Who yuans to revalue their currency?

There's an interesting article in the Wall Street Journal, "U.S. Stance on the Yuan Gets Tougher" (1/23/09) concerning treasury secretary nominee Geithner's position on the Chinese currency. The article describes how Geithner openly called out the Chinese on their currency manipulation practices - and if appointed, this stance will likely affect the treasury's stance on foreign currency manipulation.

This topic is really interesting because it provides insight on the somewhat counter-intuitive positions of a liberal and a conservative administration on the issue of "fair trade". One would expect that the Bush-admin would have pushed for a fairer currency in order to stimulate US exports and help foster the US manufacturing sector.

It seems strange that the Obad (Obama administration) would push for a fairer currency, knowing that this will a) hurt the Chinese and b) help support US manufacturing. Liberals have enjoyed the decrease in US manufacturing as it has "reduced" pollution (though just by exporting the pollution overseas) and it has increased our dependence on foreign trade (they love globalization). Perhaps this seemingly strange relationship can be added to the list of liberal paradoxes.

The Chinese aren't the only ones engaging in this currency manipulation, but they are one of the biggest contenders (along with the Japanese). This list from the U.S. Treasury U.S. Dollar Holdings shows some of our most generous dollar buyers. Here are some of the things I find most amazing over the one year period from 11/07 to 11/08 (in billions):

1. China's dollar holdings have increased from $460b to $680b
2. Japan's dollar holdings have actually slightly decreased from $590b to $577b
3. Russia, the U.K., and Caribbean banking centers have basically doubled their dollar holdings
4. Oil exporting nations have increased their holdings from $140b to $200b

China has obviously increased their holdings because they fear the dollar's depreciation -- there's nothing they fear more than a massive dollar depreciation that will make US exports more competitive.

It's very surprising that Japan has decreased their dollar holdings so significantly -- in fact, it's pretty troublesome to consider that their actions might be hinting at continued sell-offs in coming months... this will only improve our economic situation if we continue to unleash billions in bailout money.

It will be interesting to see if this topic comes up again in coming months as we beg foreign nations to buy up our bailout debt. Everyone seems to pussy-foot around the topic, fearful of causing a "red sea" of backlash. It seems pretty unlikely that the Chinese will continue revaluing their currency any time soon though - they're not about to start playing fair now with their economic stability on the line in terms of export figures.

Bottom line: if the Chinese want to be a major player on the global scene, it's about time they start playing by the rules. It seems like every other nation can get away with breaking a few rules, but if the US tries to do the same, everyone attacks the US for their 'unfair' behavior (think Kyoto treaty).

I think it's about time we revalued our definition of double standard.