Foreign Exchange Bank

The G7 meeting is coming up, and China has indicated prior to this Meet, it will not unpeg the Yuan from the Dollar at its current rate of 8.28 Yuan to the Dollar. Current statements by Chinese Banking officials must be contrued as a form of intimidation--with unofficial Officials calling for an adjustment, official Officials denying contemplation of such an adjustment, then an officially unofficial statement by a Government minister saying that readjustment could not come for at least 6-18 months. The Chinese are old hands at the business of International negotiations. It can be understood as Chinese refusal to adjust the Peg without unamious G7 demand, which the Chinese believe they can forestall.

The Bush administration may not understand the necessity of raising the ante, but the Chinese must be instructed in the old art of 'Two can play this Game'. The current Peg of the Yuan is costing American Jobs in lost Product sales, costing Americans seriously in artifically- high Oil prices, and allowing Chinese Goods to be sold below Cost throughout the World. China will assert that the United States cannot take unilateral action, and will be supported by OPEC; with the other G7 nations folding in the face of the unity of OPEC and China. It is precisely for this reason the United States must take unilateral action. But what unilateral action could the United States possibly take?

This Author immediately calls for the creation of an American Foreign Exchange Bank. The guiding condition for an Exchange Bank lies in the name; all financial transations into and out of the United States must be funneled through the Exchange Bank. The Exchange Bank will be a subsidiary of the Federal Reserve System, and regulated by the Federal Reserve Board. The essential component of the Exchange Bank Charter will be the regulation of Currency exchange rates to defend the Dollar. These Rates will normally parrot International exchange evaluations, except where there are distortions. The Exchange Bank will be empowered to insist on appropriate Dollar payments for any other Currency, and vice-versa; all in the interest on maintaining the viability of the Dollar and American domestic production. Sheer threat of the new Bank charter should bring on a more reasonable attitude at the G7 meeting, but if not; Foreign Exchange banks can be very effective in operation. lgl