What’s that, Lassie? Little Timmy fell down the well?

I’m not sure what Secretary Tim Geithner is smoking these days, but I’m sure there’s a huge market for it.  Maybe we could tax it then pay off the national debt.   The news of the Treasury Secretary’s trip to China is just developing enough of a surreal feel that I felt like Photoshopping a Buddhist begging bowl on to Beavis and entitling it Timmy Does China.  However, I’m not that skilled at photo shop and I’m still trying to finish this paper on currency regimes so I don’t have the time to be that creatively unpaid.  Let’s just label this a big enough reality disconnect to either be drug induced or a product of Hollywood.  Well, not exactly Hollywood, but CNBC, is that close? This blurb is from a thread today at Market Watch.

U.S. Treasury Secretary Timothy Geithner said Tuesday that China has confidence in the U.S. economy, even as official Chinese editorials and news reports berated Washington for selling a “devalued dollar.”

Geithner, who was wrapping up a two-day visit to China, said officials there shared his positive economic outlook for the U.S. and understood the Obama administration’s need to run higher deficits for a temporary period.

“They’ve got a pretty good feel for what we are trying to do and are very supportive,” he said in an interview with CNBC.

I’m still wondering if the folks in charge of protocal and explaining how other cultures work are understaffed at the White House.  Not since POTUS gave HRH an ipod with his speeches on it has there been such a misread of cultural differences.  Somebody needs to explain to the Treasury Secretary that criticizing your future hosts (who are well known to be hyperconcerned for their national image) for currency manipulation in front of a world wide audience isn’t going to really get them to open up to you.  Giethner’s confirmation hearing was labelled by the WSJ to be a China Bash.

Geithner’s visit to Beijing, his first since assuming the helm of the U.S. Treasury, included scheduled meetings with Chinese President Hu Jintao, Premier Wen Jiabao, and the nation’s top commerce, finance and banking officials.

In the CNBC interview, Geithner downplayed his earlier criticism of Beijing, in which he accused the Chinese government of keeping the yuan at an unreasonably low level against the U.S. dollar in order to boost China’s exports.

He did say, however, that China recognizes the need for a more flexible exchange-rate system, saying such a move “will help them … to use monetary policy to address future growth and inflation challenges.”

Geithner’s comments contrasted with the downbeat look at the U.S. economy reported in China’s state-run media.

I’m actually beginning to wonder if Geithner knows exactly what ‘state-run media’ implies here.  Maybe a refresher from the State Department would have helped him on that too.

The China Daily — a state-run English-language newspaper often used to air China’s views to the wider world — also had a news report saying Beijing officials had voiced worry about the U.S. fiscal and monetary situations.

“The government and experts have expressed concern that Washington’s mushrooming deficit, generated by massive government borrowing to fuel its economic recovery plan, and the ultra-loose monetary policy will undermine both the dollar and U.S. bonds,” it said.

It quoted a Peking University economist as saying that, in the short term, China has little choice but to buy dollar-denominated assets, “considering overall risk and liquidity.” But eventually “China might have to adopt a ‘de-dollar’ strategy if the U.S. failed to restructure its economy by increasing the country’s savings rate and reducing its current-account deficit.” See full China Daily article.

Several of the Chinese press reports cited Beijing’s holding of $768 billion in Treasurys as of March, making it the world’s largest holder of U.S. sovereign debt.

A separate China Daily article cited China Society of Macroeconomics Secretary-General Wang Jian as saying: “Prospects for the U.S. dollar and U.S. Treasurys do not look good at the moment, and even worse in the long run.”

These messages comes after China asked the G20 to consider shifting reserve currencies to a basket that de-emphasizes the dollar earlier this year. So, I’m going to have to go to the British press here, because as you know, our MSM is pathetic. (Brad, you are so right, Why, oh, WHY can’t we get a better Media.)  The BBC reports that Geithner’s speech at the University of Peking basically elicited laughter.

US Treasury Secretary Timothy Geithner has told the Chinese government its investments in the US are “very safe”, despite a growing budget deficit.

Mr Geithner is on his first official visit to China, the biggest foreign investor in US treasury bonds.

Ahead of meetings with President Hu Jintao and Premier Wen Jiabao, he said the US and China must work together to fix the global economic system.

Mr Geithner said the US would move swiftly to get its debt under control.

In a speech at Beijing University at the start of his two-day visit, Mr Geithner reassured his Chinese hosts that they need not worry about the estimated $770bn (£475bn) they have invested in US treasuries, a class of US government debt.

“Chinese financial assets are very safe,” he said, drawing laughter from the audience. (Emphasis mine.)

The Gateway Pundit provides the background on the inside joke.  It is projected that the Obama administration will quadruple the budget deficit this year. (Hence, Beavis needs a begging bowl.)  I’ve blogged about this too, but they’ve got more recent numbers.  Giethner actually tried to reassure the Chinese that the administration was going to get the deficit under control.   Count the Chinese as big skeptics.

Seventeen of 23 Chinese economists polled in connection with Geithner’s visit said holdings of Treasuries are a “great risk” for the nation’s economy, according to a Chinese state media report yesterday. Still, the majority argued against quickly cutting them, the Beijing-based Global Times reported.

Geithner, 47, needs to show how the U.S. can prevent the value of China’s investment from being eroded by a weaker dollar or by the inflation that might be stoked by the stimulus money being pumped into the U.S. economy, according to Yu.

“It will be helpful if Geithner can show us some arithmetic,” he said.

Geithner told reporters on the way to Beijing that he’ll continue U.S. efforts to seek a larger Chinese role in organizations like the International Monetary Fund.

Evidently, the begging bowl comes with incentives like promises to the Chinese on the IMF. This is just plain embarrassing. The only thing that makes it less embarrassing is the big pass the MSM is giving the story. The problem is that we owe the Chinese so much money that this amateurish foray is serious business. First the Russians tell us there’s an upcoming US revolution and that US capitalism is dead, now the Chinese openly laugh at our Treasury Secretary. Hey, Sarkozy! Any chance you’d consider buying New Orleans back? You could probably get it on the cheap given the exchange rate these days.