Sense on Cents

Treasury Secretary Tim Geithner’s assertion to Chinese university students that “Chinese financial assets are very safe” in the United States was met with derisive laughter.

The Financial Times reports, Geithner Faces Tough Challenge to Win Round Skeptical China. Why are the Chinese skeptical? Could it be that they do not “trust” Tim and his minions?

In Tim’s defense, the Chinese lack of trust in the United States predates this administration. In fact, the lack of trust between the U.S. and The People’s Republic of China extends far beyond the financial arena. That said, the basis for financial transactions and integrity is trust.

The Chinese were extremely dismayed by the lack of support from the Bush administration for various investments made by the Chinese here in the United States. The jawboning by Chinese Prime Minister Jiabao prior to the G-20 still resonates. Are the Chinese trying to create leverage in the midst of ongoing negotiations? Always. Do the Chinese have reason for concern? Most assuredly.

As investors in our country, the Chinese have witnessed numerous violations of contracts, the diminution of property rights, the decline in the value of the dollar, and a major investor (Bill Gross) questioning our sovereign creditworthiness.

Against that backdrop, Secretary Geithner’s vows of future fiscal prudence and discipline currently ring quite hollow.

The ridicule and laughter expressed by these Chinese students is nothing short of, “Get real, Mr. Secretary. Don’t tell us you’ll protect our investments. Show us!!”

LD