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You’d think that there’s at least a
little bit of a “Good Cop, Bad Cop” dynamic going on right now when President Obama
talks to the Chinese about letting their currency strengthen at a faster
pace. Of course, Obama is the good cop here with just about every GOP
presidential hopeful playing the alternate role and one can easily imagine
Chinese President Hu Jintao being told over the weekend, “Hey,
I’m about the best friend you’re ever going to have in
Washington. How about a little
appreciation, currency-wise?”
http://www.reuters.com/resources_v2/flash/vid...963&edition
As Hu made clear yesterday, from the perspective of
the Chinese, they had no part in making any of the rules in the current
global monetary system and feel little compulsion to play by them. Mindful of
the Japan experience in the late-1980s when strong currency appreciation led
to massive asset bubbles and two lost decades, they’re not likely to
simply comply with the wishes of the West when it comes to their currency.
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