The subject of the Yuan currency came up at the Nuclear Security Summit this week, and Chinese President Hu Jintao made it clear that his country will not bow to international pressures regarding their currency:

President Barack Obama urged China to move toward a “more market-oriented exchange rate” and President Hu Jintao told him the country wouldn’t yield to “external pressure” in deciding when to adjust the yuan.

Any currency revaluation by China must be “based on its own economic and social-development needs,” China’s official Xinhua news agency cited Hu as saying in yesterday’s meeting with Obama in Washington.

So much for a free-market in China, where currencies are allowed to float depending on supply and demand.

Is China a currency manipulator?

Treasury Secretary Tim Geithner has delayed a report for several weeks, likely because the Chinese delegation was to visit Washington and the President wanted to avoid any sort of conflict in this regard. But, the fact is, that China is a currency manipulator. If the Yuan was to be allowed to float freely, it would most certainly appreciate against the US Dollar, allowing the US to ramp up production capacity which would make us more competitive with exports. This, of course, would not bode well for the Chinese.

To be fair however, even though the US Dollar is a freely floated currency, does that mean the US Dollar is not under manipulation?

We’d suggest that the very idea of dropping dollars from helicopters in order to counter deflation and debase the currency is in itself a manipulation. Of course, Messrs Bernanke and Geithner will not be releasing any such reports in this particular case.

In the case of a free-floating Yuan, we should be careful what we wish for. According to Peter Schiff, When China Pulls the Peg, Cardiac Arrest Will Follow in the USA:

De-pegging will force the hand of U.S. politicians toward pursuing realistic policies. The Chinese will come to their senses eventually because it is in their interest to do so. Meanwhile, the longer the peg is maintained, the more indebted we become, the more out of balance our economy grows, and the more our industrial base shrivels. In short, the longer they wait, the steeper our fall.

If Schiff is correct, then the Chinese President indicating that the Chinese will act in their own interests is a multi-fold strategy, whose goal is not just to keep China as the top exporter in the world, but also to further weaken America by forcing us to continue to borrow money as our economic system is further destroyed under the weight of excessive debt.

There’s a global war being waged on multiple fronts, and the Chinese are playing for keeps. Does President Obama understand this, or is he still dreaming of a day when the Chinese, Russians, Venezuelans, Europeans, Iranians and Americans can all hold hands and sing Kumbaya?