Geithner: “Market-oriented exchange rates in line with economic fundamentals will be essential”
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.
The Chinese, right-wing talk show hosts, and Zero Hedge want a strong dollar. Strange company when you think about it.
The discipline to bring the U.S. current account deficit down has to come from somewhere. We’ve proven over the last 25 years or more that left to our own devices, we’ll hollow-out our economy and sell claims against our assets to foreigners in exchange for junk in the aisles of Wal-Mart.
This is the first time Geithner has made sense to me since he became Treasury Secretary. That means this “policy” will probably be reversed at the sign of any push-back from our creditors.
The thing that is going to support a strong dollar is economic policy that normalizes interest rates and keeps down the inflation of base money and its transmission into monetary aggregates. Most of this is controlled by the Federal Reserve.
Why does what the Treasury Secretary think about a “strong dollar” have any impact at all. I find it meaningless rhetoric.