In written responses to questions posed by the Senate, Geithner accused China of “manipulating” its currency, a phrase former-Treasury Secretary Henry M. Paulson and the Bush administration carefully avoided.

“President Obama – backed by the conclusions of a broad range of economists – believes that China is manipulating its currency,” Geithner wrote.

During his stint in the Senate, President Obama co-sponsored the Fair Currency Act of 2007, which defined currency misalignment as an export subsidy, paving the way for the U.S. Department of Commerce to impose countervailing duties on Chinese goods.

“At least partially as a result of the administration’s failure to address Chinese currency manipulation, the U.S. imported more than $232 billion in goods from China than we sold to it last year,” Obama wrote in support of the bill.

The bill failed to garner Congressional approval, but according to Geithner, “Obama has pledged as president to use aggressively all the diplomatic avenues open to him to seek change in China’s currency practices.”

Geithner also said the administration would push China on further economic stimulus.

“Because China accounts for such a large fraction of the world economy, a further slowdown in China would lead to a substantial fall in world growth (and demand for U.S. exports) and delay recovery from the crisis,” he said. “Therefore, the immediate goal should be for us to convince China to adopt a more aggressive stimulus package as we do our part to try to pass a stimulus package here at home.”

China’s economy expanded by just 6.8% in the 2008 fourth quarter, and 9% for the whole year. The world’s third-largest economy expanded by 13% in 2007.

When it came to China, former Treasury Secretary Paulson utilized a much lighter touch, an approach that emphasized diplomacy with the hope that this non-confrontational approach would gradually induce that communist nation into accepting a more open economy.

When asked whether he would continue the U.S.-China Strategic Economic Dialogue initiated by his predecessor, Geithner acknowledged that while there are certain challenges posed by Chinese economic policy, there are also opportunities and benefits inherent to increased cooperation.

“If confirmed, I am committed to a deep engagement between our senior economic officials to address differences and effectively resolve problems on these topics,” Geithner said.

Still, neither Geithner nor President Obama seem to be starting out on the right foot with Chinese policymakers.

Chinese officials “will be more than annoyed” with Geithner’s comments Nicholas Lardy, an economist who specializes in China at the Peterson Institute for International Economics in Washington told Bloomberg News. “They don’t like being singled out, and they don’t like countries explicitly criticizing them for the way they run their economy.”

Source: Geithner, Obama Put Pressure on China Over Currency

And yet I eat a lot of Chinese food, which seems somehow unpatriotic, but like most self-absorbed gluttons, I cannot stop because I don’t want to, just like I still eat tacos even though Mexico is taking over the USA, and I am uneasy about that, too, and I walk around outdoors without an aluminum foil hat to shield my brains from interstellar rays and invisible CIA cameras reading my thoughts.

News.bbc.co.uk had nothing to say about how one’s dietary excesses are reflective of one’s patriotism, or about any of my other weird paranoid delusions, either, but it did say that (just as bad) up to now, “Most of China’s foreign trade is settled in U.S. dollars or the euro, leaving exporters vulnerable to exchange rate fluctuations” and, of course, vulnerable to all the little bites taken by middlemen.

Now, “China has said it is to allow some trade with its neighbours to be settled with its currency, the yuan. It means if the two parties to a trade have yuan available, they need not enter world exchange markets to pay”, which will save them both a lot of time and money, as they can bypass all those expensive intermediaries that each take a little bite of your action.

Now, without these parasites, the inflationary implications caused by such cost-push factors are eliminated! Inflation goes down!

Anyway, the announcement is almost a fait accompli, as “Analysts told Chinese media that the yuan was already being used in some South East Asian countries and that China was happy to see such use extended”, which suddenly explains many of my unnamed fears and a lot of frightening nightmares about being eaten by gigantic egg rolls, instead of the delicious other way around.

Well, egg rolls or not, pretty soon everybody is going to have more egg rolls, as the Chinese are engaging in massive stimulus spending, too, just like we and everyone else are, and “announced more measures to stimulate domestic consumption”, which included such things as “subsidies to rural households for the purchase of household appliances and other goods, and the setting up of new stores and distribution centres in rural areas.”

Subsidizing raw consumption! Wow! Now THAT’S stimulus spending! But maybe such heroic measures are just to take up the slack, as the Chinese are taking a whack, which is almost poetic, which is why I wrote it that way, but also for dark, mysterious reasons about which one can only speculate and shudder, but mostly because the Commerce Department announced that consumer spending in America fell 0.6% in November, and U.S. exports fell for a third straight month, which is a lot, which also explains why the Chinese are taking a whack from slack!

What slack? From Marketwatch.com we learn that the Federal Reserve reported, “Stung by the loss of $2.81 trillion in their net wealth, U.S. households paid down their debts in the third quarter for the first time since at least 1952.”

The actual numbers are that “As of Sept. 30, households’ total outstanding debt shrank at an annual rate of 0.8% from $13.94 trillion to $13.91 trillion”, the difference being a hefty $300 billion in foregone consumption right there, unless it was all offset by higher incomes, which it wasn’t! Gaaahhh! We’re freaking doomed!

As staggering and as bewildering as to what any of this could possibly mean, it was not until later that they reveal that when you adjust this fall in nominal consumer spending for the effects of inflation (perhaps using the recently revised Gross Domestic Product Deflator that shows that inflation in prices is 3.9%?), then “Real consumer spending rose 0.6%”, which seems weird and contradictory until you remember that “Everybody’s lying to me and that is why I understand nothing”, and then everything makes sense again.

And that sudden clarity, that transcendental moment of total consciousness, is when you realize that you can trust only gold, silver and oil.

You wish you could trust The Mogambo, too, but you’ve seen how he looks at your wife behind your back, and you realize, “This guy’s a real scumbag! But maybe his advice about gold, silver and oil is good, which will make up for it!”

Source: Steady Diet of Chinese Currency

“Chimerica stocks are Chinese companies,” says Tom. “They do business in China, with Chinese management, Chinese employees, and Chinese currency. They make products for Chinese consumers.

The key is that these Chinese companies list on US stock exchanges.

Chimerica stocks list in the US because they can’t list in China or Hong Kong. “Going public” in China takes about three years. But in America, it only takes about six months. According to Barron’s, “Even now, for every company that goes public [in China] there are probably a hundred in the queue, and a lot of companies want money sooner rather than later.”

How does this happen?

A shell company is a stock without a business. The business has no assets or operations, but it still has a name and a stock symbol. To list in America, Chinese companies find an American shell company and back themselves in. Lawyers call this a “reverse merger.”

Why are Chimerica stocks good for investors?

According to Barron’s, they sell for an average 10 times earnings. The price-to-earnings ratio of the Shanghai Composite – China’s main stock exchange – is 27. Chimerica stocks are cheap because Chinese investors cannot open brokerage accounts in the United States to buy these stocks. American investors don’t know about them. Analysts don’t cover them.

Tom has put together a list of these stocks, which can be found here: Tom Dyson’s list of Chimerica stocks.

The buyer? An anonymous Chinese billionaire.

According to the report: “The anonymous Chinese entrepreneur bought a mix of vintages of Romanee Conti, a Burgundy wine and considered to be among the world’s most exclusive with only 450 cases produced each year.”

China is booming, despite the recent sell-off of Chinese stocks, but how do US investors profit from the China story without getting burnt?

Tom Dyson reckons he’s found the answer: ‘Chimerica’ stocks.

“Chimerica stocks are Chinese companies. They do business in China, with Chinese management, Chinese employees, and Chinese currency. They make products for Chinese consumers.

“Chimerica stocks are the best way to invest directly in China. According to Barron’s, they sell for an average 10 times earnings. The price-to-earnings ratio of the Shanghai Composite – China’s main stock exchange – is 27. Chimerica stocks are cheap because Chinese investors cannot open brokerage accounts in the United States to buy these stocks. American investors don’t know about them. Analysts don’t cover them.

“I’m not ready to invest in China right now. The Chinese stock market is down 44% from its highs in October 2007 and is still in a downtrend. When the market turns around – which should happen later this year – I’ll pick my China investments from this list…”

The renminbi has broken through the psychological barrier of seven yuan to the dollar, the first time the Chinese currency has done so in 14 years.

The Financial Times reports that the Chinese currency is up more than 4% against the greenback so far this year.

China’s communist leadership is under pressure from the US to allow the renminbi to climb. However, the pressure on the currency to rise might be abating, according to the FT. Today, China recorded the first drop in its quarterly trade surplus in three years.

“China’s growing middle classes is where the money is to be made in China,” says Greg Guenthner.

“As China’s working and middle classes grow, so too does the country’s purchasing power. Naturally, retail sales have experienced a dramatic surge. Domestic retail sales skyrocketed 20.2% for the first two months of 2008, to more than 1.74 trillion yuan, or about $248.1 billion. That’s more than 5% higher than last year.

“One of the true hallmarks of middle-class growth is the sale of these non-essential and luxury items. Even the poorest working members of a society will spend money on food staples. However, the working poor, especially in nations with less-developed economies, won’t be dropping big chunks of their paychecks at the Gap.”