We’ve known for months now that China is skeptical about our new spending habits. The Asian power probably wasn’t too happy before either, but with the new administration throwing around money like Paris Hilton in a Gucci store, well… let’s just say it’s gotten a bit more vocal about its distaste.
Considering how much China has invested in us over the years, I can’t say that I blame it all that much for expressing concern with out seemingly irresponsibility. As tense as the U.S.-Chinese relationship can get, we both rely on each other a little too much for comfort, a fact that China has been painfully reminded of ever since the recession began.
The Obama administration has released more than one assurance to China, all of which amount to: “Don’t worry. We know what we’re doing.” And yesterday, our esteemed Treasury Secretary Timothy Geithner even tried to assure the Chinese in person. Speaking at Peking University, an institution that he incidentally studied at back in the 1980s, he told them that, “Chinese assets are very safe.”
Quote. Unquote.
The response from the largely student dominated audience was to laugh, which isn’t a good sign considering that Geithner wasn’t trying to be funny.
The Exits Are Here, Here, Here And Here. Now Run.
Their derision isn’t being widely published, and if anything, Geithner has hailed the visit as a success, claiming that the two-day visit resulted in a better understanding and more firm agreements between the two countries. He even went so far as to claim that the officials he spoke with shared his belief that the U.S. had seen the worst of the recession and that things are looking up now.
But how much of that is political pandering? The Chinese government is far from stupid, and just like any other adept group of politicians out there, they know what’s at stake and how to play the game properly. So I’m sure they know that the situation is far more tricky than our officials are letting on.
Students in China might be able to get a few chuckles out of Geithner’s speech, but for both their government and ours, it’s no laughing matter.
I believe that Steve Sjuggerud explained it best when he wrote in today’s DailyWealth:
“In my career, I’ve learned there’s nothing surer in finance than this: When a Treasury Secretary explicitly tells you ‘your money is safe,’ then your money is in big trouble… Why? The simplest answer is, when your country’s currency is safe, you don’t have to tell people it is.”
While his facts and figures throughout the article were telling as well, let’s just skip to the end, where he gave this word of advice: “…I think the treasury secretary doth protest too much. The historical record is terrible. Position yourself accordingly.”
Regardless of how high U.S. markets skyrocketed yesterday and how much confidence consumers have gained, I think that’s a warning you should take to heart.
Tuesday, June 02, 2009 - by Jeannette Di Louie, Assistant Editor, Mt. Vernon Research
