What's Best For China: Geithner's Hubris Knows No Bounds

“It is better for China, it’s better for the world and the United States if China allows its currency to appreciate more rapidly,” thus spake Lord Treasurer, er, Secretary of the Treasury, the honorable Mr. Tim Geithner after a summit in Honolulu yesterday.

Recall Mr. Geithner, on his first visit to China as Treasury Secretary in June 2009, assured a roomful of students that their government’s investment in US Treasuries was rock solid.

“Chinese assets are very safe,” Geithner declared. The statement elicited “loud laughter” from the assembled crowd, according to accounts at the time. Ever since, he’s been in a snit about China.

In Honolulu yesterday, the 21 finance ministers whose nations make up the Asia-Pacific Economic Cooperation (APEC) gave appropriate lip service to goals like “strengthening economic growth” and “making growth more balanced.”

Then, Mr. Geithner stated his position: “This process of rebalancing will be aided by exchange rate policies in China and other Asian economies that allow their currencies to adjust in response to market forces,” he asserted to reporters after the meeting.

“China, in particular, must continue to allow its currency to strengthen, and China has acknowledged the importance of faster exchange rate adjustment.”

Tim Geithner at the APEC Conference
The lonely task of managing the world’s reserve currency

The US agency over which Mr. Geithner presides owes $1.137 trillion to China. His co-conspirators at the Federal Reserve have stated their target interest rates will remain near zero through mid-2013.

And still… the Treasury Secretary is not above wagging his finger at the Chinese. They ought to allow their currency to “adjust in response to market forces” he says.

Heh. You have to admire the man’s hubris.

Addison Wiggin
for The Daily Reckoning