Saturday, 13 November 2010

Playing Currency Hardball

American political analysts are saying United States President Barack Obama didn't help the country much at the G20 Summit in Seoul.

He didn't get the trade agreement he wanted with South Korean President Lee Myung-bak, though he won points by chumming it up with India in backing up for its bid for a seat on the United Nations Security Council, and reminiscing about his childhood in Indonesia before an erupting volcano cut his visit short by a few hours.

But I want to give him big points for finally addressing the elephant in the room.

At the press conference at the end of the G20 Summit, he straight out said what was on every other world leader's mind but didn't dare say:

"The issue of the renminbi is one that is an irritant not just to the United States, but is an irritant to a lot of China's trading partners and those who are competing with China to sell goods around the world."

He then declared of the renminbi: "It is undervalued. And China spends enormous amounts of money intervening in the market to keep it undervalued."

For years the US has danced around the thought of declaring China a currency manipulator, but now Obama has actually said it. This will probably escalate political tensions between China and the US, but so be it -- the US itself is trying to slightly undervalue its currency to stimulate its domestic economy, much to China's displeasure, as it is the largest holder of US Treasury bills.

It's good to finally see Obama play hardball. He tried the nice, diplomatic route, but got nowhere.

At least now we know where everyone in the room stands, relative to the elephant.

1 comment:

  1. time for the u.s. to realize they cannot bully everybody.