October 15, 2009

Obama China Currency Flip Flop

During the 2008 Presidential campaign candidate Obama agreed many times with American industry groups and unions that Beijing "manipulated" its currency. Perhaps not understanding the impact of the "M" word in USA-China relations Obama's Treasury Secretary Tim Geithner also said as much in his confirmation hearings. But as so often happens when candidates come to power the complexities and realities of China relations compel an about-face.

Today the US Dept. of the Treasury released its semiannual Report to Congress on International and Exchange Rate Policies with the decision that China does not "manipulate" its currency. With somewhat contorted logic Treasury says that since the renminbi remains stable against the dollar it follows the movement of the dollar against other currencies although it is still "undervalued." The report revealed that China is anticipated to account for 2/3 of global growth in 2010. The reaction of Congress awaits....

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