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There’s a reason the US hasn’t called China a currency manipulator since the 1990s. It carries almost no sanction and thus merely makes you look angry and weak. So naturally Donald Trump went there. Me: ft.com/content/40a877… Also a quick thread on trade and currencies. 1/n
There are almost no binding rules to stop govts manipulating fx, despite vast effort by the Bush II and Obama admins to turn the IMF into a global currency sheriff and the G20 into its posse. (The US did have a reasonable case at the time, but failed to carry the day.) 2/n
It’s v hard to measure fx misalignment like a conventional trade distortion (subsidies/dumping), as there is no definitive methodology. The IMF thinks China’s real exchange rate is about fair value but could be +8.5% to -11.5% out. Really. imf.org/en/Publication… 3/n
In any case the Trump admin has given up on pretending it is measuring a misalignment and simply argues that China is manipulating its currency if it fails to intervene to keep it at a level prescribed by the US Treasury secretary of the day. Which is, you know, ambitious. 4/n
Where to from here? Well, adopting the #banterheuristic rule from British politics (the next thing to happen will be the funniest thing to happen), I guess we proceed to the US intervening to buy the RMB and sell the dollar, while Beijing protests. 5/n
And when they come to write this period of economic history, they will recall how the world trading system was torn apart by the governments of the world’s two largest economies aggressively lending to each other as a hostile act, and even Brexit won’t seem that odd. 6/6
