Sebastian Mallaby - An OPEC Lesson for China

http://www.washingtonpost.com/wp-dyn/content/article/2009/01/23/AR2009012303291.html

Geithner is correct that China manipulates its currency. What's more, this manipulation is arguably the most important cause of the financial crisis. Starting around the middle of this decade, China's cheap currency led it to run a massive trade surplus. The earnings from that surplus poured into the United States. The result was the mortgage bubble. [...]

If Americans' insatiable appetite for loans explained the flood of Chinese capital into the United States, we would have seen the evidence in a rising price for those loans -- that is, higher interest rates in the bond market. But bond rates were strikingly low at mid-decade. This strongly suggests that it was the supply of lending that went up, not the demand for it. Chinese money flooded into the United States because of the push factor from China, not the pull factor from Americans.