The Pragmatic Capitalist
July 27, 2010
Over the weekend Tim Geithner paraded himself all over the weekend talk shows while he proved that he barely deserved to pass econ 101. That’s right, the Secretary of the US Treasury doesn’t get it.
- A d v e r t i s e m e n t
Mr. Geithner goes on to explain that there is no chance of a double dip (famous last words?). He displays absolutely zero sense of risk management and prescience. This shouldn’t be surprising to anyone. It is the tendency of government officials to adhere to the scientific method – “let’s wait for the dust to settle before we make our next moves”. Unfortunately, that’s not how markets work and it’s certainly not how economies work. Mr. Geithner is blindingly optimistic:
“MR. GREGORY: So just to be precise, you do not believe in a double-dip recession, that it will get worse before it gets better?
SEC’Y GEITHNER: No, I don’t. I think the most likely thing is, you see an economy that gradually strengthens over the next year or two, you see job growth start to come back again.”
Mr. Geithner then goes on to explain how he totally misunderstands how a fiat currency system in a floating exchange system works. It’s 100% crystal clear that Geithner is living in his textbook gold standard world where the USA borrows money to finance spending – nothing could be farther from the truth. The Treasurer of the USA says we “borrow” to “finance” our spending:
“I think this is a responsible way to do it. You know, my job, David, is to help make sure we can borrow to finance the obligations that Congress gives us.”
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