Geithner: Forget what I just said, now I mean the opposite

By Edward Harrison of Credit Writedowns

Is it just me or did Secretary Geithner just talk out of other side of his mouth? Today he wrote an Op-Ed in the Wall Street Journal with two Asian leaders to mark a big meeting of APEC (Asian Pacific Economic Cooperation) in Singapore.

The WSJ article started out with a bunch of diplomatic niceties about how everyone was working together and must continue to do so, so that all may prosper.

We have just lived through the greatest challenge to the world economy in generations. In acting together, policy makers have shown that they understand the most important lesson of this crisis: Our economies are inexorably linked. We must now work together to ensure strong, stable and balanced growth in the future…

We also must keep our sights on maximizing the potential of global markets. Both exports and imports remain critical stimulate the flow of knowledge and innovation that is enabling emerging economies to catch up with developed-world living standards.

Then it went on to re-affirm the utility of APEC, which people like Andy Xie are calling useless.

APEC will play an indispensable role in establishing strong, sustainable and balanced growth. Our 21 members—which include nine members of the G-20—account for 40% of the world’s population, over half of global GDP and nearly half of world trade. Our ranks include the world’s largest and fastest-growing economies.

But, you kind of got the feeling, this was leading to something else. Wait…wait… hold it… there it is – halfway through paragraph six:

Depending on individual economies’ circumstances, a combination of macroeconomic policy adjustments and structural reforms will be needed. Market-oriented exchange rates in line with economic fundamentals will be essential in assuring the resource and sectoral shifts to match and foster the new patterns of demand.

Everyone knows they are talking about the Renminbi. Remember, Secretary Geithner is the same fellow who accused the Chinese of manipulating their currency during his confirmation hearings. And most people think a freer floating Renminbi would be revalued not devalued.

Yesterday, I posted “Geithner impersonates Nicholson – America, you can’t handle the truth” in which Secretary Geithner was saying he supports a strong U.S. currency, but today he is talking about “market-oriented exchange rates.”

C’mon. We’re not that stupid.

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About Edward Harrison

I am a banking and finance specialist at the economic consultancy Global Macro Advisors. Previously, I worked at Deutsche Bank, Bain, the Corporate Executive Board and Yahoo. I have a BA in Economics from Dartmouth College and an MBA in Finance from Columbia University. As to ideology, I would call myself a libertarian realist - believer in the primacy of markets over a statist approach. However, I am no ideologue who believes that markets can solve all problems. Having lived in a lot of different places, I tend to take a global approach to economics and politics. I started my career as a diplomat in the foreign service and speak German, Dutch, Swedish, Spanish and French as well as English and can read a number of other European languages. I enjoy a good debate on these issues and I hope you enjoy my blogs. Please do sign up for the Email and RSS feeds on my blog pages. Cheers. Edward


  1. Gregor

    We are that stupid. We believed their crap when times were good. We believe it now that the consequences of 2 decades of debt inflation have become evident. We’ll believe it when we’re dropping our kids off at Chinese lessons. We are just that stupid.

  2. Matt Franko

    Can anyone identify for me, short of an actual intervention, what the Treasury Dept. can do to influence foreign exchange rates? Ive often heard Treasury accused of “not doing enough to support the dollar”.

    1. Cullen

      I suppose they could refuse to sell treasuries to non-citizens… could they?

      Who gets to decide that? I’m sure during wwII germany couldn’t buy american treasuries.

      1. ^WizeUp

        Uh, the free flowing capital never stops, for the big guys anyhow. It’s well documented that the bankers through IBM, Ford, GM, et al., provided invaluable technical/industrial assistance to the Nazis prior to and all through WWII. Their war (and genocide) machine could not have gotten as far along as it did without said help. See Harriman-Bush. After the war, the Catholic church then helped thousands of them escape to South America.

        And so it is with just about every other war. There is always a third party involved and making $ off the conflict.

        Despite the fact that history is absolutely replete with conspiracies that are only acknowledged and generally agreed upon after the fact, to suggest any conspiracy contemporaneously still renders one a social pariah because everyone knows they don’t exist, at least contemporaneously. ????

        The country has so been pumped and dumped. This is financial engineering on a global basis. US has served its purpose and now they move on to China, as we stumble morosely along under the weight of debt that can never be repaid. In today’s WSJ Exxon is selling all of its gas stations here, while at the same time investing in refineries in China. Ya think maybe they know something?

    2. ndk

      The alternative is tariffs, mostly, though domestic changes that modify the inflation rate in one way or another will hypothetically have an effect as well.

  3. bobh

    As I said yesterday, Geithner doesn’t think it’s a lie when somebody more powerful than him told him to say it.

    1. gordon

      For some reason that reminds me of a remark by a (very) young lady behind the delicatessen counter. I asked her if some prawns (Americans might say shrimp) were fresh. “They’ll be fresh as soon as they’re thawed out”, she said helpfully.

  4. Ich

    @Matt Franko,

    the thing that does the most harm to the strength of the dollar is large federal debt.

    So one thing the treasury department can do is borrowing less…

    1. Matt Franko

      I dont see how that would matter for instance between the USD and the Euro when Euro Govts borrow more (Euros) than we “borrow” USD? If sovereign “debt” mattered it would seem that the USD would be moving up on the Euro.

      1. scepticus

        sov debt doesn’t matter as long as a domestic saving demand is sufficient to fund it. See japan for this.

        what matters is the output value of one economy versus another.

        1. Matt Franko

          But the US has the highest productivity of any country…wouldnt this make the USD stronger vs for instance the Euro?

          1. scepticus

            highest productivty? you’re joking right?

            just in case you’re serious I’l point out that that productivity was funded by debt.

            the french have a higher productivity than the US, per man hour worked.

            The US works hard rather than smart. Hence the debt.

            Could be because the US pisses most of their real productivity into the most expensive and one of the least efficient healthcare systems in the world.

          2. Walter

            Yeah, but don’t the french only work about 12 hours of year… so you’d hope they would be productive hours…


          3. Matt Franko

            Screpticus, No I am not joking, I look at that kind of data from time to time for accurate perspective.

            Yes Walter, perhaps those factors are why this list shows the US at the top.

  5. Allen C

    “knowledge and innovation that is enabling emerging economies to catch up with developed-world living standards.”

    One way to catch up is to have the leaders fall behind. The desperation is growing more obvious by the week. The Great Fiscal and Monetary Experiment looks more futile by the day.

  6. Vinny G.

    As a shrink, I can’t help but notice the “learned hopelessness” in the comments above.

    Remember that fear works both ways. Hence the pitchfork solution.


  7. PascalB

    He better watch out because he may get what he asks for… which will mean steep world interest rate increases, hence stock market declines (because the USD decline is alread priced in) and tougher conditions to finance a ballooning deficit, which will be the only engine running for quite a few years to come. Increasing interest rates on the back of a heavily leveraged private sector… hmmmm… did someone say “L shaped” …. or “V followed by L”? …

  8. Michael

    What is important is the actions, not just what is being said.

    And with the market so volatile and influenced by the media and their reports of what is said, investor emotions can lead to mistakes.

    That is why sometimes it is good to tune out the media and investor emotions and just use the timing signals.


    Its daily DJIA index trading signal is up a respectable 68% for the year (as of November 1, 2009) and it is free of charge for individual investors.

  9. Connolly

    I find the comments here to be almost as good as the dribble from the Leaders…as Vinny G notes so well.
    Not being an Econ or Financial student but rather a student of forty plus yrs of running large and small enterprises and a CRE Investor, so much of “what” is transpiring is very transparent to me.
    “Matt Franco” asks a defining (in his mind) question and really thinks he has defined the answer by that query.

    I simply WATCH how Geithner act and respond and try to set the Agenda each week as the fast moving TGV streams along.
    These Boyz are scared to death!
    This entire US Econ is on auto-mode and no one really has the software manual updates….these Boyz are simnply reacting everyday and in the dark, have bad dreams.
    Do not underestimate the power of the anger of the Citizens!

    The Populace has more influence than they can even imagine.
    These Guys behind the curtain know that maybe they did NOT leave enough on the Table for the Citizens.
    And THAT my friends keep them up at night as much as anything.

    A few more small seeming mini crisis and look out.
    These over-stimulated Citizens could arise from their complacency and cause all sorts of problems for Geithner and Sons.


  10. mechanic

    “We also must keep our sights on maximizing the potential of global markets. Both exports and imports remain critical stimulate the flow of knowledge and innovation that is enabling emerging economies to catch up with developed-world living standards.

    We have just lived through the greatest challenge to the world economy in generations. In acting together, policy makers have shown that they understand the most important lesson of this crisis” ?

    We are that stupid. Paragraph 1 thinking begat Paragraph 2. Much more “fwee twade” crapola and we will be permanently and irreparably screwed. The “flow of knowledge and innovation” AND JOBS “that is enabling emerging economies to catch up with developed-world living standards” BY TRANSFERING AMERICAN MIDDLE CLASS WEALTH TO SAID EMERGING ECONOMIES. Duh!@

    By all means, drive over to Walmart to shop in your BMW or Mercedes. It won’t ever be you in the soup line.

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