Change has come to America in many respects; one is a willingness to say that China is manipulating its exchange rate.
The Bush administration studiously avoided the phrase. Tim Geithner, President Barack Obama’s nomination for U.S. Treasury secretary, said at his confirmation hearings that his boss believes that China is manipulating the yuan.
This is dangerous linguistic territory. Manipulation requires retaliatory action from the U.S. Congress. Geithner, whose comments came in written responses to Senate questions, added, “The question is how and when to broach the subject in order to do more good than harm.” Obama’s team will “forge an integrated strategy on how best to achieve currency realignment in the current economic environment.”
Geithner’s comments triggered a drop in U.S. Treasuries on concern that demand from China, the largest foreign investor in U.S. government debt, may wane. China held about $682 billion of Treasuries as of November, and overtook Japan as the biggest overseas owner of the debt last year.
Geithner is world-savvy and Obama does nothing without thought. Watch this.