On Taxpayer Money & the Bailouts
Earlier in the week, Treasury Secretary Tim Geithner addressed a meeting at the Council on Foreign Relations to discuss his plan to adjust regulations on the U.S. financial system. Here, answering a question about the perceived socialization of risk and privatization of profit, Geithner justifies risking taxpayer money during the financial crisis to revive the markets. “Central fact is that governments have to be prepared to take risks the markets can’t take, for a temporary period of time in order to get a firmer foundation for repair,” he said.
Debunking the “One World Currency” Flip-Flop
ForaTV has the complete hour-long speech and Q&A session here. It’s well worth checking out. If nothing else, it’s revealing how maliciously right-wing critics have distorted and taken his remarks out of context in order to fabricate their latest twist on the febrile “one world currency” conspiracy theories now being enthusiastically promoted on Fox News and circulated around the Wingnutosphere (where they evidently seem to get picked up by ignorant crackpots like Michele Bachmann).
At the heart of their allegations is the contention that Geithner’s had supposedly “flip flopped” from his statement made the previous day before the House Financial Services Committee where Bachmann had ridiculously asked both Geithner and Fed Chairman Ben Bernanke if they would “categorically renounce the United States moving away from the dollar and going to a global currency.” Both answered unreservedly “yes.”
Taking a snippet from his response to a question on the same subject at the CFR event the next day, they made it appear that Geithner had reversed himself. That’s not the case at all however, as can be seen from the following answers concerning the idea floated by Zhou Xiaochuan, the governor of China’s central bank about reviving the idea of a new international standard of some kind for foreign currency reserves.
On the, on the first question, I haven’t read the governor’s proposal. He’s a – a remarkable – a very thoughtful, very careful distinguished central banker. Generally find him sensible on every issue. But as I understand this proposal, it’s a proposal designed to increase the use of the IMF’s special drawing rates. And we’re actually quite open to that suggestion. But you should think of it as rather evolutionary, building on the current architecture, than – rather than – rather than moving us to global monetary union.
What Geithner was “open to” was the idea of changes in the IMF special drawing rights and most decidedly not the concept of a single world currency. Asked again at the end of the talk to further clarify his comment on the reaction to the central bank governor of China’s idea, the moderator rephrased the question this way: “Do you see any change over the foreseeable future in the basic role of the dollar as the world’s key reserve currency or the reserve currency?” To which, Geithner answered:
I do not. I think the dollar remains the world’s dominant reserve currency. I think that’s likely to continue for a long period of time. And as a country, we will do what’s necessary to make sure we’re sustaining confidence in our financial markets and in — and in the productive capacity of this economy and our long-term fundamentals.
He really couldn’t have been much clearer than that. Oh, and just in case you think he’s dissembling a bit with the latter part of the second answer, those comments about productive capacity and so on refer to earlier remarks about such components being essential to the strength of the dollar and its long-term “sustainability” in this regard.