International payments arrangements are at an impasse much as they were in the summer of 1971, when there was widespread recognition that trade imbalances were far too large.

Then, the values of the Japanese yen, the French franc and the British pound were frozen to the US dollar; no country wanted to take the initiative to realign currencies. Today the problem is the unsustainable US-China trade imbalance. China's exports of manufactured goods have increased at a rapid rate, but the adjustments that would have led to comparable increases in imports have not occurred because China refuses to budge in allowing the value of the renminbi to increase.

Beijing's unprecedented accumulation of $2bn (€1.4bn, ￡1.2bn) of US dollar securities is the product of its “beggar-thy-neighbour” policy in importing jobs. The undervaluation of the renminbi has the same impact as an import tariff of 50 or 60 per cent.