"Double Tongued"

"Double Tongued" is how the politically correct members of the financial press are describing the US$ posturing of Treasury Secretary Hank Paulson.

For those of you old enough to remember the Lone Ranger series... "man speak with forked tongue, kemo sabe" comes to mind. Double tongued = forked tongue in all but "polite" company. Paulson says publicly that he supports a "strong dollar" policy to, among other things, keep down the price of oil and other imports. Yet he has been castigating China to let their currency appreciate. Which is it? A strong $ or a strong Yuan?

(Folks, it is either one or the other, you can't have a strong $ policy regarding oil and a strong Yuan policy to make U.S. domestic manufacturing more competitive, and; the U.S. can't cure its trade deficit and still enjoy cheap motor fuel! You can't have your cake and eat it, too.)

Let me answer for Secretary Paulson: It is all about the Yuan.

I think China has, once again, played their cards very well. The Chinese have $1 Trillion in U.S. $'s in their reserves. How best to get the must bang for these bucks? Perhaps decrease the subsidy for oil to their citizens while at the same time allowing their currency to rise versus the petro dollar?... that would actually help their net trade position when oil imports are taken into account while forcing their economy to improve production versus energy consumption (if any of you think this is not correct please email me). After all, the Chinese must realize what happens to the value of the US$ if Oil reaches the $150 - $200 per barrel range (At least, I think they do).

Consider this scenario: The Yuan appreciates big time versus the US$, say 100% (I think this is a serious underestmate of the Yuan's potential). If the Chinese make no adjustment to their fuel subsidies, doesn't this lower the price of fuel by 50% IN THE BIG MARGINAL CONSUMER? Won't that put Oil demand in China into overdrive? And wouldn't that further squeeze world Oil markets, and particularly U.S. Oil imports, driving the U.S.$ precipitously off the proverbial cliff? If anybody has any good intelligence on this please let me know.

Yours for a better world,

Mentatt (at) yahoo (d0t) com