Chinese Ministry Denies Geithner's Currency Claims

I does not seem smart to upset the largest buyer (and holder) of U.S. debt securities. This is especially true in a year where the U.S. needs to borrow over $1 trillion to finance our deficit. I have said for some time that the U.S. trade deficit with China was not only an economic issue but one of national security. If China decides to boycott our treasury auctions, or worse, dump existing U.S. holdings (currently close to $1 trillion), the dollar would crash and interest rates and inflation would soar. My advise to the Obama administration is to play nice with our asian friends.-Lou

BEIJING -- A Chinese ministry Saturday strongly denied Obama administration claims that China "manipulates" its currency, as the first contact between the new administration and China takes a markedly sour tone.

Since China is the largest holder (and buyer) of US debt, it does not seem very smart to upset them. This is especially true since the U.S. will need to borrow over $1 trillion this year. I have said for years that the U.S. trade deficit with China was not just an economic issue but one of national security. If China wanted to they could boycott U.S. treasury auctions or worse, dump existing holdingsof U.S. securities causing a plunge in the dollar and skyrocketing interest rates.-Lou

On Thursday, President Obama's nominee for Treasury secretary, Timothy Geithner, told U.S. lawmakers that President Barack Obama, "backed by the conclusions of a broad range of economists -- believes that China is manipulating its currency." No Chinese official of Mr. Geithner's standing has fired back -- a move analysts say shows that China doesn't want to overreact to the statement -- but Saturday morning an official from China's Ministry of Commerce said "we never have used currency manipulation or exchange-rate manipulation as a mains to gain an advantage in international trade.".....

"In recent days persons in a Western country have said 'China is manipulating the yuan exchange rate,' " said People's Bank of China Vice Governor Su Ning, according to a report Saturday by the state-controlled Xinhua news agency. "These remarks are not only inconsistent with the facts, but they are misleading about the reasons for the financial crisis."