“Economists are full of bad ideas. Terrible ideas seem to emerge when the gurus get together to talk about coordinating their bad ideas. Last week’s public letter from Treasury Secretary Tim Geithner to the G-20 finance ministers is a great example.” John H. Cochrane, ‘Geithner’s Global Central Planning’, The Wall Street Journal, October 26, 2010
“Under a deal hammered out at a meeting in Gyeongju, South Korea, finance ministers from big industrialized and developing economies agreed to try to maintain trade balances – which are both a reflection of and a determinant of exchange rates – at ‘sustainable levels’. Unable to agree on a precise metric, as the U.S. proposed, the ministers agreed only to measure compliance by ‘indicative guidelines’ still to be negotiated. The International Monetary Fund was chosen as the umpire.” Bob Davis and Evan Ramstad, ‘G-20 Advances in effort To Cool Currency Battles’, The Wall Street Journal, October 25, 2010
When the weakling on the block attempts to impose his will on those who outrank him both in strength and in ingenuity, the outcome is entirely predictable, as was the case in South Korea last week. The only surprise is that Tim Geithner did not try to locate the G-20 meeting a few miles north of the border where he might have borrowed a few million under-employed troops to force his will on a largely skeptical gathering. If anyone was qualified to lead the discussion at that G-20 meeting , surely it was the British Chancellor of the Exchequer, George Osborne who has demonstrated that he has a backbone by his courage in confronting the special interests and cutting public spending, not a United States Treasury Secretary like Geithner who has never seen a federal budget deficit sufficiently large to satisfy his insatiable appetite.
The reason why the United States economy is in such a current low growth situation is because its government and its citizens developed unsustainable appetites for consuming more than they earned. September 2008 was the justifiable consequence of such profligate behavior. U.S. citizens learned their lesson the hard way and are now saving to find a sustainable route out of personal indebtedness. The U.S. government, with the unfailing support of its Treasury Secretary, is fighting against this endeavor every inch of the way. For every dollar that private citizens save, their wretched government dissaves in multiple numbers. ’Spend, spend spend’ , is the unfailing policy of all the Obamaniacs . ‘Let others take care of tomorrow. The rest of the world owes us a living. We are the exceptional people.’
Fortunately, no one outside the Obama public square places any credence on these exhortations. Most particularly, the wise leaders of China will not be dislodged from their respect for conservative economics. As their people save for retirement, so the government supports and does not counter-act their efforts. China will not wreck its own economy in order to bail-out high-rolling Americans. Specifically, it will not revalue the yuan to open up inefficient U.S. exporters to the Chinese market-place.
So Timothy Geithner attempts to to introduce the world economy to central planning, American-style. If only every country would over-spend, then the U.S. government will be unchained in its march to progressive socialism. Fortunately for the world, Timothy Geithner carries no more weight than his failing President among global economic leaders. Like the out-of-control drunkard falling from his barstool while exhorting others to pull down another round, Geithner finds himself in a fast-empyting bar while the bartender races to shut down his bar-tab.
“What’s the right policy toward China? They put a few trillion dollars worth of stuff on boats and sent it to us in exchange for U.S. government bonds. Those bonds lost a lot of value when the dollar fell relative to the euro and other currencies. Then they put more stuff on boats and took in ever more dubious debt in exchange. We’re in the process of devaluing again. The Chinese government’s accumulation of U.S. debt represents a tragic investment decision, not a currency manipulation effort. The right policy is flowers and chocolates, or at least a polite thank-you note.” John H. Cochrane, ibid.