If you can take your eyes off the primary election coverage, watch Geithner. The US is engaged in a love trapezoid. The four corners are Beijing, Tehran, Tokyo, and Washington. Treasury Secretary Geithner is the Obama Administration’s front person. Track the news for the names of the other agents.
This is a very serious time. The pieces are linked. Some bullets as you watch the news flow.
1. The US faces the pressure of follow-through on Iran sanctions. Iran is an exporter of oil to Asia. Japan is dependent on imported oil. China is not self-sufficient. One part of this trapezoidal geometry is about oil.
2. Iran is feeling the heat from sanctions. The US wants to tighten them. It cannot do so without help from Asian “friends.”
3. China and Japan are each buyers of US Treasury securities. They each help finance the American fiscal deficit and the ongoing current-account deficits. They each want to diversify their reserves. They are not sellers, but they are reluctant additional buyers. This is truer for China than for Japan, but it is true in both cases.
4. China is glacially proceeding toward world reserve-currency status. It gradually allows its currency to strengthen against the dollar. It follows a policy that is fully rational for the Beijing oligarchs. It shrugs off political threats from Washington politicians (Schumer, Graham) who love to bash China while talking to their American constituents. China understands our political processes and our weaknesses. However, China also understands “realpolitik” and uses it. They learned US use of realpolitik from Nixon and Kissinger. Expect them to smile publicly but put some very intense private heat on Geithner.
5. Japan faces enormous economic pressure and sees the yen strength as now threatening. In order to weaken the yen, it must acquire other currency holdings in large quantity. (See the Cumberland website, www.cumber.com, for G4 central bank charts, and flip to those on the Bank of Japan. You will be able to observe how Japan expanded its balance sheet several years ago and subsequently contracted it. We expect them to expand it in 2012 as they seek to arrest yen strength.)
6. Japan is negotiating with China so that it may acquire reserve debt instruments denominated in Chinese currency. Beijing likes this because it is a step toward achieving world reserve-currency status. Geithner now worries, because the trend points toward a gradual and long-term weakening of the US position, as the world’s second (China) and third (Japan) largest economies maneuver their global positions.
7. Our Asian friends know that the US election cycle creates maximum vulnerability for the United States. That also makes circumstances more dangerous and raises risk profiles. Europe is of no help to us, given its internal crises.
We recall that a three-legged stool is a stable form. A four-legged stool is less stable. A four-legged stool with a trapezoidal top is least stable. Especially when one of the legs is Iran.
Watch Geithner in Asia and the news flow. Read between the lines, since the public statements will all be scripted and self-serving. Risk is high. Also, stay overweight energy. We are.
Read more: BI
- Forget The Election News: Keep Your Eye On Tim Geithner And The Love Trapezoid (businessinsider.com)
- The Chinese Yuan May Become A World Currency (mb50.wordpress.com)
- Tim Geithner Glitch In The Matrix Special: Will America Become Greece In Two Years – “No Risk Of That” (zerohedge.com)
- U.S. politics clash with reality over China currency (promoteliberty.wordpress.com)
- Wen calls for focus on common interests (upi.com)
BEIJING | Sun Feb 5, 2012 9:07pm EST
(Reuters) – China’s top newspaper on Monday defended Beijing’s rejection of a U.N. resolution pressing Syria‘s President Bashar al-Assad to abandon power, saying Western campaigns in Libya, Afghanistan and Iraq showed the error of forced regime change.
The commentary in the People’s Daily, the top newspaper of China’s ruling Communist Party, was Beijing’s clearest defence of its decision to join Moscow at the weekend in vetoing a draft United Nations resolution that would have backed an Arab plan urging Assad to quit after months of bloodshed.
The commentary suggested that Chinese distrust of Western intervention lay behind the veto, which was described by U.S. Secretary of State Hillary Clinton as a “travesty.”
“The situation in Syria continues to deteriorate and numbers of civilian casualties keep rising. Vetoing the draft Security Council resolution does not mean we are giving free rein to letting this heart-rending state of affairs continue,” said the commentary in the paper, which echoes government thinking.
China, not its Western critics, was acting “responsibly” for the sake of the Syrian people, it said. The author used the pen name “Zhong Sheng,” which can mean “voice of China” and is often used to give Beijing’s position on foreign policy.
“Currently, the situation in Syria is extremely complex. Simplistically supporting one side and suppressing the other might seem a helpful way of turning things around, but in fact it would be sowing fresh seeds of disaster,” said the paper.
China’s siding with Russia over Syria could add to irritants with the United States. Vice President Xi Jinping is due to visit there next week, burnishing his credentials as the Communist Party’s likely next top leader.
Beijing and Washington have also sparred over Iran, which faces tightened Western sanctions over its nuclear ambitions.
The commentary also laid bare broader Chinese concerns about Western-backed intervention in the Arab world and beyond.
China is one of the five permanent U.N. Security Council members that hold the power to veto resolutions.
In March, China abstained from a Council vote that authorised Western military intervention in Libya. That resolution became the basis for a NATO air campaign that led to the overthrow of Muammar Gaddafi, despite misgivings from Beijing and Moscow about the expanded campaign, which they said went beyond the resolution.
“Libya offers a negative case study. NATO abused the Security Council resolution about establishing a no-fly zone, and directly provided firepower assistance to one side in the Libyan war,” said the People’s Daily Commentary.
It also cited Iraq and Afghanistan in its case against the Syria resolution.
“The calamities of Iraq and Afghanistan should be ample to wipe clear the world’s eyes. Forceful prevention of a humanitarian disaster sounds filled with a sense of justice and responsibility,” said the paper.
“But are not the unstoppable attacks and explosions over a decade after regime change a humanitarian disaster?” it said.
(Reporting by Chris Buckley; Editing by Paul Tait)
- VIDEO: West angry at UN Syria vote veto (bbc.co.uk)
- Syria: UN veto gives Assad ‘licence to kill’ – opposition – BBC News (bbc.co.uk)
- Russia, China Block U.N. Resolution To Curb Syrian Violence (outsidethebeltway.com)
- Russia and China Veto Western Aggression Against Syria at the UN (02varvara.wordpress.com)
- Syria: Russia and China’s resolution veto shames UN, says William Hague – Telegraph.co.uk (telegraph.co.uk)
- Russia, China veto UN Security Council resolution on Syria (rt.com)
- AJC Dismayed by Russia and China Veto of UN Security Council Resolution on Syria (prnewswire.com)