Treasury Secretary Tim Geithner told
reporters at a Council on Foreign Relations event today that the United States is "open" to suggestions from China's top banker that nations take steps to extend the special drawing rights of the International Monetary Fund toward a new global reserve currency. The dollar tracked down by less than two percent before picking back up by the time the Secretary clarified the government's position, several minutes later. Bottom line: the adminstration wants to send very clear signals that a strong dollar is in America's best interest, and as the president himself pointedly assured during his press conference last night, the United States has no plans to see a "new global currency" replace the dollar.
Geithner, demonstrating a bracingly misplaced confidence in his audience, explained that his understanding of the Chinese proposal had to do with moving the dollar itself, in its own "evolutionary" progression, toward a reserve currency that is more responsive to the demands placed upon it by the global market. As he put it:
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.
Of course the effective headline out of this foolhardy attempt at drawing a reasonable distinction has been "Bumbling Treasury Secretary Supports Dumping Dollar". That's the reward for intellectual honesty these days. I won't pretend to understand the full scope of this issue, but I for one am very happy at
least to see some mental flexibility from Mr. Geithner. To his credit, he resists the temptation to paint every scenario as black and white.
You never know, keep treating people like adults and they might just start acting like it.
