October 22, 2009 - U.S. Federal Reserve Chairman Ben Bernanke has warned that the global imbalances between the United States and China must be addressed immediately to prevent future economic crises. U.S. policymakers and experts have asserted that an undervalued Chinese yuan is largely to blame for these imbalances and that China's currency should be revalued to help close the U.S.-China trade gap. Stephen Roach, chairman of the Asia branch of U.S. banking giant Morgan Stanley, says that argument is flawed. He says the undervalued yuan is a political "red herring," since currency adjustment or trade sanctions against China would not help reduce the U.S. deficit but shift the U.S. demand for imports to other more costly exporters. Instead, the United States should be pushing China to create a social safety net that would encourage its population to spend more savings on domestic consumption. Roach expresses concern the United States will enact more protectionist policies against China in response to domestic political pressure over rising U.S. unemployment and slow growth......
