Congressional Agenda

The House will begin hearings on the undervalued Yuan in September. Get ready for some camera inflated rhetoric ahead of elections. Originally Schumer was going to push for this 'Currency Reform for Fair Trade Act', in the Senate, regardless of what the House wanted, even if the legislation would then be still-born. The fact that the House has agreed to open debate is noteworthy and shows things are moving forward inexorably, though at the pace of molasses.

"There is no real question that China's deliberately undervalued exchange rate is unfair, contributes to global trade imbalances, and costs the United States jobs and economic growth, particularly in the manufacturing sector," Ways and Means Committee Chairman Sander Levin said in a statement.

"We must ensure that China's rhetoric translates into results that are meaningful and that the international trading system ensures fair rules of competition," Levin said.(1)

Yet, the Triffin Dilemma maintains that the U.S. dollar will always be overvalued as long as it is the reserve currency of world transactions; this will continue as long as Washington insists on projecting global hegemony over world affairs. This hegemony is best expressed not by its hundred+ military bases worldwide, but by its veto power in the IMF.

The flip side to the argument is, where would Asia be without the 7th Fleet and its umbrella of deterrence ? The history there is one of nationalism, xenophobia, and militarism - much like Europe before it blew itself up. In a world of capitalist nation-states, be careful what one wishes for when it comes to a hegemon in decline.

1'U.S. House panel sets Sept hearing on China's yuan' - Reuters

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