Geithner: President Obama believes that China is manipulating its currency

Yahoo News

US President Barack Obama has set the stage for a possible trade war with China by branding the Asian giant a currency manipulator, a term his predecessor George W. Bush had skillfully avoided despite pressure from lawmakers.

"President Obama -- backed by the conclusions of a broad range of economists -- believes that China is manipulating its currency," his Treasury secretary-designate Timothy Geithner said Thursday in written testimony to senators quizzing him over his pending confirmation.

Obama, who took office only Tuesday, has pledged to "use aggressively all the diplomatic avenues open to him to seek change in China's currency practices," Geithner said.

Personally I do not see this as a smart move.

China buys our Treasuries and Bond allowing us to continue to live as a debt making, consumer driven, producing little country.

China *could* decide to stop buying our debt (treasuries and bonds) or worse, demand payment on the ones they already hold and we will drop into such a depression as we cannot imagine.

Instead of blaming China for our economic mismanagement, how about some honesty - how about cramming down the debt, forcing the bad assets into the open, putting the guilty in jail

Oh wait, that's where Geithner should be for tax evasion - can't do that now can we?

This is a very bad move from the Obama administration. I hope President Obama can find a way to put a gag and a set of reins on Geithner.

China is already going to dump treasuries. There's no money for them in that avenue that is substantive in returns. They are taking a major hit because of OUR monetary manipulation. And the fact that economists, financial institutions, and the media are being FAR less than honest about what is really happening.

With or without China, we will collapse.

Aren't we manipulating our own currency? Doesn't China have the right to do that?
I mean, yes, it may not help the world economic situation, but I don't know if it's necessarily against any laws.

I'm not sure.

I read this news today on my cellphone at work. I agree. Stupid move.

Something is in the works. I don't know what it is...but something is going on and we aren't being given the information.

Spending through the roof...debt/deficit through the roof... Bernanke having meetings with central bankers in France and refusing to give any information on it...and now this.

Why ruffle more feathers? Don't we have enough countries pissed off at us right now? Do we really need China to join as well?

Something is up...and i'll give someone a shiny nickel if they can prove what it is.

let's see, Mr. G hasen't even been confirmed yet, and he's
either pointing the finger at the new President...

or is revising his role, to himself be the 'bad guy', by leveling
accusations at China --- this may well be an ?acrimonious?
next 4 years, as we direct blame to China
for the mess the American perps have caused,
ending in the present global financial collapse

reply to post by redhatty


I'm sure that the Obama Administration knows all too well about China's relations with our Treasuries and Bonds. But I'm also sure that they have some kind of plan. How would we know though. We will have to wait and see what happens. I hope that he is doing beneficial things for America. Though im not a supporter of Obama, he is my President.

Sounds like the fiat currency is about to go bust, which means just about every currency in the world and now they are getting ready to set up the fall guy for why the fiat currency failed.

I've heard reports about China inflating its currency to about 5 times what it is really worth.

What it sounds like is that Geithner is pointing fingers so when we collapse it makes him look worth his salt.

At the present moment every currency is losing value and what was supposed to happen was that the dollar was supposed to collapse while TPTB could point to the Euro and say hey we need to do this because it survived and this is the best way for us to model our monetary policy after.

Well that isn't working out so well and the shell game they had planned is collapsing because the derivatives market caused way more damage than they expected.

So what it sounds like is that after the 'stimulus' package fails to work and we sink deeper into recession/depression they are going to use China for the fall guy.

That isn't going to work though because by that point people are going to be tired of hearing excuses and is going to want solutions. Eventually they are going to have to admit that Central Planning is the problem.

They are doing everything they possibly can to avoid admitting that because there isn't any money to make if you can't make the money.

edit - spelling

[edit on 23-1-2009 by Hastobemoretolife]

reply to post by St Udio


Well actually this has been known for years, that China has been manipulating their currency, Bush was warn about this but nothing was done because China is our preferred custumer when it comes to buying Americas debt at the auction block.

And for he poster that said that US also manipulate its currency I say that you are right but we call it interest rates.

I fully approve the announcement released by Obama Administration.
Chinese government adopted a very stupid policy
---the low exchange rate policy, which badly harmed the interests of
Chinese people.
When Chinese people go to USA and exchange our money to yours, we will
find the purchasing power shrinking a lot due to the low exchange rate policy, contrarily when Americans go to China and exchange your money to ours, every thing becomes cheap, even very poor Americans can enjoy luxury life in China. that is unfair.
So, I hope Obama Administration impose more pressure on Chinese governmnet to change this.

Beggars can't be choosers. The US can either start producing and saving more, or get used to its demands falling on deaf ears.

Rank Order - Exports
1 Germany $ 1,530,000,000,000 2008 est.
2. China $ 1,465,000,000,000 2008 est.
3. United States $ 1,377,000,000,000 2008 est.
source

It is very unfortunate that at the end of the Clinton administration, when the deficit was in surplus, that we did not close all relations with China at that point.

I personally would love to see America begin to be more self sufficent and get off of the Global economic grid.

I remember Levis when they were really great, now its just cheap manufacturing and low quality.

I don't know enough about all this international drama, I guess i should look into it.

I wonder what Maruice Strong will think, I DO KNOW ABOUT HIS CLOSE TIES WITH CHINA,

OOPS CAPS

I always thought he and his ilk were manipulating the market right now.
en.wikipedia.org...

Remember,Geithner is close friends with Obama, hmmm,

Guess, we will see.

First off the chinese are up about 40% on their treasuries over the last 16 months or so. Owning USA Debt has been good for them. However, at the low interest rates, holding onto these vehicles is probably not a smart move, so we should start seeing some selling pressure coming fom China.

What will ultimately happen is the fed will end up buying all the outstanding treasuries held by foriegn countries. They will also buy all the homeloans, credit card loans, auto loans, etc from all the banks. Then the USA will take over the fed and basically just erase all the debt off the books. America will then have the debt overhang off their backs. A new US currency wil be created and the banks will be recapitalized. Our country and it's citizens will be out of debt and ready to begin the most prosperous era in American history. All it takes is the will and proper oversight to make it work. Sometimes it is just smarter to start over.

reply to post by antar



Wrong. Wrong. Wrong. We never ran any trade surplus during the Clinton years.

We ran a budget surplus, which comes from increased taxes/revinue. Bush was absolutely right to return it. The Federal Government is not a business. They should not be allowed to have any profit/Surplus whatsoever. Since they do not sell things to survive. They survive with laws in place forcing people to pay them.

reply to post by redhatty

Did Geithner just wake up and discover what everyone knew for years? The Economic Policy Institute has been publishing their studies for years, with facts and figures that prove conclusively that China has been manipulating their currency. I think it is worthwhile for those on this thread to read the following policy memorandum from the EPI from 2006:

www.epi.org...

China Manipulates Its Currency—A Response is Needed By Josh Bivens September 25, 2006 | EPI Policy Memorandum #116 China Manipulates Its Currency—A Response is Needed By L. Josh Bivens and Robert E. Scott The U.S. Treasury Department’s most recent assessment of foreign trading partners' exchange rate policies refused to state that China was manipulating the value of its currency to enhance its international competitiveness.1 However, a serious reading of all evidence on the matter clearly shows that China has exceeded all well-established limits that have been used to determine currency manipulation in the past. This currency manipulation is especially problematic in light of the unprecedented size and continual growth of trade imbalances between the United States and China. The bilateral deficit with China is now responsible for roughly a quarter of the entire U.S. trade deficit, which has reached a startling 6% of gross domestic product (GDP). It is widely agreed that this deficit is unsustainable and that the process of its unwinding could be painful for both the United States and its major trading partners. The higher this deficit is allowed to go, the more wrenching this adjustment will be. China’s currency policy is a primary impediment to reducing this deficit now rather than later (when the costs will be higher). China has violated all established currency manipulation standards There are a number of questions that can be asked to shed light on whether or not a country is manipulating the value of its currency vis-à-vis the dollar for competitive advantage, and, whether or not this harms the United States. First, does it have a high and rising bilateral trade surplus with the United States? Second, is its global current account surplus (the broadest measure of its trade and income flows) high and rising? Third, does it possess a high and rising accumulation of international reserves?2 Table 1 below shows China’s current position in light of these questions and compares it to past cases when the U.S. Treasury Department has found that nations were manipulating the value of their currency vis-à-vis the dollar for competitive gain. On each front, the current position of China well exceeds the previous threshold that led to a finding of manipulation. The bilateral U.S.-China surplus (as measured by the U.S. government) was $203 billion for 2005. This bilateral surplus has risen by $119 billion over the past five years and represents over 9% of China's total GDP. In seven of the nine cases where damaging currency manipulation was found, the U.S. bilateral trade deficit was lower than 9%, and in May 1992—the first time China was found guilty of currency manipulation—its surplus with the United States was only 3.4% of China’s GDP. China's global current account surplus is now over 7% of its GDP, up 5 percentage points in five years. China’s reported current account surplus exceeds levels reached in four of the nine previous cases. Furthermore, there is evidence that demonstrates that China’s own trade data may substantially under-estimate its global trade and current account surpluses.3 Using data on Chinese imports and exports from its top 40 trading partners (covering 88-95% of China’s total trade), the China Currency Coalition estimated that China’s total trade surplus in 2003 was $203 billion, 341% more than China’s officially reported trade surplus of only $46 billion. China’s international reserves increased by $207 billion in 2005, ending the year at $821 billion. The best estimates are that 70% of these are dollar reserves and that this share has remained stable over time. These international reserves constitute 36% of China's total GDP and are sufficient to finance over a year of Chinese imports. China’s purchase of reserves in the form of dollar-denominated assets has propped up the value of the dollar, keeping the Chinese currency from gaining value. In short, these reserve purchases act as a de facto subsidy for Chinese exports into the U.S. market. Chinese currency policies affect more than just bilateral trade between China and the United States. Since 2002, the dollar has depreciated by 36% against the euro. Since the yuan is pegged firmly to the dollar, it depreciated as well. Since 2003, Chinese exports to the EU-25 (made much more competitive by the euro/dollar depreciation) are up by over 52 billion euros, while U.S. exports to these countries are up just over 5 billion euros (see Figure A). Thus, the yuan-dollar currency peg affects third-party (China/European Union) trade relationships as well.

The conclusion of the report states:

Conclusion Every available indicator demonstrates that China is manipulating the value of its currency with the intent of spurring the growth of its trade surpluses. This currency manipulation has had damaging effects on some sectors of the U.S. economy and has been a primary contributor to the enormous run-up in the American trade and current account deficits. For the sake of stability in the U.S. economy, the Chinese economy, and the global economy, action needs to be taken to begin unwinding these imbalances.

It is NOT the US that is hurting China, but that China's policies that have created severe trade deficits for the US.

Different interest groups in USA have different interests in this sector.
American manufacturers want China to appreciate its currency so that
their products can be more competitive.
American investors want China to depreciate its currency so that they can
use less money buy more Chinese assets.
Unfortunately, your former treasury minister Paulson is the representative
of investors. So you should never expect him to take substantial actions
to compel china appreciating its currency.
To solve this problem, you should find a new treasury minister who represents
the interest of American manufacturers.


[edit on 24-1-2009 by gs001]

PR China is imploding. It will trigger soon global great depression.

Originally posted by antar
It is very unfortunate that at the end of the Clinton administration, when the deficit was in surplus, that we did not close all relations with China at that point.

What did you say?

Originally posted by disgustedbyhumanity
What will ultimately happen is the fed will end up buying all the outstanding treasuries held by foriegn countries. They will also buy all the homeloans, credit card loans, auto loans, etc from all the banks.

And that will make runaway inflation or even hyperinflation. Monetary base is already skyrocketing.

Originally posted by disgustedbyhumanity
Then the USA will take over the fed and basically just erase all the debt off the books. America will then have the debt overhang off their backs. A new US currency wil be created and the banks will be recapitalized. Our country and it's citizens will be out of debt and ready to begin the most prosperous era in American history. All it takes is the will and proper oversight to make it work. Sometimes it is just smarter to start over.

Wishful thinking .

Just imagine for a moment that USA do it - the rest of the world would retaliate and USA would economically crash and not recover in the following decades. You know why? US GDP is 70% consumption, almost no manufacturing base .

Obama wants to create plenty of jobs and may see made-in-china stuff as an obstacle to his creativity. Obama wants to dwarf Bush's generosity in sending the nation the Statue of Liberty checks. I see two trains colliding head on and the result are bills that smear too easily.

As much as I don't like Geitner, he is right when it comes to the case of China manipulating currencies.

China does not buy U.S. debt just because they like us.

China buys debt because it inflates and churns our economy. They buy our debt to keep their currency low. If China's currency were allowed to appreciate based on how the trade deficits were behaving, then their currency would have spiked therefore killing their exports to the U.S.

If China's exports stop for even a short time due to a jump in prices, the Chinese economy could implode and destabilize the country. China needs to grow at a certain rate per year or else new job seekers out of college or whatever in China would be out of luck finding a job.

Young people + unemployment= Oh Crap. Especially with the all those Chinese.

The Chinese MUST fund U.S. debt. If they stop, we go into a depression, while bad, is survivable due to the infrastructure, resources, military, and organization of the U.S. If Americans stop buying Chinese goods or any other goods because of a depression, China will go into complete chaos with hundreds of millions of people rioting with a hugely corrupt military being unable to control the situation.

China has a long history of civil wars. There are multiple dialects. The Chinese government cannot afford to have the people uppity, even for a short time. The Chinese government had enough of a headache with the protests before the Olympics. Imagine the trouble when entire cities with economies based on exporting to the U.S. have factories close and throw out millions of workers on the street.

China doesn't just buy our debt, they buy themselves time.

I don't know but it seems that the Obama administration is looking for a bogeyman. Almost every leader in history facing a time of crisis needed to create a bogeyman to unite their people whether or not it is the right thing to do.