US Treasury Secretary Tim Geithner has been hitting the air waves and the editorial page during his trip to the APEC conference in Singapore. From Bloomberg to CNBC, Geithner has been consistent in stating that it's very important the US maintain a strong dollar. However, he is advocating the opposite for the Asia-Pacific nations.
In an editorial in the Asian WSJ with the finance ministers of Indonesia and Singapore, Geithner said. "Market-oriented exchange rates in line with economic fundamentals will be essential in assuring the resource and sectoral shifts to match and foster the new patterns of demand." Clearly, they are advocating a path of boosting private demand to stimulate domestic growth and move away from export dominated policies. How to do that? "Among other things, emerging economies must strengthen their social-safety nets through sustainable health and retirement-benefit schemes, thus reducing the need for high precautionary saving that contributes to global imbalances."
The elephant in the room is clearly China and their managed currency peg to the US dollar. Yesterday, the Chinese made a slight shift in their language about the currency in possible anticipation of this criticism. In its third-quarter monetary policy report, the People's Bank of China changed from keeping the Yuan "basically stable at a reasonable and balanced level" to "Following the principles of initiative, controllability and gradualism, with reference to international capital flows and changes in major currencies, we will improve the yuan exchange rate formation mechanism."
Or this could've been done in anticipation of President Obama's first Far East trip. Many of those business leaders that supported President Obama during his presidential campaign want him to fulfill a promise on China. Last year, Obama pledged to "insist that China stop manipulating its currency because it's not fair to American manufacturers, it's not fair to you and we are going to change it when I am president of the United States of America."