Yuan, Yawn?

Yesterday, I queried Google about the Marburg Virus and landed on a web site from a Chinese news source reporting "Britney is pregnant." Sigh. It's really disheartening to see how just how far and fast prattle travels and how little press serious issues receive. The state of the U.S. dollar in the hands of the those who allegedly oppose big government is and should be a concern to everyone--nothing to yawn about.

This link via The Financial Times (and Brad DeLong):

China's leaders are preparing their people for an end to the policy of pegging the renminbi at Rmb8.28 to the US dollar, the bedrock of economic policy for a decade. Changing the currency regime would have big implications for China's economic management and, some in Beijing think, forits development strategy predicated on foreign direct investment inflows and export-led growth. China's exchange rate is also central to the growing debate over whether the current imbalances in the global economy - whereby the US has a large current account deficit while other countries accumulate dollar assets - can be sustained (see chart below). Pressure on China to alter its exchange rate is particularly strong from Washington...

And this New Yorker link via Kottke and Boing Boing:

Of course, the Chinese and the Japanese could decide that the costs of the falling dollar are too great, and suddenly stop (or, at least, cut back sharply) their lending to the United States. This would lead to a so-called "hard landing" for the U.S. economy: high inflation, punitive interest rates, collapsing stock prices and housing prices. It would also lead to bedlam for China and Japan. Their best customers would effectively be unable to afford their wares. To paraphrase John Paul Getty: If you owe the bank a hundred dollars, you've got a problem. If you owe the bank three trillion dollars, the bank's got a problem.