Secretary Geithner made some interesting comments during an interview with the WSJ on Fri.
This is the citation:
Solomon, Deborah, 2010. Q&a: geithner on the economy, tax cuts, and china. The Wall Street Journal, Sept. 12.
This is what he said in response to a question about China's commitment to currency reform:
Are you satisfied with China’s progress on the yuan?
"Geithner: Of course not. China took the very important step in June of signaling that they’re going to let the exchange rate start to reflect market forces. But they’ve done very, very little, they’ve let it move very, very little in the interim. It’s very important to us, and I think it’s important to China, I think they recognize this, that you need to let it move up over a sustained period of time."
My view is that we need concrete action regarding the currency issue because it affects other countries beyond the US. For example, china appears to be purchasing Japanese government bonds using US Dollars gained from the extremely favorable balance of trade. This is drastically strengthening the Yen and producing a major threat to the Japanese economic recovery while at the same time the Yuan is greatly undervalued versus the US Dollar because of Chinese government control.
These types of imbalances always readjust in a radical way, creating even more worldwide economic hardship in terms of reduced GDP growth.
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