Chinese officials are letting it be known that there will be a large revaluation of the reminbi “to satisfy domestic needs”. This move was made entirely to do a favor for Obama but if managed correctly it does work for Beijing as well and everything in China is carefully managed. Despite the claim that it is a domestic issue, they are planning to make the announcement before President Hu Jintao visits Washington next week.
China spends roughly 200 billion USD per year to manipulate the currency markets in its favor. Presumably it would be in a position to buy more Treasury bonds stabilizing bond prices. Mortgage interest rates have been climbing in the past two weeks as they are tied to the bond price. China has made it clear that they aren’t going to do any big changes overnight so as to maintain stability as they shift to bigger domestic economy. Some say the rise in the remindi will hurt China as they need to buy imports but not that much. China used its huge currency reserves during the crisis to buy up or lock in supplies from across the planet. You don’t need to worry about China, they have plenty of canned goods and oil fields, copper mines and on and on.
While the Republicans were trying to make health insurance reform Obama‘s Waterloo, Sec Geithner (who speaks fluent Chinese) was quietly making a deal with Mr Hu to outflank the Republicans. By November healthcare will be a positive issue for Democrats and they can point to gaining hundreds of thousands of jobs a month and while hanging the Republicans for losing 8 million jobs in the waning days of the Bush Administration.
Lets be clear, this does not fix any of our problems except the Republican problem and probably that one is only marginally contained. They still have all the money and control all the economic activity but they won’t be able to get control of Congress despite the treasonous Supreme Court trying to give it to their fascist (I mean corporatist) buddies. I see nothing to keep that double dip from coming but maybe the damage can be contained and used to enact real reform. www.prairie2.com