■"A Currency Afloat (for All Of 20 Minutes)," by Keith Bradsher, New York Times, 30 April 2005, p. B1.

■"The Global Savings Glut," op-ed by Robert Samuelson, Washington Post, 27 April 2005, p. A23.

■"China Sets Bank IPO in Motion: Injections of $15 Billion Into ICBC Is Viewed as a First Installment," by Andrew Browne, Wall Street Journal, 26 April 2005, p. C16.

■"China Heads List of Problems for New Trade: Congress Is Pressing Battle on Piracy," by Elizabeth Becker, New York Times, 30 April 2005, p. B3.

■"Currency Game, Yet Again, Focuses on Yuan Revaluation," by Craig Karmin, Wall Street Journal, 29 April 2005, p. C1.

The biggest uncertainty/certainty in the global economy today is that China's yuan is too cheap vis-‡-vis the dollar, to which it is pegged, thus increasing our massive trade deficit with them (the biggest source in the global economy today of our overall trade deficit).

Recently, all the talk and effort in the system was about engineering the slow fall of the dollar, which is occurring. Now, with that accomplished, all attention in the system turns toward China and the inevitability that it must revalue the yuan.

Why this matters: the fundamental imbalance of the world today is that Americans spend too much and save too little, and there is the tendency to assume it's all our fault, when in reality it reflects the larger global environment in which the Asians tend to save too much and spend too little. If they're not doing that, then guess what? It's a whole lot harder for Americans to continue spending too much and saving too little.

This weird imbalance reflects the tipping point we're at now: the New Core pillars (like China), which have integrated themselves into the global economy over the past couple of decades, have reached the point where their savings/investment focus needs to shift somewhat to allow domestic spending designed to create domestic markets and domestic demand. Otherwise, the global economic system as a whole gets perverted into a sort of specialization where the Old Core (U.S. especially) consumes and they (the New Core) produce, leading to this irrational fear that the global economy will somehow lock into that dynamic forever!.

So again, lotsa speculation on when China will finally revalue the yuan, which is just a single-point version of a float, where the currency would adjust on a daily basis according to currency exchange markets. Ultimately, we want the yuan to float, as do the Chinese, but for now, keeping it pegged works well for the Chinese to keep their exports cheap, plus it gives them time to create the other types of currency and market controls needed to make having a floating currency be a good thing rather than a bad thing (good = it becomes another mechanism to control the economy in a macro-sense, by not letting the currency get too strong or too weak; bad = it allows pressures to infiltrate the economy that might overwhelm it if there aren't other mechanisms that allow adjustments). The U.S. lets its dollar float, but we have a lot of other mature mechanisms that allow the government to steer the economy in a rough sense, like restricting or expanding the money supply, the Fed raising or lowering interest rates, the Treasury selling bonds or buying them back by reducing the debt, etc.). China doesn't have all those mechanisms yet, and until they do have a critical mass of them (how much? Good question), it's not in their best interest to let the yuan float.

Still, keeping the yuan pegged artificially to the dollar at roughly 8 yuan to 1 buck ad infinitum can't work either, especially as China racks up huge trade surpluses with a number of states-especially the U.S. All those surpluses generate political pressure in their trading partners for protectionism vis-‡-vis China. This is growing now in the U.S., and China, being smart enough to know that some surplus is better than none, even if they're not maximizing their possible short-term gains.

So China's been signaling all over the dial that it's ready to do it sometime soon, and experts expect it will happen on the eve of a major holiday segment over in China, so it would fall on low business-activity days.

Well, on Friday, the yuan actually seemed to float for about 20 minutes, trading a tiny bit more expensively (6 one-thousandths of a yuan). And baby, did it spook some markets for those twenty minutes, since next week is a major holiday sequence in China, meaning all the close watchers figured, "baby, this is it!"

Well, maybe it was and maybe it wasn't.

But clearly it's coming. It's coming because China can't afford a protectionist response from the Old Core, because they're expecting that "old money" to progressively invest in their banking industry so as to help China reorganize all those bad loans (roughly a trillion). Getting banking up to snuff is a key component to having the yuan float in the future.

So for now, to buy time, China will revalue to get our Congress off their trail, and on to something really scary, like outsourcing to India!

Yeah baby! Get off the Chinese economic threat and shift over to the Indian economic threat!

Friedman would be proud.