China's Flawed Economic Model by Mike Whitney

April 6, 2010

The Class War Goes on in Beijing, Just as It Does in Washington

China's Flawed Economic Model

By MIKE WHITNEY

There's no doubt that China manipulates its currency to gain an advantage over its competitors. There's also no doubt that Treasury Secretary Timothy Geithner will do everything in his power to avoid a confrontation with China's President Hu Jintao when he arrives in Washington in two weeks. That's why Geithner has decided to shelve Treasury's mandated currency manipulation report for the time being and defuse a potential imbroglio with Hu. But the Treasury Secretary's unwillingness to embarrass his guest, has angered members of congress who think the administration needs to take a tougher stand on China to protect American workers and U.S. exporters. Senators Charles Schumer (NY-D) and Lindsey Graham (SC-R) are demanding that China be labeled a "currency manipulator" so that punitive action can be taken. That could lead a full-blown trade war with America's biggest creditor.

There's no chance that the Geithner will openly challenge Hu or that the administration will take any action that would jeopardize relations. China's President will get the red carpet treatment for the length of his visit and Geithner will spend the bulk of his time pressing the leader for concessions that will allow greater access to China's market for his buddies in the financial services industry. That's the "hidden agenda" that both the congress and the media fail to see. From Geithner's point of view, the confab is not really about "strategic dialogue" on "mutual economic and security issues". That's just a smokescreen. Geithner is backed by powerful Wall Street constituents who could care less about exchange rates or jobs. What they care about is markets and profits. And for that, they need greater access.

During his term as Treasury Secretary, Henry Paulson spent more time in Beijing than he did in Washington. But his goals were the same as Geithner's; to do whatever it takes to pry open the biggest consumer market on earth. That basic policy hasn't changed.

No one believes that Geithner is going to fight to save American jobs. It's laughable. From his perspective, the currency flap is just stick for beating up on China when groveling doesn't work. But it's too early to put the stick to work, just yet. For now the policy is all "carrots", although that could change in an instant if Wall Street doesn't get its way.

http://www.counterpunch.org/whitney04062010.html

isn't big enough to consume their own toxic crap and must rely on "currency manipulation" to export it (to the biggest debtor nation on earth). Geithner sees an export market for what - credit default swaps (i.e. the U.S. brand of toxic drywall)? Is this all some kinda sicko Ponzi scheme? There has gotta be a way to just get even by out-manipulating the manipulators maybe? Is it true that that China has to buy scads of dollars to pull off the curency manipulation scheme? Who is the other end of the deal selling 'em dollars? Geithner? Ha! A way to pull the plug on the whole disgusting toxic mess maybe? Free trade in toxic assets?