Geithner's Biggest Problem is Dollar, Not China
It's a bit rich for U.S. politicians to berate Treasury Secretary Timothy Geithner for not labeling China as a currency manipulator.
Perhaps Sen. Lindsey Graham, a South Carolina Republican, hasn't seen a newspaper in the last 12 months. With near-zero interest rates, the likely issuance of trillions of dollars of government debt and massive taxpayer-funded bailouts, the U.S. will soon make China look like a manipulation piker.
Memo to Graham and his ilk: Your economy has lost any moral high ground as it drags the world down with it. That will be even truer as the dollar eventually pays the price for ultra-loose monetary and fiscal policies. And it will.
Sure, China manipulates the yuan. Everyone knows that, including Geithner; he said so during his January confirmation hearing. It's also widely recognized that a stable yuan is propping up the U.S. financial system. Its $2 trillion of reserves are a direct result of China manipulating the yuan.
Geithner's climb-down from the manipulator charge is about pragmatism. He is aware of the fragility of international support for the dollar.
"I do not look for an immediate collapse," says Hans Goetti, chief investment officer at LGT Bank in Liechtenstein (Singapore) Ltd. "I am bearish longer term as the Fed will continue with their demolition job on their balance sheet."
The key distinction may be motive. China micromanages its currency on purpose to help exporters. The U.S.'s manipulation may be inadvertent. The end result will be the same.
By William Pesek Bloomberg News
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