Yet 2% appreciation in RMB may not be a compromise, but a reality check to Bush's administration?

Thus, the crucial question is: are the US authorities really "serious" about demanding that China gets serious with its currency de-pegging or are really clueless and masochistic? Do they really mean what they say or are they clueless about the consequences of such reckless talk?

There are at least three interpretations of the US posturing:


1. Talk is cheap and the posturing is aimed at containing protectionist pressures in the US.
2. The US authorities are really clueless or masochistic
3. Wishful thinking that a Chinese revaluation alone would solve the US current account problems.
Those are symptoms usually better left to shrinks to take care of. Since the administration does not believe in and has made fun of the "reality-based community", it is high time for the foreign central banks, starting with the Chinese one, to provide a reality check to this administration that has been living for too long in the delusional belief that deficits do not matter and have no effects on interest rates. Maybe, if the Chinese were kind enough to take seriously - for their own sake and benefit - the only half serious posturing of the US, this reality-challenged and gravity-defying and dream bubble-inhabiting administration will start to get its bitter but overdue reality check. It would at first get really ugly in the financial markets but it is the bitter pill that is long overdue and required to make it wake up from its strange dream. Maybe unconsciously - and this may be the fourth freudian interpreation - the administration really wishes to be woken up from its own delusional dreams and rejoin the "reality-based community" where most the world resides.

The details from a economist blog