From Ezra Klein:
"Bruce Bartlett thinks that Timothy Geithner is becoming a liability to Obama, but there's not much Obama can do about it.
'Geithner's political tone-deafness is becoming a serious liability to Obama. The problem with replacing him, as I have said earlier, is finding someone who is qualified, confirmable and not connected to Wall Street. Given that half the top political appointees at Treasury are still awaiting Senate confirmation, I think Obama may be stuck with Geithner no matter how low his stock falls. Is there a potential replacement who has paid his taxes, has populist leanings, knows Wall Street but isn't part of it, who wouldn't be filibustered by the Republicans?'
I made this point the other day, as well. A Senate that can't be trusted to confirm non-controversial nominees can't be trusted to confirm controversial nominees. In that way, holds and filibusters, which are supposed to make the executive branch's nominees more accountable, in fact makes confirmed nominees much less accountable, as the president can't trust his ability to easily replace them and so can't take the risk of firing them. I thought of ending this post with a line about how Republicans who want Geithner gone are actually making it impossible for him to go, but then I realized that Republicans probably don't want Geithner gone. They're served best by making him both unpopular and irreplaceable."
http://voices.washingtonpost.com/ezra-klein/2010/01/if_you_cant_hire_you_cant_fire.html
Showing posts with label Tim Geithner. Show all posts
Showing posts with label Tim Geithner. Show all posts
Sunday, January 24, 2010
Sunday, March 29, 2009
That One World Currency
TW: Michelle Bachmann (Republican MN) amongst other rants recently is very concerned that the US dollar is about to be legislated away (presumably with the connivance of Obama/Geithner). This meme was prominent on Fox as well. I thought I would post an Economist piece that puts the odds of that happening as pretty low.
This is not to say modification of the current international monetary system is not needed. If the U.S. continues its current account deficit indefinitely our economic growth will suffer. As other nations increase their percentage of world GDP alterations to the current systems will become relevant. But sane minds realize those changes will be incremental and potentially beneficial to the U.S. as well as others instead of sudden, surreptitious and designed to harm the U.S.
Long before the US$ is shunted aside massive changes to world GDP including China et al. becoming far larger consumers will be necessary. Note as well the SDR proposal mentioned below did not even include Chinese currency in the basket.
From Economist:
"IN FUTURE, changes to the international financial system are likely to be shaped by Beijing as well as Washington. That is the message of an article by Zhou Xiaochuan, the governor of the People’s Bank of China. Mr Zhou calls for a radical reform of the international monetary system in which the dollar would be replaced as the main reserve currency by a global currency. It is a delicate issue, however. When Tim Geithner, America’s treasury secretary, discussed the proposal in New York on March 25th, his remarks sent the dollar tumbling before he made clear that, naturally, he thought the greenback should remain the dominant reserve currency.
Mr Zhou’s proposal is China’s way of making clear that it is worried that the Fed’s response to the crisis—printing loads of money—will hurt the dollar and hence the value of China’s huge foreign reserves, of which around two-thirds are in dollars.
He suggests that the international financial system, which is based on a single currency (he does not actually cite the dollar), has two main flaws. First, the reserve-currency status of the dollar helped to create global imbalances. Surplus countries have little choice but to place most of their spare funds in the reserve currency since it is used to settle trade and has the most liquid bond market. But this allowed America’s borrowing binge and housing bubble to persist for longer than it otherwise would have. Second, the country that issues the reserve currency faces a trade-off between domestic and international stability. Massive money-printing by the Fed to support the economy makes sense from a national perspective, but it may harm the dollar’s value.
Mr Zhou suggests that the dollar’s reserve status should be transferred to the SDR (Special Drawing Rights), a synthetic currency created by the IMF, whose value is determined as a weighted average of the dollar, euro, yen and pound. The SDR was created in 1969, during the Bretton Woods fixed exchange-rate system, because of concerns that there was insufficient liquidity to support global economic activity. It was originally intended as a reserve currency, but is now mainly used in the accounts for the IMF’s transactions with member countries. SDRs are allocated to IMF members on the basis of their contribution to the fund.
Mr Zhou’s plan could win support from other emerging economies with large reserves. However, it is unlikely to get off the ground in the near future. It would take years for the SDR to be widely accepted as a means of exchange and a store of value. The total amount of SDRs outstanding is equivalent to only $32 billion, or less than 2% of China’s foreign-exchange reserves, compared with $11 trillion of American Treasury bonds.
There are also big political hurdles. America would resist, because losing its reserve-currency status would raise the cost of financing its budget and current-account deficits. Even Beijing might want to rethink the idea. Mr Zhou praised John Maynard Keynes’s proposal in the 1940s for an international currency, the “Bancor”, based on commodities. But as Mark Williams of Capital Economics says, central to Keynes’s idea was that a tax be imposed on countries running large current-account surpluses, to encourage them to boost domestic demand."
This is not to say modification of the current international monetary system is not needed. If the U.S. continues its current account deficit indefinitely our economic growth will suffer. As other nations increase their percentage of world GDP alterations to the current systems will become relevant. But sane minds realize those changes will be incremental and potentially beneficial to the U.S. as well as others instead of sudden, surreptitious and designed to harm the U.S.
Long before the US$ is shunted aside massive changes to world GDP including China et al. becoming far larger consumers will be necessary. Note as well the SDR proposal mentioned below did not even include Chinese currency in the basket.
From Economist:
"IN FUTURE, changes to the international financial system are likely to be shaped by Beijing as well as Washington. That is the message of an article by Zhou Xiaochuan, the governor of the People’s Bank of China. Mr Zhou calls for a radical reform of the international monetary system in which the dollar would be replaced as the main reserve currency by a global currency. It is a delicate issue, however. When Tim Geithner, America’s treasury secretary, discussed the proposal in New York on March 25th, his remarks sent the dollar tumbling before he made clear that, naturally, he thought the greenback should remain the dominant reserve currency.
Mr Zhou’s proposal is China’s way of making clear that it is worried that the Fed’s response to the crisis—printing loads of money—will hurt the dollar and hence the value of China’s huge foreign reserves, of which around two-thirds are in dollars.
He suggests that the international financial system, which is based on a single currency (he does not actually cite the dollar), has two main flaws. First, the reserve-currency status of the dollar helped to create global imbalances. Surplus countries have little choice but to place most of their spare funds in the reserve currency since it is used to settle trade and has the most liquid bond market. But this allowed America’s borrowing binge and housing bubble to persist for longer than it otherwise would have. Second, the country that issues the reserve currency faces a trade-off between domestic and international stability. Massive money-printing by the Fed to support the economy makes sense from a national perspective, but it may harm the dollar’s value.
Mr Zhou suggests that the dollar’s reserve status should be transferred to the SDR (Special Drawing Rights), a synthetic currency created by the IMF, whose value is determined as a weighted average of the dollar, euro, yen and pound. The SDR was created in 1969, during the Bretton Woods fixed exchange-rate system, because of concerns that there was insufficient liquidity to support global economic activity. It was originally intended as a reserve currency, but is now mainly used in the accounts for the IMF’s transactions with member countries. SDRs are allocated to IMF members on the basis of their contribution to the fund.
Mr Zhou’s plan could win support from other emerging economies with large reserves. However, it is unlikely to get off the ground in the near future. It would take years for the SDR to be widely accepted as a means of exchange and a store of value. The total amount of SDRs outstanding is equivalent to only $32 billion, or less than 2% of China’s foreign-exchange reserves, compared with $11 trillion of American Treasury bonds.
There are also big political hurdles. America would resist, because losing its reserve-currency status would raise the cost of financing its budget and current-account deficits. Even Beijing might want to rethink the idea. Mr Zhou praised John Maynard Keynes’s proposal in the 1940s for an international currency, the “Bancor”, based on commodities. But as Mark Williams of Capital Economics says, central to Keynes’s idea was that a tax be imposed on countries running large current-account surpluses, to encourage them to boost domestic demand."
Thursday, March 19, 2009
Off With His Head: Then What?
From Ecomomist:
"CONNIE MACK IV, a semi-obscure Republican congressman from Florida (and son of Connie Mack III, the former senator), made a stab for glory today by calling for Tim Geithner to resign as treasury secretary. "President Obama should nominate a new treasury secretary with the experience and leadership skills America deserves," Mr Mack said.
That's all the Capitol Hill press needed. Hours later, John Boehner said that Mr Geithner was "on thin ice". Shortly thereafter, Darrell Issa of California let it be known that he wanted Mr Geithner out.
Why do a few members of the minority party suddenly matter when they talk about Tim Geithner? Greg Sargent explains that "if Republicans can make this a conversation focused solely on the AIG mess and whether Obama's Treasury Secretary is to blame for it, they could do the White House some real damage." No need to accuse Mr Geithner of any wrongdoing; a rumour mill and a few calls for resignation should be enough. There's no sign that they've thought through the implications of decapitating the Treasury department in the middle of an economic crisis."
TW: I must admit I have been surprised at the virulence directed at Obama's efforts to do things differently than Bush. Naively I assumed since Bush's presidency was such a clear disaster and Obama was elected by a decent margin that if Obama tried to do the things he outlined during the campaign folks would be more or less pleased. Obama's poll numbers are holding up fine but the Republicans and some Dems and a fair amount of MSM just cannot abide the change.
It is clear the Republicans are trying to cut the Obama administration off at its knees before it really even gets started.
Demagoguery is nothing new in Congress or from opposition parties. In reading about an Andrew Jackson or Abe Lincoln or FDR one sees his political opponents continuously maneuvering to slay the POTUS lest he do something challenging. One of the problems with democracy is that populist grandstanding is the easy path.
I would say W. Bush got half way there. He was right in understanding one must be doggedly stubborn in the face of opposition. Of course, when your policies are foolish such stubbornness only perpetuates the foolishness. One rarely hears of the other POTUSes who were personally willful but substantively wrong (e.g. James Polk, Herbert Hoover etc.), not to mention other powerful political figures like John Calhoun, Jefferson Davis etc. You need to be stubborn and right.
Will Obama's policies work, one cannot say but I would hope he sticks with them long enough despite the opposition to give them a shot. We need bold, creative leadership not the status quo, opposition at any cost peddled by the Republicans.
"CONNIE MACK IV, a semi-obscure Republican congressman from Florida (and son of Connie Mack III, the former senator), made a stab for glory today by calling for Tim Geithner to resign as treasury secretary. "President Obama should nominate a new treasury secretary with the experience and leadership skills America deserves," Mr Mack said.
That's all the Capitol Hill press needed. Hours later, John Boehner said that Mr Geithner was "on thin ice". Shortly thereafter, Darrell Issa of California let it be known that he wanted Mr Geithner out.
Why do a few members of the minority party suddenly matter when they talk about Tim Geithner? Greg Sargent explains that "if Republicans can make this a conversation focused solely on the AIG mess and whether Obama's Treasury Secretary is to blame for it, they could do the White House some real damage." No need to accuse Mr Geithner of any wrongdoing; a rumour mill and a few calls for resignation should be enough. There's no sign that they've thought through the implications of decapitating the Treasury department in the middle of an economic crisis."
TW: I must admit I have been surprised at the virulence directed at Obama's efforts to do things differently than Bush. Naively I assumed since Bush's presidency was such a clear disaster and Obama was elected by a decent margin that if Obama tried to do the things he outlined during the campaign folks would be more or less pleased. Obama's poll numbers are holding up fine but the Republicans and some Dems and a fair amount of MSM just cannot abide the change.
It is clear the Republicans are trying to cut the Obama administration off at its knees before it really even gets started.
Demagoguery is nothing new in Congress or from opposition parties. In reading about an Andrew Jackson or Abe Lincoln or FDR one sees his political opponents continuously maneuvering to slay the POTUS lest he do something challenging. One of the problems with democracy is that populist grandstanding is the easy path.
I would say W. Bush got half way there. He was right in understanding one must be doggedly stubborn in the face of opposition. Of course, when your policies are foolish such stubbornness only perpetuates the foolishness. One rarely hears of the other POTUSes who were personally willful but substantively wrong (e.g. James Polk, Herbert Hoover etc.), not to mention other powerful political figures like John Calhoun, Jefferson Davis etc. You need to be stubborn and right.
Will Obama's policies work, one cannot say but I would hope he sticks with them long enough despite the opposition to give them a shot. We need bold, creative leadership not the status quo, opposition at any cost peddled by the Republicans.
Saturday, March 7, 2009
Who the Heck Exactly Do They Think Will Do Better
TW: Folks are frustrated with our financial meltdown, it is a complicated issue far beyond the expertise of 99% of the public (including me). But intuitively we have now had a Republican Treasury Department led by a guy who was highly respected (Hank Paulson) and now we have Tim Geithner who until a month ago was also highly respected. As I have said before the financial system is fried. If the best are struggling to fix it that should be the concern, not squealing for another pitcher. We have a circular problem, to say Geithner was part of the original problem indicts 99% of economists and financial professionals. There are probably a few quacky Ron Paul acolytes out there but I assure you, you do not want them running things.
From Jim Surowiecki at New Yorker:
"Secretary of the Treasury Tim Geithner’s job is not getting any easier. Geithner has yet to have any of his seventeen deputies confirmed, and yesterday two expected nominees for Treasury positions withdrew themselves from consideration. The withdrawals seem to have been in part because of frustration with the elaborate vetting process that the Obama Administration has put in place, as well as concern over anticipated attacks from Congressional Republicans. But I have to wonder also whether the withdrawals, and the difficulty Obama is having filling these jobs, aren’t also the result of the endless and vituperative stream of attacks on Treasury in general and Geithner in particular, attacks that are coming from both the left and the right.
Geithner has been Treasury Secretary for little more than a month, yet the calls for his resignation are already coming fast and furious. More important, the attacks on him don’t, for the most part, take the form of reasoned disagreement. Instead, they assume, and assert, that if, say, Geithner is against nationalizing the banks, he is either stupid or corrupt, when it seems more likely that he’s just reached a different conclusion about the risks and rewards of nationalization. (Henry Blodget’s call, today, for Geithner’s resignation ultimately boils down to saying that Geithner should go because he doesn’t agree with Blodget about the virtues of nationalization.) Treating disagreements over policy issues as prima facie evidence of evil intentions, or as a reason for firing, creates an environment for policymaking that’s toxic, and makes it harder to get good people to work in the public sector. And at a time when we need government more than ever, that’s just not a good thing."
From Jim Surowiecki at New Yorker:
"Secretary of the Treasury Tim Geithner’s job is not getting any easier. Geithner has yet to have any of his seventeen deputies confirmed, and yesterday two expected nominees for Treasury positions withdrew themselves from consideration. The withdrawals seem to have been in part because of frustration with the elaborate vetting process that the Obama Administration has put in place, as well as concern over anticipated attacks from Congressional Republicans. But I have to wonder also whether the withdrawals, and the difficulty Obama is having filling these jobs, aren’t also the result of the endless and vituperative stream of attacks on Treasury in general and Geithner in particular, attacks that are coming from both the left and the right.
Geithner has been Treasury Secretary for little more than a month, yet the calls for his resignation are already coming fast and furious. More important, the attacks on him don’t, for the most part, take the form of reasoned disagreement. Instead, they assume, and assert, that if, say, Geithner is against nationalizing the banks, he is either stupid or corrupt, when it seems more likely that he’s just reached a different conclusion about the risks and rewards of nationalization. (Henry Blodget’s call, today, for Geithner’s resignation ultimately boils down to saying that Geithner should go because he doesn’t agree with Blodget about the virtues of nationalization.) Treating disagreements over policy issues as prima facie evidence of evil intentions, or as a reason for firing, creates an environment for policymaking that’s toxic, and makes it harder to get good people to work in the public sector. And at a time when we need government more than ever, that’s just not a good thing."
Friday, February 13, 2009
The Bank Morass and Geithner
TW: I do not post on the details of the banking morass as there is cacophony of voices trying generally unsuccessfully to provide some level of insight. The problem as Silver outlines is that few are actually qualified to speak intelligently to the topic and if they are the details are intricate unless one devolves into ideology (a frequent occurrence).
Bitching about the proposals out of the government is the easy route, that was true with Paulson and it is true with Geithner. But again as Silver points out, if anyone has an incentive to get this thing right it is the Obama Administration. Those on the left squawking about a sellout to Wall Street are from my perspective deeply wrong.
I sense that our financial system is screwed (specifically not only insolvent but deeply so). I do not know the answer. I suspect nationalization may be the ultimate direction as the losses are enormous (measured in trillions). One way or the other the governments here and elsewhere will have to absorb massive losses created by our financial institutions and their customers. While this is highly annoying and frustrating, I have yet to read a viable alternative solution. For those repulsed by the concept of nationalization I simply ask what is your solution especially one that is not merely socializing all the losses while in form avoiding nationalization.
From Nate Silver:
"...I'm sorry, but somewhere between 99.9% and 99.999999% of us are severely underqualified to be making policy recommendations on this particular issue. And I'm certainly in the majority on this one. My anecdotal experience for the past several months has been that the more someone knows about the economy, the more they know (or at least are willing to admit to) what they don't know. Anyone who is professing with certainty that this or that will work -- nationalizing the banks, for instance -- is an idiot.
...Nobody, absolutely nobody, has more incentive to get this right than the Obama Administration. If the economy collapses -- well, more than it already has collapsed -- then the Democrats get slaughtered in 2010, Obama is a one-termer, health care doesn't happen, the poverty rate increases by a couple orders of magnitude, and the imperative to fix the environment gets put on the backburner. To suggest that Obama or Geithner are tools of Wall Street and are looking out for something other than the country's best interest is freaking asinine. Maybe their ideas are wrong -- but their hearts are in the right place."
http://www.fivethirtyeight.com/2009/02/give-geithner-break.html
Bitching about the proposals out of the government is the easy route, that was true with Paulson and it is true with Geithner. But again as Silver points out, if anyone has an incentive to get this thing right it is the Obama Administration. Those on the left squawking about a sellout to Wall Street are from my perspective deeply wrong.
I sense that our financial system is screwed (specifically not only insolvent but deeply so). I do not know the answer. I suspect nationalization may be the ultimate direction as the losses are enormous (measured in trillions). One way or the other the governments here and elsewhere will have to absorb massive losses created by our financial institutions and their customers. While this is highly annoying and frustrating, I have yet to read a viable alternative solution. For those repulsed by the concept of nationalization I simply ask what is your solution especially one that is not merely socializing all the losses while in form avoiding nationalization.
From Nate Silver:
"...I'm sorry, but somewhere between 99.9% and 99.999999% of us are severely underqualified to be making policy recommendations on this particular issue. And I'm certainly in the majority on this one. My anecdotal experience for the past several months has been that the more someone knows about the economy, the more they know (or at least are willing to admit to) what they don't know. Anyone who is professing with certainty that this or that will work -- nationalizing the banks, for instance -- is an idiot.
...Nobody, absolutely nobody, has more incentive to get this right than the Obama Administration. If the economy collapses -- well, more than it already has collapsed -- then the Democrats get slaughtered in 2010, Obama is a one-termer, health care doesn't happen, the poverty rate increases by a couple orders of magnitude, and the imperative to fix the environment gets put on the backburner. To suggest that Obama or Geithner are tools of Wall Street and are looking out for something other than the country's best interest is freaking asinine. Maybe their ideas are wrong -- but their hearts are in the right place."
http://www.fivethirtyeight.com/2009/02/give-geithner-break.html
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