Today was a day of virtue with eyes glued to the computer screen and messages whizzing back and forth to Stockholm by text and e-mail. In between I dashed off a 350-word translation for a hotel brochure...£60 in the kitty for that...and did clever things online. Here are a few of them.

The Llangolman BT phone bill got paid, the Annual Return for William Franklin & Sons Limited was filed online with Companies House, my Rye post office box was renewed for another 12 months for £56, £40 went off to my daughter to reimburse her for the car aerial demolished at the Cardigan Car Wash back in February and Clare was paid £111 for some recent translation work from Swedish into English.

One of the strangest arrangements on the planet is the way China is shipping cheap goods to America and Europe, making a handsome profit and taking their winnings in very dodgy bits of paper and electronic promises. Economists have no problems with all this. They tell us that it keeps interest rates and inflation low and maintains growth in the global economy. The Thinking Man in the Street is less sanguine…being distrustful of economists and smart enough to wonder what will happen when China backs out of the deal and leaves the West to its own devices. Two American Senators…Charles Schumer and Charles Grasser…are also concerned. But they plan to do something about it.

This week the Schumer and Grasser double act were in China to warn the Chinese that the US Senate will take action to stop the flood of cheap Chinese goods into America. Their message is ‘Stop dumping and destroying American jobs or we will slam a 27.5% tariff on all Chinese imports!’ If the Chinese want to avoid this then the Communists must stop controlling the exchange rate between the yuan and the dollar. The yuan was revalued by two percent last July and currently stands at eight to the dollar. Presumably the two Charleys are lecturing the Chinese on The Gospel according to Ricardo in which exchange rates are free to adjust to imbalances between currencies. What fun to be a fly on the wall and hear what the Chinese have to say by way of a response. They might mention their reserves.

Seven years ago China’s reserves were worth $ 150 billion. These reserves are increasing at the rate of $17 billion a month, currently stand at $854 billion and are expected to top the trillion by the end of the year…i.e. no let up in the rate of accumulation. The actual breakdown of these reserves is China’s most closely guarded secret…after its nuclear arsenal. But somebody somewhere has guessed that three quarters of China’s reserves are in dollar-denominated assets…a third of them in US Treasury Bonds where the Central Bank of China holds $ 263 billion and is America’s biggest holder of these bonds with the Central Bank of Japan not far behind.

The key factor in the ballooning of China’s reserves is the rapid growth in the gap between China’s exports and imports. To thwart any strengthening in the Chinese yuan against the American Dollar China’s Central Bank intervenes vigorously in foreign exchange markets by trading between two and three billion dollars every day. One rumour doing the rounds is that the inscrutable Chinese Communist Party is shifting more of its reserves into euros and yen to reduce its dollar exposure. But discriminating between information and disinformation with billions of dollars at stake is no simple matter.

When Luigi Genazzini was Chief Economist on the European Development Bank’s Africa desk…we had spent two weeks in Oman counting camels and donkeys together in the mid-70s…we spent a couple of evenings when I was passing through Luxembourg pondering the ways of exchange rates. Luigi was puzzling over the Zambian economy at the time but his broader agenda was to get the bank’s economists to develop a consensus view on how to handle exchange rates. As a trained economist he knew all the official theories. But as a banker he also knew they made little sense in the real world. Our conclusions? We didn’t understand exchange rates…why they were what they are…but nor did anyone else. What to do? I had no advice for him then. And I have no advice for anyone else now.