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Thursday, March 26, 2009

VIDEO- Geithner's Words Heard Around The World

The Telegraph:

The dollar plunged instantly against the euro, yen, and sterling as the comments flashed across trading screens. David Bloom, currency chief at HSBC, said the apparent policy shift amounts to an earthquake in geo-finance.

"The mere fact that the US Treasury Secretary is even entertaining thoughts that the dollar may cease being the anchor of the global monetary system has caused consternation," he said.

One would think a person in the position of U.S Treasury Secretary, would understand his words and comments have an immediate effect on America's currency.

It is being called Amateur hour and that is appropriate considering how incompetent Geithner is.

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. When he first took office, he mistakenly threatened to brand China as a currency manipulator, putting his reputation at risk. The dollar will recover its gains if Geithner attempts to clarify his comments. In addition to the comments on China, Geithner also said that the U.S. still has substantial resources left in TARP and that it will take a few months before we can see effects of the mortgage modifications measures.

There is an update at this link, which shows Geithner did try to backtrack from his damaging mistake.

A few minutes after saying the U.S. is open to an SDR linked currency, Geithner clarified his comments by saying that there is "no change in dollar as world's reserve currency and likely to remain so for long time." In our alert, we said that the dollar would rebound if he attempts to clarify his comments. 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.

The Politico shows a couple things in their article regarding this. First Obama flatly rejected the idea of a "new global currency" and secondly, it was not Geithner that corrected his wording, it was the moderator, Roger Altman, that brought the topic back up for clarification.

UPDATE: Evidently sensing a gaffe, moderator Roger Altman told Geithner that it would be "useful" to return to the question, and asked if he foresaw a change in the dollar's centrality.

"I do not," Geithner said, adding several forceful promises, including, "We will do what's necessary to say we're sustaining confidence in our financial markets."

Rookie mistake and one that now leaves doubt across the world in our ability to pull ourselves out of an economic downturn.

More from Hot Air.

With Geithner's inability to handle the AIG situation, lying about when he knew about the bonuses, the administration pressuring Dodd for the amendment to guarantee those bonuses, Obama signing the stimulus bill making sure they were guaranteed, and Geithner's little confidence game with Toxic assets, it is amazing that he is still Treasury Secretary and shows the extreme inexperience of the Obama administration.

They are in over their heads and making a mess of everything.