Geithner's Opening Blunder - China Bashing

As refreshing as the activist tone and tempo of the early days of the Obama administration may be, there is a developing uncertainty as to exactly what is the philosophy of the new administration? Take, for example, the nexus of foreign and economic policy and the comments made by recently confirmed Treasury Secretary Geithner.

What is Mr. Geithner trying to convey when he states that China is “manipulating” its currency? What is the strategy and gamesmanship behind rhetoric that can easily be construed as having a protectionist sound to it?

At a time when the threat of a global beggar-thy-neighbor mindset could develop between and among nations pressured by their citizens (leading to protectionist actions, such as the one the toy industry in India just instituted), it seems quite imprudent for a high US government official in a brand new administration whose philosophy is not quite fully disseminated to be making accusatory statements about one of the world’s most important countries.

The activist tone and tempo of the Obama administration is clearly designed to quickly seek the high ground in the battle to change the game of the political status quo. And who can blame the President. The economic stimulus package is a perfect example of the competing forces at work, with the result almost certainly being the equivalent of an economic camel – a horse designed by a committee. Therefore, getting a jump out of the starting gate does seem to be a rational tactic. However, as shown in business, the first mover advantage may not be sustainable, particularly when so many forces are aligned against change and the advocates for change may not be completely prepared for all contingencies, including the inevitable unintended consequences.

Investment Strategy Implications

There’s a great moment in the acclaimed HBO series “John Adams” when Ben Franklin advises the volatile Mr. Adams against publicly attacking someone who disagrees with him. “He might think you are serious”, cautions Mr. Franklin. Perhaps the Treasury Secretary should heed such advice. Or, maybe the implied no-drama Obama administration is just a campaign slogan.

Comments

[Mickey 13:]

As we are becoming more aware of on a daily basis, the principals in the Obama administration have a tendency to speak first and think about it later. Geithner shouldn't be taken too seriously, we see him as another Wall Street loser who cheats on his taxes, lies to congress and is looking for a quick fix to a problem that should be resolved in the bankruptcy courts...

Jan 28 09:10 PM

[eltigre:]

it appears that dr geithner having lost his way several years ago isn't going to find his way back to the real time path anytime soon. so what else is new?

Jan 28 09:33 PM

[investor88:]

Sometimes the less said the better?

Jan 29 03:19 AM

[seneca:]

Good work: accurate, short and right to the point. Geithner is quite likely as immature as the Chinese say he is, and not up to the job.

Jan 29 04:49 PM

[Tony Petroski:]

"What is Mr. Geithner trying to convey when he states that China is “manipulating” its currency?" He's trying to convey that China is manipulating their currency. Tell it like it is Mr. Secretary.

Jan 29 07:48 PM

[seneca:]

What's your expertise in currency manipulation? Traded currency for Deutsche Bank? If not, then you better understand that ALL nations manipulate their currency, using market mechanisms or otherwise. I suppose you're not in Davos giving the world your opinion on matters well beyond the scope of whatever expertise you might have.


On Jan 29 07:48 PM Tony Petroski wrote:

> "What is Mr. Geithner trying to convey when he states that China
> is “manipulating” its currency?" He's trying to convey that China
> is manipulating their currency. Tell it like it is Mr. Secretary.

Jan 30 11:03 AM

[Carlos Lam:]

I think it is the height of hypocrisy for Sec'y Geithner to balk at any attempts the Chinese make to control the rise of the yuan. The Federal Reserve --- of which he was on the Board of Governors --- has by its own admission injected, printed, and handed out billions of dollars, thereby debasing the US dollar. Additionally, it is unwise as a matter of public policy to make such public accusations against a nation that holds such huge amounts of US treasury debt; China could --- if it wanted to --- begin sales of its debt, thereby causing yields in this country to jump. So much for the "soft power" policy of the Obama administration.

Feb 03 01:03 PM