Geithner’s dollar comments
Thursday, March 26th, 2009
Here’s Geithner’s infamous non-defense of the dollar, when asked about Chinese central bank suggestions to reduce reliance on the dollar as a reserve currency:
“As I understand his proposal, it’s a proposal designed to increase the use of the IMF’s special drawing rights. And we’re actually quite open to that suggestion. But you should think of it as rather evolutionary, building on the current architectures, rather than moving us to global monetary union,” Geithner said during an interview in New York with the Council on Foreign Relations.
“It is very important just to underscore that the future evolution of the dollar’s role in the system depends really primarily on how effective we are in the U.S. in getting not just recovery back on track, our financial system repaired, but we get our fiscal position back to the point where people will judge it as sustainable over time,” he said.
Later in the day, Geithner protested that his comments were misinterpreted and stood firm for a strong dollar. (Anyone know where I can find this text?) Strong currencies don’t have to plead their case.
The bad news is that no currency is safe as central banks print money to fill holes left by worthless securities. The Chinese need to get more of their reserves into gold rather than worrying about SDRs.