More on Sino-American tensions

In politics, small issues can gather momentum all of a sudden while the larger issues continue to be neglected.  Remember the Terry Schiavo bill and the Congress?  I mean, Bush had to give up his Crawford vacation time in order to get to DC only to address this!

It will awful if the Chinese currency issue vaults to the top of the political agenda.  More on this, in addition to my earlier note, from the Economist:

The basic economic analysis—that a stronger yuan, on a trade-weighted basis, is necessary to rebalance China’s economy away from exports—is surely right. But the world’s immediate problem is a dramatic shortfall in demand across the globe and that will not be righted by exchange-rate shifts. Currency movements switch demand between countries; they do not create it. In the short-term, therefore, the outlook for the world economy depends on whether governments’ stimulus packages are successful and, right now, team Obama would do better to focus on the scale, nature and speed of Beijing’s stimulus measures than rant about the currency. What’s more, the evidence for currency manipulation is weakening. Although China still runs a huge current-account surplus, it is no longer accumulating foreign-exchange reserves at a rapid clip, as capital is flowing out of the country.

More important, the political calculus could easily misfire. Domestically, Mr Geithner’s comments may simply fan congressional flames for tougher action on China. Lindsey Graham, a senator who first pushed for a 27.5% tariff against China in 2005, called the comments “music to my ears”. 

Music to Sen. Graham's ears will not get us out of this global economic crisis.  Yes, this will/should be a part of the longer-term global economic restructuring. As much as the ag subsidies, ethanol subsidies, gas tax, social security, and everything else ought to be discussed.  But, just as we are not discussing overhauling social secturity right now, we ought to stay away from the "currency manipulation" angle for now.