Geitner and co. don’t have a leg to stand on. The Chinese will bitch slap him like the crook he is.

If currency manipulation from other side which is enabling them to have trade surplus and buy out our treasury and private sector is a free-market competition, then what is preventing our treasury to do the same currency manipulation on those countries so that we can indulge in free market competition and reap the benefits instead of having cascading job losses and industry shut-downs.

We have been having these discussions where they will look into the issue for the last decade, so far nothing happened. They will float it in market only when our last industry shut-downs and all our people are out on the streets. I do not think anything will happen unless we do the same currency manipulation to them but I doubt our current congress, senate and executive branch will let it happen.

This is what tarriffs are for. To control manipulation behaviour.

And as for China bitch slapping the US, becuase they hold much US paper, how quickly would they like their paper to become worthless? If the Chinese try to sell the US paper, where’s the willing buyer?

Mercantilism has consequences.

There is an implied, and possibly even an actual contact, ratified and accepted contract here, embodied in the WTO trade agreements, and with their currency manipulaton, are the Chinese breaking the contract?

Got that right. China’s starting to play hard ball and there’s nothing the U.S. can do about it.

The WTO, which the U.S. pressed on developing countries so the U.S. could take advantage of them, prohibits tariffs without adjudication. And I think that takes years. Seems like the U.S. didn’t count on WTO rules being a 2-way street. Besides, China owns the U.S., not the other way around. Who do you think will buy U.S. treasuries, if not for China, India, Japan? U.S. has already blinked & will blink every time China sez boo. Deficits have consequences.

Hi eCAHN. You know way more than I about this, but what do you think of the old Chinese proverb “When you owe the bank a million dollars, the bank owns you. But when you owe the bank a billion dollars, you own the bank.”?

Which deficit are we discussing?

The Fed’s Revenue deficit or the trade deficit?

The Fed’s revenue deficit is self-inflicted by the US. It’s fixable with a change to taxation policies, if there is the political will. Big if, I’d agree.

The trade deficits are the major subject of discussion. At some point, the defferences in cost between countries cased by differing environmental and labor laws will have to be addressed by tarriffs or taxes, WTO or not.

The Chinese are aiming their economic weapons at the US’s economy. Very sucessfully I believe. I wonder when our beloved leaders will realize that the Chinese actions are an attach on us, and should be viewed as if it were an attack by a unfriendly power, and the attack given the same emphasis as other items vital to our national security.

Other than our economy, what is there for our defense spending to protect?

Makes for good populist rhetoric, but the manufacturing capacity is already gone and we shipped it off happily.

At this point, letting the renmimbi to appreciate freely would put a whole lot of “middle class” Walmart shoppers into a squeeze, unless there are domestic products ready to take the place of Chinese imports. Wouldn’t it? And doesn’t the current exchange make it worthwhile for China to keep financing US debt? (Granted, China’s in a bind over the debt financing too.)

Our policy makers put us in this hole, and now they’re just looking for scapegoats.

That’s my point at 3. Thanks.

The US is only as weak as it perceives itself to be. The Chinese can stop buying our paper. Good luck to them with their potentially suddenly unhappy 900 Million could become revolting people.

Yes, but they can do without many of the things they buy. They have already started.

As fast a manufacting went offshore, it could return.

Could it? I mean, i know that it can and such a thing would make me incredibly happy…but do we have the will to do it at the leadership level, to make the necessary investments?

Yes, one of the reasons China doesn’t want to float the yuan beyond the narrow band is because they would lose value on their significant dollar reserves. They are trading out of their dollars right now, gradually so the dollar which is being held up by the other struggling global economies doesn’t suddenly collapse. They will likely release the yuan to float fully in the coming months, though it may not be as dramatic as the doubling of the yen following the original Plaza Accord. The Toronto G20 in June will be interesting. The rebalancing should help with jobs here, and also with the debt.

China is defeating the US the way the US defeated the USSR. Money beats war any day of the week. Soon they’ll have all the manufacturing jobs (or most) and if they ever decided to go all out protectionist like some Americans want the US to, they would survive way better than the US ever would. Just sheer population numbers would mean survival.

We owe China too much $$$$. We borrowed so much for wasteful welfare programs and now we’re stuck. We have no choice but to tread lightly. With continued deficit spending things will only get worse and China will only increase their control of what our government says. After all there’s no law that says they have to roll over those treasuries.

You’re absolutely right. Money will always beat war.
And yes they would survive far better than the US. They are savers. Americans are spenders….the drunken sailor type of spenders.

That’s the way I’ve thought about this issue until recently-last 6 months, maybe a year. Some of what is causing me to think things have changed are that the U.S. economy was trounced by the recession, whereas the Chinese sailed through without blinking. Furthermore, the U.S. economic tools are close to used up. There’s no real monetary policy oomph left with interest rates at zero. Fiscal stim, except for token amounts, just won’t happen. Nor will tax increases.

Furthermore, the argument is more subtle than just picking up your marbles & going home. It’s about changes on the margin. The U.S. doesn’t have much to gain with a weaker RMB, the cost differences would still swamp such a marginal change, whereas the U.S. has a lot to lose on the USG debt purchases, if the Chinese back off buying new debt. Sure the value of the existing Chinese holdings of USG debt would decline, but they have such humongous reserves, they can afford to play chicken.

Then there is the observance of an increasingly hard line by the Chinese. And finally, one of Paulson’s claim to adulthood was that he knew China well, had done lots of biz with them while head of GS, and before; China was his investment banking area of expertise. If Paulson couldn’t get anywhere with them, and he didn’t, O’s fops are so much more unlikely, especially in their weakened objective position.

If i understand things correctly, the Chinese have been using a fair amount of those reserves as foreign aid…taking us back to money beating war. It’s a proactive way to unload all those dollars without crashing the dollar because it gets China access to raw materials in places like Africa.

Clearly, China has outplayed the US for close to two decades now, and while China still needs the US it’s focus looks to be on extricating itself from that need…or turning it into a position of serious advantage. And with the every step the US looks like it’s being stuffed into tighter and tighter corners.

Our manufacturing sector is just moth-balled and we can rev it up if only the policy makers take the step of providing our industries a level playing field. I think walmart shoppers will not feel a difference but will get better quality goods for their children instead of lead or cadmium goods they get now as American industries rev-rup and take the slack for our families.

First of all in those countries there are no intellectual property protections on American stuff, deep & heavy import protections for local industries, currency manipulation for export industries and preventing existing American imports to make an impact(eg. Movie Avatar was allowed to run for 10 days only in-spite of its wide-spread popular appeal in China. In this case piracy was useless because it was a 3-D movie best viewed in theatres).

The playing ground is wholly tilted against American industries and I hope our policy makers realize we are being failed against totalitarian state by their passivity and I hope they realize they are being played upon very well at the expense of American workers.

So basically, they want to hold off on doing what really is necessary for not only our economy, but the world’s so they can work an angle?! This smacks of the same mentality that has led the Democrats to think that they can negotiate with Repugnicans. China will string them along, then hose them when China gets it’s way.

Furthermore, the Chinese are starting to really feel the pain caused by fouling their own nests. They’re about to lose their two biggest rivers to glacier melt caused by human-made climate change (and one of these rivers is what powers Three Gorges Dam). The poisoning and other problems caused by the near-total absence of effective regulation (and/or the near-total hold of corruption in the nation’s fabric) is getting to be too widespread to ignore.

~~~EDITED IN MODERATION~~~, America is the stronggest Currency Manipulation country.

~~~ModNote: While the facts may be with you, please try to make a less ostentatious introduction.~~~