One James Rickards, former general counsel of the hedge fund, Long Term Capital Management has said that China has the ' greatest bubble in history.' Apparently the Chinese central bank's balance sheet resembles that of a hedge fund, buying dollars and short selling the yuan. Mr. Rickards should know what he is talking about because I seem to remember that LTCM nearly collapsed and had to be rescued by the Fed under Alan Greenspan. Every pundit of economics is critical of China keeping its currency artificially low and buying American securities. This transfers cheap wealth to the US encouraging excessive spending. This, apparently, was the main reason that the markets collapsed in the US. There are strident calls in the US calling on China to revalue its currency which has been pegged to the dollar at around 6.9 for the last three years. Some congressmen are asking for China to be named a ' currency manipulator ' so that extra tariffs can be imposed on its exports to the US. Name calling is likely to play into Chinese hands.The Chinese will act very offended, say that it is an attack on its sovereignty and impose tit for tat tariffs. Many countries will support China and see it as a victim of US, the bully. Instead of name calling the US government should politely inform China that just as the Chinese insist on the right to set the exchange rate of the yuan the US has the right to set the exchange rate of the dollar and set it at whatever level they want. This will have the same effect of making Chinese goods expensive and help the balance of payment. The Chinese will squeal but let them. Unfortunately the US administration is scared of the Wal Marts of the world.