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China: Laughing at the Message, or the Messenger?

U.S. Treasury Secretary Tim Geithner was laughed at in a meeting with Chinese students in Beijing, when he tried to assure them that China's dollar assets were "quite safe." . All right, he had a hard line to deliver. It's like a developing country's finance minister saying "I will not devalue my currency" even as he is about to.

On the other hand, maybe at least part of the derison was directed at Mr. Geithner himself, rather than at his country. For it was he, fifteen years earlier, who had crafted a policy that put China on a Latin America-style austerity program in 1994, when the country was not suffering from anything more than a liquidity crisis. another Treasury official might have acted differently.

An austerity program is unacceptable in China, particularly when it is undeserved, and China vowed never to be put in that position again. That accounts for its fixation on accumulating currency reserves, especially U.S. dollars, that has now pushed the UNITED STATES to the brink.

So who is laughing now? It is said that he who laughs last laughs best. Unfortunately, that person is unlikely to be Timothy Geithner.