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The following "initiative" from Mr. Geithner follows on from a theme articulated earlier in the week, in which the older and supposedly richer (in fact, the most indebted) economies are prepared to grant more power to the newer and less affluent (in fact, surplus economies with huge currency reserves and savings) economies in the G20, with respect to IMF voting rights.

WASHINGTON (MarketWatch) -- The United States has linked a faster rise in China's currency to a deal that would give the Asian country more sway at the International Monetary Fund. In a speech to the IMF's governing council on Saturday, Treasury Secretary Timothy Geithner said any agreement to give emerging market economies more voting power at the IMF "needs to be accompanied with more progress by countries, particularly the surplus countries, towards more market-oriented exchange rate policies and policies that will reduce reliance on exports and strengthen domestic demand." The top Chinese representative at the IMF talks, Zhou Xiaochuan, the head of China's central bank, has already rejected any link between the two issues. The U.S. has been seeking new levers to force China to let its currency rise.

Surely there is great irony in the fact that Mr. Geithner has so little leverage to exert over the PBOC and central banks of the G20 "tigers", that the reverse situation of China and the other BRICs considering how many votes should be allotted to the US, UK, France, Spain etc, would be a much more plausible scenario.

Moreover, there is further irony in the fact that the PBOC are doing the US a massive favor at present by unloading their US dollars in exchange for yen, euros and Aussie and Canadian dollars, which has the effect of enabling the US to have the most successful stance in competitive devaluations, with the side benefit for China that the exports from Germany, Japan, Canada etc will be relatively less competitive in world markets than the yuan based manufacturing, which is tied to a depreciating US dollar.

From the viewpoint of IMF realpolitik, it really feels as though the tail (Mr. Geithner) is trying to wag the dog [PBOC].

Source: Is Geithner in a Position to Make Demands on China?