China U.S.A. Relations and Rhetoric…Keep an Eye on Comments!

As we have mentioned several times, Timothy Geitner the new Treasury Secretary recently mentioned “manipulation” concerning Chinese currency.

Why are we watching this so closely?

As of September 2008, China became the largest holder of our debt (2 Trillion dollars according to government records, seconding Japan.) This makes sense as they are a huge exporter of goods, that we as Americans, consume. Our watchful eye on the rhetoric between US, China, and many other national leaders, recently coming from a summit in Davos, is on the forefront for us, as China has through their purchasing power of our debt (treasuries) significant influence over interest rates.

Was it wrong for Geitner to mention “manipulation” concerning China’s currency policy?

This is not our battle to fight, but our concern is that China begins cutting back on their purchasing of Treasury debt which may have an effect of pushing rates higher.

Again we offer extreme caution towards long term fixed income instruments, there may be unknown risk to many who have unknowingly flocked to this possible “fear bubble”! JK