Wednesday, March 25, 2009

Say What??

Here are two stories that do not seem to go together. First, the Obama administration continues to push for extended powers to take over troubled non-bank financial institutions. Second, Bank of America has announced that it will begin repaying TARP funds in April. What gives?? I am not quite sure that BofA's announcement means we are out of the woods, but it certainly gives a signal that maybe there is light at the end of the tunnel. Yet, Mr. Geithner wishes to expand his powers. It appears that events are overtaking the administration's movements to further centralize the economy. We can only hope this happens before too much damage has been done.

There were a couple interesting points in the AP article on Geithner that are worth mentioning. First:
In response to a question, Geithner said he had not seen a recent article by the head of China's central bank, Zhou Xiaochuan, in which he called for a new currency to eventually replace the dollar as the world's major reserve currency. But Geithner praised Zhou and said he looked forward to reading the article. Those comments immediately sent the dollar plunging on world currency markets.
Okay, c'mon. I know Mr. Geithner is new to this game, but you would think that a former President of the New York Fed would know that a Treasury Secretary's words act like policy, whether he intends them to or not. But, perhaps more disturbing is the following:
"A strong dollar is in America's interests," he said, returning to the stock phrase that the past five Treasury secretaries have used to signal to markets that the U.S. is not contemplating any changes in its dollar policies.
I am trying to figure out why Mr. Geithner thinks that a "strong dollar policy" and moneterizing the debt is at all consistent...