Dear rss free blog,

Britain’s National Theatre is a People’s Cementbox built on the South Bank of the Thames in the heighday of Brutalist Architecture during the first post-War Labour govt. of the 1950s. So the playhouse comes with political baggage.

It is thus not too surprising that the political playwright David Hare was given a platform here to “seek to understand the financial crisis”. Most of his play is tendentiously full of leftwing cliches. But there are exceptions I like. The actor playing Lawyer Harry Lovelock explains:

“It wasn’t by chance that banking became so complicated. Because the more complicated it becomes, the fewer people understand it. And that suits the bankers fine. Authority is bestowed on those who can maintain the mystique. Gambling is fine. I’ve nothing against gambling with your own money. But when you begin to gamble with your customers’ money, that’s a different thing, isn’t it? That’s when ethical problems arise.”  

And here is what investment banker David Freud told Hare:

“Everyone was fooled by the fact that the boom lasted so long – not 6 years, which is normal, or 10, which is normal – this one lasted 17. Why? The real reason? Because people in China were working for 46 cents an hour, that’s why. And so inflation was kept low, because all these cheap goods flooded onto the market. They were working for us, for nothing. All you had to do to make money was to be in the right place at the right time. You punted and every time you punted you won. After a lifetime in the City I’ve met an awful low of leading businessmen and at the end I’ve concluded that there’s no such thing as a genius entrepreneur.”

David Hare would be the right person to write about Rusal. Its chief oligarch, Oleg Deripasa, is trying to float off a chunk of its shares to avoid bankruptcy. He owes $74 bn to the banks. As he was been banned from the USA, even Goldman Sachs found the risks of a Rusal ADR offering too risky. Then Deripasa tried to interest resource-hungry Chinese via an IPO in Hong Kong, again frustrated apparently by rumors of criminal links. Now he is aiming to sell 10% of Rusal in Paris. Among the cast of characters who are partners of Deripasa are Glencore of Switzerland, the pardoned Mark Rich, and Roman Abramovich, a more solvent oligarch. Do not buy this aluminum stock unless you are protected by the Mafia. 

Today, while Pres. Obama gingerly steps around the issue of the exchange rate of the renminbi (which translates as “the people’s currency” in South Bankspeak), and while China’s own economic leaders contradict each other about the link between the the RMB and the $, think of Mr. Freud.

Here is my proposed solution with the advantage of requiring no currency-setting measures by the split Beijing leadership. As China stimulates its economy, and provides better social services (like education, healthcare, and pensions), Chinese people will start consuming more. And naturally they will want imported goods. So the huge stock of surplus dollars China has piled up will shrink to pay for foreign goods. So there will be fewer dollars in the cache to worry about.

Chinese buying imports will demand that they be priced accessibly in the local currency. And the Beijing bosses, terrified of popular discontent (and they are), will allow access to affordable foreign exchange.

So the RMB will move up to a more natural level as China becomes a normal world trading partner of other countries. 

Here is a technical note I am embarrassed about. Paid subscribers aiming to read back issues on our website should first download the free Mozilla Firefox browser. Only when overseas, I discovered that not only the new Internet Explorer 8 cannot get you access to our website; even earlier versions of Microsoft IE don’t work.

Initially techies from our firm and our webhost thought it was somehow the fault of my laptop. But having tried Internet cafes and desktops around Europe, I can now confirm that the problem is at the webhost.

More for paid subscribers follows starting with easily accessible widely-traded Exchange Traded Funds before turning to more exotic ideas.

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