The People’s Bank of China manages the yuan by setting a value for it against a basket of foreign currencies every day. It then allows market fluctuations within a very tight spread around the daily value. (This is roughly how FDR managed the value of the dollar against gold throughout the first year of his Presidency, a point that has some resonance with China’s situation.)

This system of managing the yuan has been in place since 2005, and it replaced a strict peg to the US dollar. That move was intended to blunt criticism from American politicians that China was deliberately undervaluing their currency in order to steal our jobs. (No one stopped to ask why the US was and is at full employment if all our jobs were floating overseas and to illegal immigrants.)

But the yuan has appreciated only about 10% against the dollar since 2005. It turns out that China’s “market-driven” currency closely tracks the dollar anyway. And the calls for protectionism by US Democrats continue.

Over the last several months, however, China’s monetary authority has quietly allowed the yuan to appreciate against the dollar at an accelerating rate. At the same time, the yuan has fallen sharply against the euro and moderately against the Japanese yen.

This quote from the article linked above makes it about as official as it ever gets with the Chinese:

Deputy Governor Liu Shiyu on Oct. 26 said foreign exchange markets have “a role to play in correcting” trade imbalances, reacting to calls for more rapid gains by the Group of Seven nations.

You may recall from my previous post on the subject that the Washington meeting of the G7 finance ministers and central bankers two weeks ago was expected to be a bash-the-weak-dollar fest. Instead, Treasury Secretary Paulson appears to have intimidated enough of his peers to turn the thing into a pile-onto-the-strong-yuan party.

Why does China persist in undervaluing their currency? The most reasonable theory I’ve heard is so that they can prevent lower-cost producers in East Asia (like South Korea, Taiwan, Indonesia, Malaysia, Thailand, Singapore, and Vietnam) from stealing any of their market share for exported manufactured goods. But there’s a funny thing about reality: you can’t deny it for long. If you do something unnatural like undervalue your money, the stress will show up somewhere else.

And China is running out of alternatives. They face raging domestic inflation caused by their enormous trade surplus with most of the world. Since they artificially undervalue the yuan against the dollar, the influx of dollars from American importers translates into far too many yuan back in China. (Chinese exporters are not allowed to hold dollars, and are required to exchange their foreign revenues into yuan.)

They’ve tried increasing benchmark interest rates and bank-reserve ratios, each several times this year. Recently they also tried increasing the passbook savings rate, which has been below the inflation rate all year. Chinese individuals, who are notorious savers, are smart enough to know when their deposits are losing real value, and they have responded in the logical way: by plowing their money into the Shanghai and Shenzen stock markets, which are now at astronomically high bubble-like valuations.

None of this does anything to slow down Chinas’s rampant overinvestment in manufacturing capacity, because obviously it doesn’t attack the real problem, which is too much money. Allowing the renminbi to appreciate will help, but it’s an open question whether China will let it happen fast enough. There is a case to be made that the yuan should be at 5 to the dollar rather than 7.4.

China also faces extreme danger from the United States, on two fronts. First, we may drop into recession, which will dampen consumer spending and maul the Chinese export economy. And second, the Chinese expect that the most likely next President (Hillary Clinton) will work together with a strengthened Democrat majority in Congress to enact protectionist legislation against them. Both of these are reasons to proactively abandon their currency undervaluation.

With all this, it’s still an extraordinarily important step for China to expose themselves to the discipline of free markets. Both by character and by history, they’re extremely fearful of what happens when foreigners have anything to say about their internal affairs. They’re every bit as fearful of allowing their own citizens to interact with the rest of the world, free of government control.

They have a very long way to go. But remember the ancient Chinese proverb about the journey of a thousand miles.

Let me be clear here; I hope to all that is Holy that Rudy doesn’t get the nomination even if I think he would be great to have on the ticket. My actual first preference (as of right now) would be a Thompson/Romney ticket, followed closely by Romney/Giuliani and then a Thompson/Giuliani ticket (don’t ask me to explain the logic behind it), but the fact is that I certainly would not be as disappointed as I probably should be if Rudy happens to end up at the top of the ticket.

The reason why is simple - in the words of Lincoln with regard to Ulysses S. Grant; he fights. And after George W. Bush and eight years of “New Tone™” castration, the GOP could do with a leader who does not automatically run away from confrontation on the domestic front. I submit that if the past six years have proven anything, what the GOP needs to embrace is not a Compassionate “New Tone™” Conservatism, it is an articulate, intelligent, tenacious and aggressive Conservatism that does not shy away from a fight, routinely engages the other side on the battlefield of ideas, and never ever pulls its punches.

Rudy’s tenure as Mayor of New York is remarkable not just for what he got accomplished, from reducing crime, slashing welfare rolls, cleaning up Times Square, cutting taxes, etc. - things that conventional (i.e. liberal) wisdom had long declared impossible in “ungovernable” New York City, it was that he was able to be so effective in the face of the unrelenting and vituperative hostility of the New York Press Corps (at the head of which, of course, the New York Times), wave after wave of constant attacks and slander by the Left’s myriad shrieking organizations, a virtually dead Gotham GOP (which, to his discredit, he did not do much to revitalize) and a City Council where his allies were less than 10% of the total body.

But he got [things] done. And not just “things” like John McCain regularly promises he would get together with folks like Ted Kennedy, Russ Feingold and Patrick Leahy, “put partisanship aside” and do … but conservative things.

Remember again that this was/is New York City, where there are at least five Democrats for every one Republican (and this is if you include Chafee-style anti-Republican “Republicans“). But as Deroy Murdock helpfully points out, Rudy managed to accomplish a lot of things that make for very pleasant reading for anyone on the starboard side of the political spectrum.

… Giuliani famously supervised a 57-percent overall drop in crime and a 65-percent plunge in homicides.

Giuliani curbed or killed 23 taxes totaling $8 billion. He slashed Gotham’s top income-tax rate 21 percent and local taxes’ share of personal income 15.9 percent. Giuliani called hiking taxes after September 11 “a dumb, stupid, idiotic, and moronic thing to do.”

Giuliani’s spending increases averaged just 2.9 percent annually. His fiscal 1995 and 2002 budgets actually decreased total outlays.

While hiring 12 percent more cops and 12.8 percent more teachers, Giuliani sliced manpower 17.2 percent, from 117,494 workers to 97,338.

Rather than “perpetuate discrimination,” Giuliani junked Gotham’s 20 percent set-asides for female and minority contractors.

Two years before federal welfare reform, Giuliani began shrinking public-assistance rolls from 1,112,490 recipients in 1993 to 462,595 in 2001, a 58.4-percent decrease to 1966 levels. He also renamed welfare offices “Job Centers.” According to Giuliani’s book, Leadership, in fiscal 2001, City Hall placed 151,376 welfare beneficiaries, a 16-fold increase over 1993’s 9,215 assignments under Democrat David Dinkins.

Foster-care residents dropped from 42,000 to 28,700 between 1996 and 2001, while adoptions zoomed 65 percent to 21,189.

Giuliani privatized 69.8 percent of city-owned apartments; sold WNYC-TV, WNYC-FM, WNYC-AM, and Gotham’s share of the U.N. Plaza Hotel; and invited the private Central Park Conservancy to manage Manhattan’s 843-acre rectangular garden.

Giuliani advocated school vouchers, launched a Charter School Fund, and scrapped tenure for principals.

While many libertarians frowned, Giuliani padlocked porn shops in Times Square, paving the way for smut-free cineplexes and Disney musicals.

Rudy was able to pull this off in spite of the active opposition of New York’s liberal elite because he was/is a fighter, and he fought them each and every single day to get his policies enacted, and just as important, he fought them afterwards to keep them enacted. As John Podhoretz put it; “… [Giuliani’s] success in turning New York around wasn’t merely a matter of changing policies. He had to sustain those policies when they came under deliberate, systematic and unrelenting assault by the city’s liberal elite.”

Rudy Giuliani did not just stop at arguing for his own policies, he routinely went after the liberal elite’s sacred cows with the rhetorical equivalents of a machete and sledge-hammer, impolitically pointing them out for the useless, counter-productive, wasteful and inherently destructive ideas they were and rightfully attributing to them their responsibility for turning New York into the “ungovernable” smut, violence and crime-ridden cesspool it was before he came along. Pohoretz again; “… more than any other candidate [for the GOP Presidential nomination] in the race, Rudy Giuliani is a liberal-slayer. When he rejects liberal orthodoxy, which he does often, he doesn’t just oppose it. He goes to war with it - total, unconditional war.”

Speaking personally as a Republican and a Conservative; one cannot help but get all doe-eyed at a fellow Republican who took/takes so much obvious joy and pleasure in waking up every morning and happily extending a defiant middle finger to the New York Times.

This is Giuliani’s major selling point to me; he may have made one or two bad friends (i.e. NARAL), but he also made all the right enemies (NRA excluded), and he ended up winning far more often than he lost on their own home turf.

I like fighters.

If you’re not reading Mr. Yon, you should. His piece is hard to excerpt, but I’ll give it a shot. About the controversy:

Some months ago, a soldier in Baghdad wrote a piece on the way war can degrade the morals and affect the judgment of combat soldiers. His story was published at face-value in The New Republic magazine. In it the soldier wrote terrible things about his unit, making the article sensational.

…

The soldiers name was Beauchamp. Hed tried to hide his identity, but poor Beauchamp had no idea that the blog world would get on his trail and tree him like a coon. Beauchamp crawled up to the top of that tree, looked down into the snarling spotlight, and suddenly knew he was caught. His simple mask was no more effective than a coons, and that in itself might provide a little insight into how deeply Beauchamp had thought this all through. In any case, he was up in that tree, surrounded by hounds whod done this plenty of times, yet always found this part exciting. The hunters would have written the last sentence if the choice was up to them.

Speaking as the smallest hound (puppy following along, really) in this chase - yup. Cheerfully. Without a doubt, it was fun. Just like it was fun to help yank the mask off of Jesse MacBeth, and just like it was fun to watch people make Dan Rather look foolish by doing the research that he wouldn’t, and thus like it was fun all the other times we found that pulling on one loose thread would unravel a whole narrative tapestry. It will undoubtedly keep on being fun, too. Just so we’re clear.

Yon goes on to talk about how, while he was in Baghdad, he had the opportunity to meet Private Beauchamp’s battalion commander (LTC George Glaze). LTC Glaze made it clear to Yon that in his opinion Beauchamp had learned his lesson, was trying to make amends for his behavior, and had chosen to stick it out rather than leave. Glaze’s willingness to stand by one of his soldiers (while not trying to diminish the soldier’s mistakes) clearly impressed Yon, who wrote:

Lapses of judgment are bound to happen, and accountability is critical, but thats not the same thing as pulling out the hanging rope every time a soldier makes a mistake.

Beauchamp is young; under pressure he made a dumb mistake. In fact, he has not always been an ideal soldier. But to his credit, the young soldier decided to stay, and he is serving tonight in a dangerous part of Baghdad. He might well be seriously injured or killed here, and he knows it. He could have quit, but he did not. He faced his peers. I can only imagine the cold shoulders, and worse, he must have gotten. He could have left the unit, but LTC Glaze told me that Beauchamp wanted to stay and make it right. Whatever price he has to pay, he is paying it.

It is a strong temptation to shrug and simply not care. A very strong temptation, in fact. But there are times when you need to step back and give someone the chance to prove that they have reformed their ways. People closer to the scene than I am, and whose judgment I can respect, have decided that this is one of those times. I cannot speak for the others on this site who reported on this, but I will give Private Scott Beauchamp that chance, and I hope that he takes it, for his own pride’s sake.

(pause)

But as for The New Republic…

(very evil smile)

Woof, I say. Woof.

Apparently, the Great Falls Historic District meets the criterion for national significance, but does not meet criteria for suitability, feasibility, or need for NPS management yet:

[d]espite the objections of the NPS it was pushed through the Committee on Natural Resources. Not only does it defy the NPS recommendations and place 109 acres under federal control, but it assures that millions of taxpayer funds will be funneled into this region of New Jersey.

How could something so blatantly counterproductive be forced onto the floor you ask?

John Lawrence, Chief of Staff for Speaker Nancy Pelosi (D-CA) and Paterson, NJ native. Mr. Lawrence sat in during the Committee hearings regarding H.R. 189, he also was recognized by Chairman Rahall, saying “there is another distinguished visitor present who happens to be the Chief of Staff to the Speaker of the House of Representatives, Mr. John Lawrence, who must call this his hometown, I believe, and has been back there nodding very strongly yes to everything that the gentleman from New Jersey has been saying.”

Hmm…surely the Nancemaster is just making sure the stuff that is “best” for the American people is attended to by her trusted legislative gigolo…err, I mean highly paid staffer…

Yeah, right.

If you beleive New Jersey’s own Star Ledger you would need to ask yourself whether something smells fishy, or if that’s just New Jersey’s pristine air made all the better by a federally subsidized National park in the middle of a war zone…err, I mean crime-challenged city…

A Paterson Great Falls national park designation represents countless economic, recreational, cultural and educational opportunities for one of America’s most densely populated, diverse and historic urban communities,” Pascrell said in a written statement issued after the House vote.

The state’s plan, championed by the Department of Environmental Protection, would create a 60-acre state park linking existing open space with historic factory buildings, and would offer spectacular new viewing areas.

A 2006 study by the National Park Service, however, found that the Great Falls would not qualify for designation as a national park because its proposed themes of industry and technology were already prevalent in other national parks.

Fine…”countless economic, recreational, cultural and educational opportunities for one of America’s most densely populated, diverse and historic urban communities” - yet the question remains-why? Why there, and why now? I mean, Nancy is very busy passing legislation that gets vetoed. In her spare timed, she busies herself with renaming Post Offices…so why pick on Jersey? Don’t they have enough troubles as it is?

According to Roll Call [subscription] there’s a little more to it than you might see at first glance:

Republicans point to Lawrence’s attendance at a June 28 Natural Resources Committee markup of the bill. During the markup, Chairman Nick Rahall (D-W.Va) first identified Rep. Bill Pascrell (D-N.J.), the sponsor of the Paterson Great Falls National Park Act, and then took the unusual step of also pointing out Lawrence’s presence at the meeting. According to a transcript of the meeting, Rahall told his colleagues that he also would like to “note at this time, there is another distinguished visitor present who happens to be the Chief of Staff to the Speaker of the House of Representatives, Mr. John Lawrence, who must call this his hometown, I believe, and has been back there nodding very strongly ‘yes’ to everything that the gentleman from New Jersey has been saying. And he is the former Staff Director of this committee, I might add, as well to [former] Chairman George Miller.”

Neither Lawrence nor any of his family members have lived in Paterson for decades, according to Lawrence, and they have no financial interests in the area. Lawrence told Roll Call that he attended the hearing simply out of civic pride and that he believes any staff member should be allowed to attend hearings affecting their home towns. “I would not only hope but encourage any staff person whose hometown is up for a national park’s designation to take five minutes to go and listen to the testimony,” Lawrence said.

But Republican Study Committee Chairman Rep. Jeb Hensarling (Texas), who is organizing opposition to the proposal, called Lawrence’s attendance “one of the most unprecedented strong arms I have ever seen. … I’ve never known a committee chairman to stop the proceedings to single out a staffer.” Hensarling argued that given Lawrence’s position as the most powerful staffer in the House, his presence in the meeting cast a shadow over the proceedings and was tantamount to Lawrence “standing in the room and staring everyone down … and next thing you know everyone’s voting for it.”

Lawrence dismissed questions about his presence at the hearing as an “idiotic and absurd thing to say. I attended part of the hearing because I’m very proud of my hometown.” He also stressed that the bill was “designed with zero input from me” and that he has never discussed the issue with Members or staff.

It is not unprecedented for the hometown or other institution closely connected to senior leadership aides to see benefits. For instance, Aurora University, the alma mater of Rep. Dennis Hastert’s (R-Ill.) former chief of staff, Scott Palmer, benefited from Congressional earmarks during Palmer’s time in the Speaker’s office. Nine months after the university gave Palmer an honorary degree, Hastert’s office steered through a $9.8 million earmark for the school to construct a teacher training institute.

The Paterson bill would designate a 109-acre portion of Paterson as a national park. Local officials in Paterson, which is economically depressed, as well as the state’s entire Congressional delegation, have backed the proposal, which would include the building of an apartment complex, a microbrewery and climbing wall, as a way to boost the economy.

But in a report requested by Pascrell, the National Park Service found that the area is not suitable for designation as a national park. Likewise, NPS Deputy Director Daniel Wenk in testimony to the committee this spring also laid out the service’s reasoning for rejecting the designation.

Lawrence said the high profile of the bill which has led to editorials in The New York Times and other papers played a part in his decision to attend the hearings because of Paterson’s poor economic health and the need to redevelop the area. Paterson is “a very poor city that is struggling to improve and develop its resources,” Lawrence said.

Lawrence also pointed out that he served on the Natural Resources Committee for years while he worked for Miller and that if he had a significant interest in the issue beyond his connection to his hometown, that would have been the time to press the issue. “I was the staff director of the Resources Committee … if I had wanted to make it a national park, then would have been the appropriate time to do it.”

Hensarling, however, argued that Lawrence’s presence was inappropriate and is a sign of what Republicans have argued is a lack of commitment to Pelosi’s 2006 campaign pledge to reform Congress. “If this is her definition of honesty and reform, it helps explain why Congress has such low public opinion ratings.”

I’d close this with some big tirade about Pelosi, strong-arming, ram-rodding unwanted legislation, and the like…except she has failed at every turn and continues to do so unimpeded by me. Why throw a wrench in an already failed machine? She certainly doesn’t need MY help-Pelosi sucks all of her own volition-who am I to muck that up?