American Treasury Timothy Geithner, at the Council on Foreign Relations, said the U.S. is "open" to a headline-grabbing proposal by the governor of China's central bank, which was widely reported as being a call for a new global currency to replace the dollar, but which Geithner described as more modest and "evolutionary." "I haven't read the governor's proposal. He's a very thoughtful, very careful distinguished central banker. I generally find him sensible on every issue," Geithner said, saying that however his interpretation of the proposal was to increase the use of International Monetary Fund's special drawing rights – shares in the body held by its members – not creating a new currency in the literal sense. "We're actually quite open to that suggestion – you should see it as rather evolutionary rather building on the current architecture rather than moving us to global monetary union," he said. "The only thing concrete I saw was expanding the use of the [special drawing rights]," Geithner said. "Anything he's thinking about deserves some consideration." The continued use of the dollar as a reserve currency, he added, "depends…on how effective we are in the United States…at getting our fiscal system back to the point where people judge it as sustainable over time." – Politico
Dominant Social Theme: Thoughtful men mull thoughtful change.
Free-Market Analysis: You could see them popping like metaphorical popcorn kernels yesterday, all over America and probably in Canada and the EU as well. So called conspiracy "nuts" jumping into the sky as if they'd been fried in oil and propelled heavenward. What likely bounced them upward were the above comments by American Treasury Secretary Timothy Geithner that sounded as if he was endorsing a new global currency to take the place of the dollar.
Such "nuts" have long been predicting such a move, of course. Their idea has been that the economic crisis, as staggeringly large as it has been, was manufactured to stampede the globe into a one world order that would include a single currency. Those who believe this kind of thing were likely to be absolutely galvanized by Geithner's remark, which no doubt traveled all around the Internet in about 10 seconds.
Of course, with the help of a friendly moderator, Geithner almost immediately backed down from his statement. But the damage was done, and the dollar plunged sharply before recovering somewhat. What is more important, and no doubt unfortunate, was that Geithner again leaves the impression that he is either pursuing a very devious and secret agenda (those who believe in conspiracies would have no difficulty believing it) or he is in over his head.
In any event, Geithner's stand down isn't entirely convincing either, nor are the comments now anonymously sprinkling the Internet (and no doubt generated by American administration apologists) that the Chinese proposal is merely an elaboration of IMF currency privileges. In fact, as we reported yesterday, a commentator at the Telegraph called the Chinese proposal to create a kind of International Monetary Fund super-money "paper gold." That sounds like a new reserve currency to us. Of course, here at the Bell, we are pretty simple people. So we asked why just-plain-gold wasn't good enough. (Why more paper?) But in any event, never in our wildest dreams did we think the very next day the American Treasury Secretary would come out and endorse this sort of evolution – even if only momentarily.
And as it turns it out, even though Geithner basically retracted his remarks during the day — a "climb down," they call it – there is also this odd report from Politico which makes the case that Geithner was not alone. Geithner wasn't the only top Obama adviser who refused to rule out a transition to a global currency. White House economic adviser Austan Goolsbee said much the same thing yesterday afternoon in an interview with CNN's Wolf Blitzer. Although he characterized such a change as "unlikely," Goolsbee twice declined to rule out such a global currency despite being pressed by Blitzer.
For two top officials to indicate their doubt in the dollar is strange indeed. What are the chances? Of course it is no doubt accidental, but such comments, when put in the context of other comments around the world will surely drive suspicions that the IMF is being promoted before the April G20 meeting in a big way – and that the dollar is being deliberately talked down in a concerted manner.
In the past month, as the Bell has pointed out numerous times, IMF encomiums have been generated by leaders in the EU, the Kremlin, China and now the United States. Those who believe rightly or wrongly that the current financial crisis will be used by the monetary elite to create a one-world order, complete with a single currency and other trappings of a single state, have seen their suspicions strengthened inordinately by such remarks. In fact, the response to the financial crisis increasingly seems to emphasize a "global solution."
Even those who can't countenance a broad conspiracy moving the globe toward a "one-world order" might well be given pause by all this IMF promotion. But forget conspiracies. Geithner's statement was ill-considered no matter what he had in mind. Embattled Americans will surely not wish to hear that their Treasury Secretary was impressed by a communist Chinese monetary proposal of any sort. And, yes, many will hear about it, and already have, even if the mainstream media does not play it up. There is no way to unsay what Geithner said, or to pull the video of his statements from view. Wrong era. Wrong technology. American President Barack Obama himself may understand the power of the Internet, but it is evident Geithner does not – or then again… maybe he does.