The Great Wall Of Geithner

The Helicopter Ben and Timmy Show isn't exactly what you would call "accountable" to the American people.  That apparently includes the United States Senate as well.  Throw in the subject of the Senate's ire being China's currency policy and the Fed's refusal to pull China's chain on this -- because they can't, China has all the leverage here -- and you have a recipe for a good old fashioned Beltway turf war.

Democratic and Republican senators alike pilloried Treasury Secretary Timothy Geithner on Thursday for refusing to label China a currency manipulator and for ignoring a congressional mandate to issue a report on China's exchange-rate practices.

Few issues spark bipartisan agreement in Congress like criticism of administrations for refusing to get tough with China over its fixed exchange rate. Critics charge that China sets the yuan at an unfairly low rate against the U.S. dollar, making American products more expensive in China and Chinese products cheaper here, exacerbating the U.S. trade deficit and holding down U.S. export-driven jobs.

"I'm not sure what this administration's policy is ... and I don't see a China economic framework," complained Senate Finance Committee Chairman Max Baucus, D-Mont., adding that federal agencies lack a cohesive strategy for dealing with China.

The top Republican on the panel, Iowa Sen. Charles Grassley, needled Geithner about earlier remarks from President Barack Obama — made during Geithner's confirmation hearings — that he thought that China manipulated its currency to get a home field advantage. The Treasury chief repeatedly dodged questions about whether Obama still thinks that.

"So what does President Obama believe? You've had discussions with him," an exasperated Grassley asked, failing to get a firm answer.

Geithner repeatedly responded that the Obama administration is pressing China to level the playing field by opening its markets to international trade. He said that pressure from the U.S. government and others had helped China agree to modify its "indigenous innovation" policy, which protected some of its domestic manufacturers from competition but harmed U.S. exports and American firms that operate in China.

The reality is that the Senate can huff and puff all it wants to, but if the US decides to push the currency war with China right now, it's going to be a disaster.  China can afford to call in our markers if they so choose.  We can't.  That's the bottom line, and both Helicopter Ben and Timmy damn well know it.  For once, I'm backing the Glimmer Twins here over the Senate.  Pissing China off right now would assure we end up in that double-dip recession and it would happen overnight.

Long term we need to get out of China's back pocket, but it's going to be a long crawl to get there.