Yesterday Barack Obama, president of the US, met Hu Jintao, president of the People's Republic of China, for a private meeting. The agenda was long, covering the world economy, climate change and non-proliferation of nuclear weapons. The last two are the most important, over the long run. But the first is the most urgent. If we do not achieve a healthy global economic recovery, hope of a co-operative relationship is likely to prove vain. Yet such a recovery is far from ensured. Worse, some of what is now happening – particularly China's decision to depreciate the renminbi along with the dollar – makes healthy recovery less likely.

This, then, was an opportunity for Mr Obama to tell some brutal truths. I hope he did, after careful briefing from his staff, on the following lines.

“Mr President, as I said in Japan, ‘the US does not seek to contain China, nor does a deeper relationship with China mean a weakening of our bilateral alliances. On the contrary, the rise of a strong, prosperous China can be a source of strength for the community of nations'. For the foreseeable future, our two countries will be the leading players on the world stage. We must approach our challenges in a spirit of co-operation and accommodation. But that is, alas, not happening over your exchange rate policies.

“Chinese officials have expressed understandable concern over US fiscal and monetary policies. Most recently, Liu Mingkang, your chief banking regulator, has argued that the combination of a weak dollar with low interest rates had encouraged a ‘huge carry trade' that was having a ‘massive impact on global asset prices'. Similarly, many Chinese officials complain about our huge fiscal deficits and worry about the safety of Chinese investments in US Treasury bonds.

“I do share these concerns. But our current fiscal and monetary policies have a straightforward cause: we were contemplating the abyss a year ago. Even now, our recovery is too weak to reduce unemployment from intolerable levels. Confronted with these risks, the Federal Reserve and my administration have acted to sustain demand. if anything, those who warned our stimulus package would prove too small were right.

“We faced a slump for a simple reason: the financial crisis we inherited triggered a collapse in US private spending and a sharp rise in private saving. My advisers have told me that between the fourth quarter of 2007 and the second quarter of 2009, the balance between US private income and spending shifted from a deficit of 2.1 per cent of gross domestic product to a surplus of 6.2 per cent – a swing towards frugality of 8.3 per cent of GDP. The collapse of our fiscal position is no more than the mirror image of this shift in the balance between private income and spending. The Fed's easing is also an inevitable response to the collapse.

“I am president of the US. I am not going to put our economy into a depression, to protect the value of Chinese savings. After all, nobody in the US asked you to intervene on so massive a scale in currency markets and so accumulate the incredible total of $2,275bn in foreign currency reserves by September of this year, much of it in our currency.

“The policy China apparently recommends to us would not even work on its own terms. Suppose the Fed stopped quantitative easing and raised interest rates, to strengthen the dollar, while we pushed through a huge fiscal tightening. This would return the economy into a slump. Thereupon the fiscal deficits would surely worsen, once again.