"If a person lives long enough, he can watch everyone forget everything they learned. ... [Fed] Chairman Ben Bernanke thinks he can hold down US long-term interest rates by purchasing mortgage bonds and US Treasuries. Sixty years ago the [Fed] understood that this was an impossible feat. ... Since Fed Chairman Bernanke announced his plan to purchase $1 trillion in mortgage and Treasury bonds in order to help the housing market with low interest rates, interest rates have risen. When will the Fed remember that printing money does not lower long-term rates. ... Treasury Secretary Geithner is another economic incompetent. He told China that he stood for a 'strong dollar,' but that China should let its currency appreciate relative to the dollar, which, of course, would mean a weaker dollar. He simultaneously told China that their investments in US Treasury bonds were safe. His Chinese university audience, being economically literate, laughed at Geithner", Paul Roberts (PR), 3 June 2009, at: http://vdare.com/roberts/090603_illiteracy.htm.
If China let the yuan rise, which I favor, does Timmy Boy (TB) realize that will increase US interest rates? Did TB forget he must sell about $1.8 trillion in debt in the next 12 months? TB, explain how will "exchange-rate flexibility ... [help] achieve sustained growth". Imagine, TB wants China to adopt Social Security and Medicaid-type programs. Don't we have a $62 trillion actuarial deficit arising from those? TB apparently accepts all the Keynesian fallacies. TB likes "market-based interest rates" for China, but not apparently the US. TB must have studied in the Steve Forbes economics school, my 15 November 2008 post, link: http://skepticaltexascpa.blogspot.com/2008/11/forbes-capitalist-fool.html. China can control the quantity of yuan or the yuan-dollar exchange rate. Not both.
Saturday, June 20, 2009
Geithner, Steve Forbes Two?
"US Treasury Secretary Timothy Geithner, in a speech here [Beijing] Monday, touched on a contentious subject, urging China to move toward a more flexible exchange-rate regime. 'Greater exchange-rate flexibility will... encourage resource shifts to support domestic demand, and provide greater ability for monetary policy to achieve sustained growth with low inflation in the future,' Mr. Geithner said in a speech at Peking Univeristy, where he studied Chinese in the summer of 1981. Allowing the yuan to rise would be an important sign that China is serious about boosting domestic demand, economists say. ... 'Strengthening domestic demand will strengthen China's ability to weather future fluctuations in global supply and demand,' Mr. Geithner said. ... US pressure on China to boost its domestic demand--and Washington hopes, buy more US goods--isn't new, but has taken on an increased urgency as the damage from the financial crisis had left the world with fewer sources of growth. Mr. Geithner on Monday urged China to improve its health-care and social-security programs--which could reduce households' need to save-- and move to more market-based interest rates and prices", my emphasis, Andrew Batson & Maya Randall at the WSJ, 2 June 2009.
I agree with PR.
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5 comments:
It's truly the height of irony that TresSec Geithner would presume in any way to tell the Chinese what to do...
Hello... he was at the steering wheel as the world's greatest economy blew itself to pieces.
The students laughed at him? Sure... because he is the ultimate oligarch tool... and now he says to China to soak excess savings with social redistribution schemes.
Steve Forbes and Geithner? Not seeing it.
Anonymous:
You may control the price of something or the quantity, but not both. Steve Forbes, like Timmy Boy, doesn't understand that.
Isn't a basic supposition of the Federal Reserve that they can control the amount and yield of US debt through the Open Market operations?
http://en.wikipedia.org/wiki/Open_market_operations
Anonymous:
The Fed is a monetary "Wizard of Oz". It can claim to be able to do all kinds of wonderful things. So? It can control the yield of short-term US debt, but not the amount. Consider, if the Fed buys debt to reduce its yield, it must increase the monetary base (MB). Increasing the MB causes "inflation" over the long run increasing nominal yields as nominal yields increase to give effect to expected future "inflation". Over the long run, the Fed cannot influence real variables, i.e., it can't create real goods out of nothing. That's why the Chinese are buying commodities. They are selling dollars, in effect using commodities as Irving Fisher's 1911 "compensated dollars".
How can the Fed control the amount of US debt? The Treasury does. The Fed can only control its own balance sheet, i.e., how much US debt it holds.
Anonymous:
See my 24 August 2007 post, "Counterfeit Nation". The Fed's real business is conterfeiting. Think about it. How do you get a dollar? How does anyone you know get a dollar? How do Chinese exporters get dollars? How does the Fed? Consider, why is counterfeiting illegal? It's really very simple.
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