We're a bit of a broken record about China's ongoing currency manipulation.  But there's a reason why we keep shouting the same message-- China keeps cheating, and it's working for them.

The U.S. racked up a record $295 billion in trade debt with China last year, much of it due to China's policy of artificially undervaluing its currency in order to boost exports.

Basically, Beijing buys dollars and hordes them in order to set its own exchange rate.  This happens to be illegal under trade agreements China has signed, but Beijing isn't losing any sleep over it.

You'd think, however, that the U.S. would be doing all it can to stop China's currency peg.  But guess again.

According to Reuters reporter Emily Flitter, the U.S. Treasury Department has given the People's Bank of China a direct computer link to its auction system.  This means that, unlike any other central bank in the world, China can now bypass Wall Street when buying U.S. government debt and go straight to the U.S. Treasury.  This is the Treasury's first-ever direct relationship with a foreign government, according to Flitter.

Other central banks, like the Bank of Japan for example, place orders for U.S. debt with major Wall Street banks designated by the government as primary dealers. Those dealers then bid on their behalf at Treasury auctions.

Since June 2011, though, China has been able to participate in auctions without placing bids through primary dealers.

Flitter says the change was not announced publicly or in any message to primary dealers and that although there is "no prohibition on foreign government entities bidding directly, the Treasury's accommodation of China is unique."

This sort of accomodation is troubling, to say the least.

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