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.
