The Barack Obama Amateur Hour continues today, with Treasury Secretary Tim “Literally The Only Man Who Can Do The Job” Geithner speaking at the Council of Foreign Relations today. A panelist asked Geithner about China’s call to move away from the US dollar and to create a new strategic reserve currency based on international organizations. Geithner said that sounded great, and got the utterly predictable result:
In a blink of an eye, the U.S. dollar has collapsed against the Euro, Japanese Yen and other major currencies. The trigger was comments from Tim Geithner who said that the U.S. is “quite open” to China’s suggestion of moving towards a Special Drawing Right (SDR) linked currency system. If the world adopts the SDR, which was created by the IMF as an international reserve asset, it would mean that countries around the world would need to hold less U.S. dollars. The U.S. is probably open to this suggestion because a weaker dollar is stimulative for the U.S. economy and would relieve the U.S. from having to implement effective monetary policy while balancing the international demand for a reserve currency.
Geithner’s comments indicate that the U.S. is not taking China’s suggestion with a grain of salt and instead is giving it legitimacy. This is extremely important ahead of the G20 meeting. The only question is whether this is another amateur mistake by the new U.S. Treasury Secretary.
The dollar pared losses versus the euro on Wednesday after U.S. Treasury Secretary Timothy Geithner said the dollar was likely to remain the world’s reserve currency for a long time.
The U.S. dollar fell to a session low against the euro after Geithner said he was “quite open” to China’s suggestion of moving toward SDR-linked currency system.
The dollar began regaining some lost ground after the moderator nudged Geithner into a clarification. Kathy Lien asks whether any grown-ups work in the Obama administration at all:
These contradictory statements are clearly the act of an amateur Treasury Secretary that has been thrust onto the public forum and is struggling with the need to be very particular in his choice of words. Geithner is learning the hard way about the impact that his comments can have on the currency market and despite his attempt to pacify investors, his words have left air of uncertainty in the U.S. dollar.
As if we didn’t already know that from the AIG bonus implosion. Geithner got a reprieve from talk about his ouster with the warm reception of his toxic-asset plan this week by Wall Street, but this should really be the last straw. If Geithner is too inexperienced or obtuse to understand that legitimizing a suggestion to move away from the dollar could be harmful to American interests — especially at a time when President Obama needs to sell trillions more in debt — then he’s too stupid by half to hold his present job.
Haven’t we lived with this embarrassment long enough?