Earlier we mentioned the possibility that the combination of higher capacity utilization and still-high unemployment would put Ben Bernanke into an uncomfortable position of having, possibly to raise rates before he was ready.
But it’s become evident that the real problem is the way the lack of employment has pushed folks in the US to push Obama towards a currency confrontation with China.
Schumer and Krugman are both pushing hard for one, and more are on the way.
Geithner and Obama don’t want to have to do this, and know that the result of such unilateralism will be damaging.
But, if pressured hard from the left, Obama will be left with little choice but to offend his counterparts in Beijing.