Update – Feb 2, 2009: According to a source on China Law Blog, President Obama called President Hu Jintao to set the record strait.
Excerpt: “We at this time have no more information beyond confirmation of the call, but our sources tell us that President Obama did make the call in an effort to let President Hu know that the United States very much hopes to maintain strong positive relations with China and to cooperating with China on the many crises now confronting the world.” Read full post > Obama Called Hu And Threw Geithner Under The China Bus
Tim Geithner speaking loudly and carrying a whiffle bat
Diverging a bit from telecom, tech and iPhone … iPhonAsia is concerned over some recent rhetoric from our new Treasury Secretary Tim Geithner aimed at China. Excerpt From the Wall Street Journal 1/24/2009 :
In a written submission to the Senate Finance Committee, Mr. Geithner said the Obama Administration “believes that China is manipulating its currency.” He says he wants Treasury to make “the fact-based case that market exchange rates are a central ingredient to healthy and sustained growth.” The dollar promptly fell and gold jumped $40 on the news.
The table below shows clearly that China and Japan hold the lion’s share of our Treasury debt. We might consider more carefully how we approach China as we tiptoe through the current economic crisis. Geithner’s comments were critical of China’s purported manipulation of the Yuan. Geithner accused China of holding their currency artificially low in order to make Chinese goods cheaper. Does China violate economic treaties by deliberately manipulating the Yuan to keep it low in comparison to the dollar and other currencies? Of course they do! Nothing new to see here, now move along.
China currently holds some $500 billion in U.S. Treasuries. The U.S. needs to borrow an additional $2 trillion in the next year. It isn’t smart piss off our largest lender. If China boycotts the next Treasury auction, or worse, begins dumping U.S. Treasuries, the U.S. cost of borrowing would skyrocket. Geither and the Departments of State and Commerce had better tread lightly and remember Teddy Roosevelt’s advice: “Speak softly and carry a big stick.” The sort of rhetoric coming from Treasury is speaking loudly while we are carrying a whiffle bat. And “whiffs” of trade restrictions and tariffs are reminiscent of Smoot-Hawley. A trade war is the last thing we need right now.