Washington PostU.S., China Clash on CurrencySun Dec 17, 2006 18:16
U.S., China Clash on Currency
Both Countries Assertive as Economic Talks Open in Beijing
By Ariana Eunjung Cha
Washington Post Foreign Service
Friday, December 15, 2006; D01
BEIJING, Dec. 14 -- U.S. and Chinese leaders clashed publicly on the opening day of strategic economic talks, with Treasury Secretary Henry M. Paulson Jr. pushing China to revalue its currency and Chinese Vice Premier Wu Yi saying Americans do not have a full understanding of the situation.
After standing by as U.S. officials criticized her country's economic policies in the media during the past week, Wu set the tone for the meeting with assertive introductory remarks that spanned 20 typed pages and 5,000 years of Chinese history.
"Some American friends are not only having limited knowledge of, but harboring much misunderstanding about, the reality in China," Wu said, according to a copy of her remarks provided by the Ministry of Foreign Affairs. For example, Wu noted that China needed to create enough jobs to absorb an estimated 300 million rural workers -- equal to the entire population of the United States -- into its urban economy in the next two decades.
Paulson was equally aggressive in his follow-up speech, saying that the U.S. government's "strong view" is that China should allow its currency, the yuan, to be more flexible. Most countries allow the value of their currencies to be set in global markets, but China intervenes to keep its currency pegged to the dollar at an exchange rate that many Western economists regard as skewed in China's favor.
The Chinese economy "would be more effective under a regime where currency values are determined in a competitive, open marketplace based upon economic fundamentals," Paulson said. A revaluation of the yuan upward would make U.S. goods cheaper in China and Chinese goods more expensive in the United States.
Throughout the day, U.S. officials pushed on issues such as trying to resolve the huge trade imbalance between the two countries and making sure that China lives up to commitments it made five years ago when it joined the World Trade Organization. By the afternoon, they said they were optimistic.
"They were very much in a receiving mode," Labor Secretary Elaine L. Chao said in an interview with reporters. "They were listening very carefully."
Commerce Secretary Carlos M. Gutierrez said that the meeting "exceeded expectations" and that "it was a very candid . . . honest, solid dialogue."
High-level U.S. officials, interviewed after the close of meetings for the day, said the two sides agreed on many things in principle, such as the need to keep their economies open to other countries. But specific measures and a timetable were less clear, with the United States pushing for rapid change and China seeking to move cautiously.
Skepticism toward foreign trade, particularly with China, played a major role in the recent U.S. elections, and proposals for punitive tariffs or other protectionist measures could gain support in Congress next year.
"I sense that they have an understanding of the stakes," Gutierrez said. "And the stakes are very large. You are talking about a lot of business, a lot of jobs on both sides. We are their No. 1 customer."
While most of the day was focused on U.S. requests of Beijing, China also listed some priorities: fewer obstacles to the export of U.S. technology and to Chinese investment in the United States. The complaint about U.S. export controls, in particular, led to some tense exchanges, U.S. delegates said,
"They would like no restrictions, and we have restrictions, so there are certain things that they would like that we can't give on," Guttierez said.
U.S. Trade Representative Susan C. Schwab said in an interview that she told the Chinese that their country was "slowing if not backsliding" on economic reforms.
Paulson is a former Wall Street executive who has made dozens of trips to China. He has taken command of the Bush administration's economic discussions with that country and took a high-level delegation of Cabinet members and others with him on this trip as he seeks to make progress toward resolving thorny disputes.
The format of the meeting included formal presentations and broad debate on issues such as China's transport problems and the U.S. culture of easy credit.
Perhaps the meeting's most anticipated and sensitive talks -- about whether China should allow the yuan to rise in value -- were anchored by a statement from Federal Reserve Chairman Ben S. Bernanke, who accompanied Paulson on the trip.
Bernanke said an increase in the currency's value would benefit China, according to U.S. officials present at the talk.
"Other people piped in to say the U.S. has a very interested stake in China's economic well-being," Chao said.
Published December 15, 2006 7:27 PM EST
*** BREAKING NEWS ***
CHINA TO DUMP ONE TRILLION IN U.S. RESERVES!!!!
Tells visiting Bush administration officials they will not sit back and lose their shirts as U.S. Dollar collapses; they are getting out fast and large!!!!!!
BEIJING, CHINA -- Sources with a U.S. Delegation in Beijing have told The Hal Turner Show the Chinese government has informed visiting Bush Administration officials they intend to dump One TRILLION U.S. Dollars from China's Currency Reserves and convert those funds into Euros, gold and silver!
China was allegedly asked to withhold the announcement until Bullion Markets closed for the weekend to prevent an instant spike in gold and silver prices. This delay will give the world the weekend to consider appropriate actions rather than have a knee-jerk reaction which could see the U.S. Dollar totally collapse in value Monday.
According to this Senior source, China told the U.S. delegation they no longer have faith in U.S. Currency for several reasons:
1) The Federal Reserve Bank ceased publishing "M3" data in March, making it nearly impossible for anyone to know how much cash is being printed. China said this act made it impossible to tell how much a Dollar is worth.
2) The U.S. Dollar has lost upwards of thirty percent (30%) of its value against other foreign currencies in the recent past, meaning China has lost almost $300 Billion simply by holding U.S. Dollars in its reserves.
3) The U.S. has no plans whatsoever to reduce deficit spending or ability pay down any of its existing debt without printing money to pay it off.
For these reasons China has decided to implement an aggressive sell-off of U.S. Dollars before the rest of the world does so. China reportedly told the US delegation; "we are the largest holder of U.S. Currency and if the rest of the world unloads theirs before we unload ours, we will lose our shirts."
Early this week, in an unusual move, the Bush administration sent virtually the entire economic "A-team" to visit China for a "strategic economic dialogue" in Beijing Dec. 14 and 15.
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke lead the delegation, along with five other cabinet-level officials, including Secretary of Commerce Carlos Gutierrez. Also in the delegation is Labor Secretary Elaine Chao, Health and Human Services Secretary Mike Leavitt, Energy Secretary Sam Bodman, and U.S. Trade Representative Susan Schwab.
The Bush administration wanted to get China's cooperation in preventing a dollar collapse. The Hal Turner Show has been told the effort failed.
According to the source, Fed Chairman Bernanke left the meeting "pale and in a cold sweat" as the implications of China's decision seemed to sink in.
The implications are enormous: The U.S. Dollar is likely to collapse in value against all other major currencies as early as Monday, December 18.
This would cause a worldwide sell-off of dollars, create almost immediate "hyper-inflation" in the US and also impact world markets at a level "worse than the Great Depression of 1929."
Arabs to the rescue?
In a strange twist of fate, Arabs and OPEC may come to the rescue of the U.S.!
Senior officials in OPEC made clear that they too would be severely harmed if the U.S. Dollar collapsed, and hinted they "would not be inclined to sell oil to any particular nation that intentionally caused such a collapse."
This was a thinly veiled threat to China, which depends heavily on OPEC oil for its rapidly developing energy needs.
The OPEC officials even went so far as to say "Since China lacks the ability to project their military power, OPEC nations need not worry about any Chinese military response to an oil cut-off ."
Such brutally candid remarks will not sit well with China; and signal ominous things for the U.S. .
Arabs and OPEC will want something in return for saving the U.S. from economic collapse and it is already widely speculated what they want will be a complete change in U.S. backing of Israel in the Middle East.
If such demands are made by the oil-rich Arabs, the U.S. would be left with little choice but to virtually abandon the jewish state to preserve itself.
WAKE UP! WAKE UP! WAKE UP!
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