BREAKING CHINA'S PIGGY BANK

During the first days of December there was a barrage of rumors that China was going to devalue its currency (the renminbi or RMB), causing an abrupt drop in the US stock market. A drop in the RMB would have been a disaster - a game of chicken that would have plunged both China and the US into the abyss. All heck broke out diplomatically and financially.

It was a harsh message just before Treasury Secretary Henry Paulson came to Beijing for the China-US Strategic Economic Dialogue (SED) meeting (12/04-05): Be nice and kowtow or else. As the main Chinese state banker Gao Xiqing says, "Be nice to the people loaning you money."

Who is to blame? [Read more]