As the G20 meet to determine the fate of the global currency war, Secretary of Treasury Tim Geithner publicly proclaims, yet again, that the United States will not weaken it’s currency on purpose:
The United States of America will never do that. We will never seek to weaken our currency as a tool to gain a competitive advantage and to grow our economy. It’s not an effective strategy for any country, it’s certainly not for the United States. We’ll never do that.
This suggests that Mr. Geithner doesn’t believe that the printing of trillions of dollars and subsequently injecting those dollars into the economy via easy lending and quantitative easing will debase the currency.
And all this time we thought the Fed’s motivation for quantitatively easing and lending money at zero interest was designed to, well, grow the economy. Otherwise, what exactly is the Fed’s motivation behind QE 2.0’s $600 billion dollar cash infusion?
If the policies of this administration and the last are not being pursued to weaken the dollar then we’d ask Mr. Geithner to explain the following US Dollar Index chart:
source: Trading Charts
That’s a near ten year decline of the US dollar versus other currencies. If this doesn’t signal a weakening currency, we’re not sure what does.
Geithner continues by sharing his wisdom on why the dollar remains the world’s safe haven asset of choice:
Mostly what you’ve seen when you look at the broader arc of financial markets over the last two and a half years is you’ve seen a period where, when the world was most concerned about the potential risk of global depression, most concerned about the possibility of systemic collapse, you saw the world seek the safety of the risk-free assets of the United States. The dollar generally rose through that period of time.
And as the world has become progressively more confident some of that safe haven inflow has been reversed. That’s been the dominant trend we’ve seen and that’s very encouraging, and not just about people’s overall confidence in the U.S., but a sign of greater confidence that, although we face a lot of challenges in the United States and a lot of challenges globally now, the risks we face are more manageable than those we’ve faced anytime in the last two and a half years.
Mr. Geithner’s assessment that the US dollar was a safe haven asset of last resort is one we can agree with to some extent. In 2008, when the entire worlds’ stock markets started collapsing, investors around the globe shifted their assets into the US dollar. That, along with the fact that most global settlements required US dollars in order to transact, led to a strong rise in the dollar.
When the media and foreign governments convinced people that the green shoots were sprouting and recovery was mere months away, investments did flow out of US dollar assets into riskier equities, forcing stock markets around the world up.
But as we pointed out yesterday, we are nowhere near a recovery, and the fact that Europe is about to fall apart suggests that we have not avoided the depression and systemic collapse Mr. Geithner mentioned.
If European sovereign debt begins to fall apart, country-by-country, we can expect at least one more run-up of the US dollar. Even though investors and foreign politicians are screaming about dollar debasement, if financial markets start to collapse, the dollar will, yet again, likely become the safe haven asset of choice – but only because people will be in panic mode and do what they’ve always done in a stock market collapse.
But it will last only for a little while – and probably for the last time.
Unless you’ve had your head buried in the sand, it’s clear that the US dollar is being debased by the Federal Reserve through quantitative easing. Regardless of what happens in the near-term, the long-term trend depicted in the chart above remains intact and the US dollar will likely continue depreciating.
Most Americans understand this, most foreign leaders understand this, and most foreign financial institutions understand this, as evidenced by Chinese rating agency Dagong recently downgrading the rating of US bonds from AA to A+. We understand that the rating is likely a political move by the Chinese, but nonetheless, it shows that most holders of US debt are fed up with the policies of easy money.
Mr. Geithner may think that current policies will not weaken the dollar, but that is exactly what is happening – and it doesn’t take an economist to see that in not only the US dollar index chart above, but food, energy and commodity prices, as well as what Soverign Man refers to as value deflation.
If the dollar does, once again, become the safe haven asset of last resort in another global meltdown it will only be until foreign holders of US debt reposition themselves to find a better way to preserve wealth. Our guess? They’ll start looking to gold, silver and other commodities that don’t have the risk of a default or forced devaluation of the US dollar.
Watch Tim Geithner:
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As one pm writer says, “If you bury your head in the sand, you deserve to get your ass kicked”. That could go for a few other things also. Big money is flowing to ag & pm’s.
Timothy “tax cheat” Geithner  is a liar!  Maybe even an idiot.  Barry’s whole crew is clueless.
Liar, lair,  pants on fire!  ” The Government is here to help you!”  ROTFLOL!
unfortunately,  the rest of the world is not laughing.
Seriously, either he is an absolute moron, or they are destroying the Dollar on purpose.
I tend to think its the former but he is taking orders from those who want the latter.
What a circus clown Geithner is! What a circus clown! And his nose should be growing like Pinnochio.
Haha. I put this on my facebook page last night. All my friends think it’s hilarious. Apparently, it’s not only Chinese college sutdents who think Timmy G is a comedian.
I wish people would quit using the “quantitative easing” euphemism. Call it what it is…
counterfeiting resulting in theft by fraud
Giethner only speaks to the idiots who are dumb enough to listen. Unfortunately, most of them are in the USA.
It is much easier to just avoid any system where counterfeiting is not only allowed, but cheered on. That mean stay away from corp US, FRNs, government bonds, etc. Anything that can be affected by such lunacy.
It’s common sense for the people here and governments abroad. I wonder how long it will take the corp to get a clue?
Debasing the currency would be punished with death if we still operated under the rule of law, the Constitution. In the corporate democracy it is praised and credited with miracles that never happen.
Kinda makes me sick…
 {This suggests that Mr. Geithner doesn’t believe that the printing of trillions of dollars and subsequently injecting those dollars into the economy via easy lending and quantitative easing will debase the currency.}
No…this suggests Geithner thinks we are all stupid….it also proves he is an a*s and a liar!
Maybe he is still using that old version of Turbo Tax
REB…No…this suggests Geithner thinks we are all stupid
Well if this is what he thinks then he is right for the most part.
The masses don’t have a clue. They won;t wake up until the day Chicken McNuggets go to 20.00 an orderÂÂ
Geithner knew! CNBC is another mouthpiece for financiers, and they did not even question his statements.ÂÂ
First Depression, then Inflation, then Hyper-Inflation …. then Collapse. If he doesn’t know then he is not competent for the job!!!!
Geithner was also trying to defend his administration, saying that he did not have any intention to hurt the middle class and investors ( Saudi Arabia, German, Russia and china, etc…) ÂÂ
geithner was president of the new york fed before being appointed as sec of the treasury. this means, of course, that he has outstanding credentials. it’s obvious to anyone with advanced knowledge of economics that he is right on target by affirming that the fed would do nothing to weaken the u.s. dollar.
when other countries collapse when their respective currencies collapse the u.s. dollar will explode upward in value. this is obviously what our wall street bankers have planned for the american middle class -the ascendency of america into greatness.
so relax everyone. you’re in good hands with geithner, bernanke, rubin and summers and their rothschild partners in europe in control. just save as many nice new crisp ten dollar bills as you can and everything will be fine…
No, this is not “quantitative easing” its Bailout Number Two at http://www.shtftimesepitaph.blogspot.com
I am not worried about Germany, because it’s one of the NATO countries (We should dismantle NATO –  Which Supports Endless Wars). Its votes were bought and paid for by our tax dollars, except for China and Russia. As you know every dollar that is printed from thin air by the private Federal Reserve who continues to make the dollar worthless.
Shroomer, you crack me up! I heard they’re accepting resumes at (P)MSNBC. Your latest would be an excellent example of the journalistic integrity and independent thought the MM all strive for. They might even compensate you in crispy $10 denominated FRN’s. Keep ’em comin!
Comments….. Timmah is a lying weasel ! If he says something,
expect the opposite to be the true.
Comments…..ÂÂ
http://www.zerohedge.com/article/subprime-wisdom-bud-abbot-and-lou-costello
Don’t worry about the dollar. I believe that the equation against the euro will reach 1:1. Just take a look at what’s happening in Europe.
They managed to save (i wonder how though) Greece. They will try to save Ireland at the most. Then what?
What if Portugal and Spain need funding too? Then euro will go down. Living in Europe i see how the German government is trying to make a profit out of this. But eventually it will go down also.
This is the chance for U.S. to enter the global markets again, with a stronger currency. One major factor is needed though; production capacity. Bring back knowledge and jobs and restart industrial production.
To show profits based on layoffs is not enough. Profits must be generated from increased sales.
Manos
Remember, it’s our dollar but your problem. The best & worst is yet to come, are you ready? The bloating stinking fly ridden corpse’s are floating down the polluted river.
Comments….. And we should believe Turbo Timmy because…..?
;0)
THIS AIN’T NUTHIN BUT A LIL SMOKE IN THE HOUSE…..
wait … it’s coming … JUNE 2011 IS WHEN IT STARTS TO HIT HARD AND even the yokels who drink budlight in your town are gonna wake up and say – WTF!
It simply amazes me how many idiots here in montana are republicians and swear that fox news , uncle sam and g o d will come through for them!
F IN IDIOTS will see the light next year… the lights of DHS SECURITY AND THE UNITED NATIONS PEACE KEEPERS AT NIGHT roaming our streets to keep the sheeple cowed and enslaved as we transfer to a new world wide government and banking system!
it’s already here… open your eye’s folks… debt is your enslavement – DEBT CONTROLS YOU!
COME JUNE 2011 YUR’ HOME WILL FULLY ENGULFED IN A 3 ALARM FIRE and fox news uncle sam and god . ain’t goin’ to give two shits about it… arm up prepare. BECOME PREY… or predator in the years to come as we make this transition to WORLD DEBT ENSLAVEMENT! CHOICE IS YOURS AND YOURS ALONE TO MAKE !!! PREY???? OR PREDATOR?
@tekroanin – I love people that give specific dates like June 2011. Easy to track their accuracy 🙂
It’s easier and likely safer to give a general 18 month time frame though. The idiots in charge can keep the sham going for longer then you anticipate.