U.S. bid to 'reform' the yuan sank 1930s China.

(From Financial Post)

Under a barrage of fallacious arguments from the Bush administration and the U.S. Congress, Beijing made a tactical retreat on July 21, 2005. It "reformed" China's exchange rate regime. After a decade in which the yuan had been linked to the U.S. dollar at a fixed rate, China adopted a managed floating exchange rate regime. And on the new system's initial day of operation, the yuan was allowed to move from 8.28 to the dollar to 8.11, a 2.1% yuan appreciation. Since then, the yuan has appreciated another 1.12% against the greenback.

Even though the United States has hailed China's new exchange rate regime as a step in the right direction, Washington wants more yuan appreciation. According to "experts" inside the Beltway, a 20% appreciation, or more, would be suitable. No doubt President Hu Jintao will hear plenty about this during his four-day U.S. visit, starting today. The Bush administration and many in Congress will argue, as they have in the past, that a yuan appreciation will help China. This latest version of Uncle Sam Knows Best is laughable.

This isn't the first time U.S. special interests have prevailed in the name of helping China. During his first term, Franklin D. Roosevelt delivered on a promise to do something for silver. Using the authority granted by the Thomas Amendment of 1933 and the Silver Purchase Act of 1934, the Roosevelt administration bought silver. These purchases and bullish rumors about U.S. silver policies helped to more than triple the price of silver in the 1932-35 period.

Bizarre arguments contributed mightily to the agitation for high silver prices. One centred on China and the fact that it was on the silver standard. Silver interests asserted that higher silver prices -- which would bring with them an appreciation in the yuan -- ...