Friday, July 22, 2005

Charts that bug me 

I got this from Chart of the Day. I'm not in the slightest sold on the prefatory "due in part to currency manipulation". I once heard Barry Eichengreen form the question "is the exchange rate a price or a promise?" (I cannot figure out who made that formulation first.) China up to now had promised to convert RMB to dollars at 8.28 to the dollar, and honored that promise. Yesterday they decided no longer to honor that promise, and to manage the external value of the yuan using a target band and a basket of currencies. Which exchange rate regime constitutes manipulation to you?

That's not to argue against the central bank's actions yesterday. It is simply to say that words mean something, and that calling China's fixed rate "manipulation" is more than a little misleading.