22
Jan
09

Taking Shots at America’s Banker

As I’m fond of saying, words have power. Today, Timothy Geithner, the nominee for Treasury Secretary, proved as much in his written testimony with a direct shot at China.

“President Obama backed by the conclusions of a broad range of economists believes that China is manipulating its currency,” Geithner wrote. That stopped short of a charge that China is manipulating its currency intentionally to gain an unfair trade advantage, as the 1988 trade law requires for an official citation of “manipulation,” which in turn would trigger a United States diplomatic effort to get China to let the value of its currency, the yuan, rise. (link)

James Fallows of The Atlantic provides a succinct explanation for the potential issues surrounding this stated position. The one that sticks out to me highlights the risk of such pointed language:

Do we think that the Chinese authorities who have put some $2 trillion into US assets will respond blandly to being labeled manipulators — or to a policy that would effectively devalue the investments they’ve already made here? If Americans think that, they’re naive–in my view, based on this interview with a man at the center of Chinese decision making. (link)

Here’s where my interest lies…we have yet to see a firm economic plan from the United States government so why the strong language aimed at America’s favorite banker? I claim no expertise in foreign currency matters, but I do wonder, like Mr. Fallows, why Geithner elected to use such blunt language for something that’s been a tricky diplomacy dance for years.

While I might wish otherwise, China plays a large role in American piggy banks. What happens to our economic recovery if China decides to stop the flow of money? Think about it in the most basic of terms. If a child mouths off to a parent, odds of her continuing to receive a weekly allowance plummets. While America isn’t exactly a child, it is in a position of being reliant on another entity who has power in the relationship.

Addressing China and Chinese policy that impacts American policy is a valid role for government officials. I can only hope that in coming months said officials will show more common sense in their efforts and words.

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