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A test of true character, perhaps, is the extent to which one is prepared to blame oneself. As such, the Western world's response to this self-made "credit-crunch" has highlighted the hypocrisy of our so-called leaders, their refusal to face reality and, above all, their lack of character.

When sub-prime first hit, Hank Paulson, then US Treasury Secretary, said "this financial crisis was caused to a large extent by a failure to address the rise of the emerging markets and the resulting global imbalances". Last autumn, European Central Bank boss, Jean-Claude Trichet, argued that "imbalances have been the root of present difficulties".

Even Barack "Change We Can Believe In" Obama has stooped to play the blame game. "We cannot follow the same policies," the President said on a recent trip to Asia, "that have led to global imbalances."

The implication is that sub-prime, and the deepest Western recession in generations, wasn't our fault. It was entirely unrelated to widespread financial fraud, political myopia and lax regulation. Central banks kept interest rates too low for too long, Western consumers went on a debt-binge and our governments spent like crazy – but all that was nothing to do with us.

It was their fault - China and all those other upstart emerging markets. They produced things the rest of the world wanted, ran big trade surpluses and accumulated reserves. As a result, the Western world was "flooded" with Eastern savings, "forcing us" to keep on borrowing and spending.

You probably find this analysis deeply suspect – illogical and even crass. That's because it is. Yet, the arguments above convey, in essence, the "advanced" nations' position towards the emerging markets of the East. Among Western governments and the glove-puppet economists who serve them, the "global imbalances" line - despite its patent absurdity - is pretty much conventional wisdom. As such, this tawdry, blame-shifting nonsense is repeated ad nauseum in official speeches and diplomatic missives.

This is the context in which Beijing and Washington are now discussing the future value of China's currency, a debate that last week turned pretty nasty. It sounds like a technical subject, one for currency dealers and other Wall Street denizens, but the outcome of this growing row is of vital importance to every country on earth.

China is the world's most populous country. About to surpass Japan, if it hasn't already, the Peoples' Republic will, over the coming years, trump the US as the world's biggest economy. The manner in which America and the broader Western world engage with China doesn't reflect that reality. The West acts as if our relative decline is China's fault. In doing so, our political leaders demean themselves and us while making the outcomes we want less likely.

Last weekend Zhou Xiaochuan, governor of the Chinese Central Bank, apparently indicated that Beijing is preparing to abandon its dollar peg. Since July 2008, the yuan has been held at around 6.8 to the US dollar. Zhou observed this was a "special measure", designed to help China weather this Western-made financial crisis. "Sooner or later," he said, "these kind of policies will be withdrawn."

Back in Jan 2009, Tim Geithner, the current US Treasury Secretary, said: "President Obama believes that China is manipulating its currency." That's a pretty incendiary thing to say. The tough talk has since been maintained, with the US and its Western allies consistently arguing that the dollar-peg keeps the yuan "artificially low", making China's exports more competitive, to the detriment of Western goods.

Chinese "currency manipulation" is a part of the broader "global imbalances" thesis. Given that, Zhou's words – a statement of the obvious – were seized upon as "evidence Western pressure is working", with China about to impose a one-off revaluation. On Monday, currency derivative traders, having sucked up the White House spin, were betting on a 3pc rise against the dollar.

The reality is, though, that Zhou said something similar back in October, referring to the peg as "an unusual method during an unusual time". All America's hectoring does is to ensure that any official Chinese statement suggesting the dollar peg will soon end is met with another saying it won't.

In the aftermath of Zhou's speech, Chen Deming, the commerce minister who, naturally, has close ties to China's export sector, insisted any currency appreciation would be "gradual and controlled". Premier Wen Jiabao boomed that the yuan would remain "basically stable" – a phrase he's been using for months.

When it comes to China, the West needs to face the truth. The more America calls for China to revalue the longer Beijing will take to do it. Chinese politicians are as unlikely to buckle in the face of Western pressure as their Western counterparts would be given a tongue-lashing from Beijing.

China's government is petrified of social unrest. Given the importance of the export sector for continued high growth and jobs, this again makes it impossible to Beijing to be seen yielding to pain imposed by the West.

It's also not clear that China's currency is "under-valued" by all that much. Despite the peg, the yuan is 20pc higher than in 2005. This flies in the face of claims that the fall is America's share of global exports – from 23pc to 18pc over the last five years – has happened because the yuan hasn't been allowed to rise. But, then again, blaming foreigners is easier than restructuring clapped-out, bloated and heavily-subsidised Western factories.

Last week we also learnt that China's exports rose 46pc during the year to February. Inevitably, this has also been presented as "evidence" of China's foul play with the yuan. Yet this export rise is from a very low base – with February 2009 being the epicentre of the sub-prime storm. More significantly, Chinese imports rose 45pc over the same period.

During the first two months of 2010, in fact, China's trade surplus fell by 51pc – with the gain in exports being out-weighed by an import surge. This hardly suggests the yuan, as Geithner claims, is "way too low".

On Thursday, Obama weighed in, calling on China to adopt a more "market-oriented exchange rate". The US Treasury Department, meanwhile, has set a mid-April deadline to decide whether China truly is a "currency manipulator", warning that America could impose new levies on Chinese products if that's judged to be the case.

The president is playing with fire. For one thing, his country is being kept afloat by China's willingness to keep buying US government debt. Obama really should tread carefully. At the same time, the US is now at risk of sparking what could be an all-out trade war.

The reality is that America's "weak dollar" policy – its long-standing practice of allowing its currency to depreciate in order to lower the value of its foreign debts – amounts to the biggest currency manipulation in human history. At the same time, the US has, for years, shamefully stalled on various rulings passed by the World Trade Organisation that show America to be breaching global trade rules.

Chinese inflation is now at 2.7pc – close to the official 3pc target. Beijing will eventually allow the yuan to rise, but in its own time and in order to tackle inflation and not because of US pressure. America needs to act smarter and get its own economic house in order. Obama has decided instead to lash out at China in a desperate attempt to placate a US electorate increasingly mindful of their president's failings.