Despite pressure from Congress to designate China as a “currency manipulator,” Treasury Secretary Timothy Geithner has announced he will delay making a determination on whether or not to accuse China of undervaluing the yuan in favor of allowing ongoing high level discussions between U.S. and Chinese officials to continue. Critics say the Administration is postponing a decision in order to encourage Chinese cooperation on Iran sanctions.
Sen. Arlen Specter (D), one of 14 senators calling for tariffs on Chinese products if China doesn’t revalue the yuan, reacted to Secretary Geithner’s announcement on Fox News Sunday as follows: “We have a real problem with the Chinese. They are very shrewd and customarily they outmaneuver us. They take our jobs. They take our money and then they lend it back to us and own a big part of America.”
True, China has cheap labor and low-priced exports. The Chinese also buy enormous quantities of our debt, which serves to finances the Administration’s out-of-control spending. It makes no sense to antagonize them.
If China were to unload substantial amounts of Treasuries, the U.S. would have only two choices: buy back the Treasuries with newly-printed dollars, which would exacerbate inevitable inflation (once the billions of dollars sitting in commercial bank reserves begin circulating, the dollar’s value will decline dramatically); or let bond prices nosedive, causing interest rates to rise sharply and dampening our anemic economic recovery, starting with the housing market.
It would be wise to avoid a confrontation with Beijing at all costs. Even if Secretary Geithner’s decision is based on unrelated considerations, attempting to resolve our differences with China through diplomacy rather than name-calling is the right course of action.
Amy H Laff is a StateBrief.com partner. A graduate of Univ of Penn and Stanford Law School, Amy practiced law and mediation on the east coast before relocating to the Valley, where she founded and chairs the AZ chapter of the Republican Jewish Coalition. Amy makes frequent media appearances, including AZ Law Channel and Tony Katz Radio Spectacular. Additionally, she works with companies and candidates on branding and communication. 
Well said. It is only logical to anyone who has even the slightest economic sense that the effect of an “angry dragon” will be very serious blow-back, rippling through our very fragile economy.