The Ignorant Investor

WASHINGTON (AP) -- The United States will use upcoming meetings of the world's economic powers to keep up the pressure on China to revamp its currency policy, which critics contend is contributing to America's massive trade deficits.

China is ''moving far too cautiously in making its currency regime more flexible,'' Tim Adams, the Treasury Department's under secretary for international affairs, said Wednesday as he talked about Friday's meeting of the world's richest countries and weekend meetings of the International Monetary Fund and the World Bank.

I've been watching the debate over how far we should push the Chinese on their currency policies. The Money Folk, also known as The People Who Really Run the American Government, seem dead set against pushing the Chinese government towards a floating exchange rate. This should seem odd to any disinterested observer, since for years the The Money Folk have been snidely explaining to us ignorant regular folk (aka "The Shrinking Middle Class and Displaced Workers Club") that free market solutions are the cure to all economic and social ills:

Burdened by low economic growth? "Cut taxes and open markets." Social security going bust? "Privatize it and let the markets work their magic." Reduce government spending? "Private contractors can do the job cheaper and faster."

Yet what do they say when it comes to the Chinese government's continued manipulation of its currency?: "The Chinese need to set the exchange rate to prevent capital outflow."

To me, this is talking out of both sides of their faces. If you think free trade is such a good idea, what is wrong with the free movement of capital? Especially when the rest of the world can't impose the same limits. So, free marketeers- what's really behind this sudden love of the hand of government manipulating the Chinese currency?