Geithner in China, in Today's News 06.02.09

Geithner in China.  What is US Treasury Secretary Timothy Geithner doing in China? Doesn't he have enough to do in the United States implementing the government-run economy and telling GM and Citibank what to do?

WSJ: "BEIJING--US Treasury Secretary Timothy Geithner, in a speech here Monday, touched on a contentious subject, urging China to move forward to a more flexible exchange-rate regime."

The United States has harped on China to adopt a flexible exchange rate for some time now.  To some degree the rise in the price of oil a couple of years ago was designed to pressure China on exchange rates.  So it is natural that Geithner would talk on this subject.  (BTW, it is lucky for Geithner that his speech had to be translated.  Anyone who has heard his monotone in English can easily be bored to the stage of loud snoring.)

But are exchange rates the reason for his China visit? Another quote from the WSJ a dozen pages or so later can shed some light:

"The mixture of an unprecedented amount of Treasury-bond offerings along with government support to troubled financial institutions and banks 'will cause the total amount of Treasurys and other government-backed debt to soar from roughly 25% of the total investment-grade bond market in 2007 to 80% by 2010,' according to a recent report from investment manager BlackRock Inc." (Emphasis added.)

And so one can surmise that Geithner is in China to make sure that the Chinese will fork over to invest in the 'unprecedented' increase in debt offerings.  Not too long ago the Chinese leadership expressed doubts about the wisdom of such investing. They even tried to band together with Russia to form a new world currency.

Geithner's job is to reassure the weak-hearts in China that all is well with investing in the United States.  In fact it is so well that China needs to increase its investing dramatically. And they need to do it now in 2009 and 2010 when the 'unprecedented' rise in debt is occurring.

China has been one of the bigger investors in Treasurys in recent years.  So dependent on this source of revenue is the United States that the success of the cryptocracy's 'reform' of the economy rides on China's investment continuance and increase.  

One can assume that the Chinese will go along.  They have nothing to lose, really. They get a return on their investment and their leverage on the United States government will grow.

Does the cryptocracy care that the United States is dependent on China, who could pull the plug at any time on the stability of the American economy?  Of course not. It is entirely in the cryptocracy's interest to have everyone dependent on everyone else. The resulting crises and negotiations provide abundant opportunities for the cryptocracy to make even more money.