Tuesday, June 02, 2009

China Smart, America Dumb

Treasury Secretary Tim Geithner is traveling in China and gave a speech last night to a group of Chinese students. One of the students asked him about the safety of Chinese assets in American dollars. Geithner responded, "Chinese assets are very safe."

But the group of Chinese students were not so easily fooled. The Reuters article then states, "His answer drew loud laughter from his student audience." Of course these Chinese students know better than to trust an American bureaucrat doing everything in his power to destroy the dollar when he tells them the dollar is a safe investment. Geithner is a liar, a fool, or both. This is evident to at least this particular group of Chinese students.

But perhaps the best part of the article is the naivete of the Reuters writer who attributed the laughter to "... scepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home."

Glenn Somerville, the writer, clearly has no understanding of the situation and why the Chinese would laugh at Geithner. It has nothing to do with the "wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home." The issue is that the dollar is becoming worthless before our eyes, yet it is only the Chinese that see this.

There were some useful tidbits in the rest of Geithner's speech that reflect a measure of truthful analysis. Reuters wrote, "In his speech, Geithner renewed pledges that the Obama administration would cut its huge fiscal deficits and promised "very disciplined" future spending, possibly including reintroduction of pay-as-you-go budget rules instead of nonstop borrowing."

Geithner also said, "We're committed to bring our fiscal deficits down over time to a sustainable level."

Geithner is right that our current spending is unsustainable, as I've been saying for a while now. He also recognizes, or so he says, that we must cut the deficit and restrain future spending. This of course echoes what Obama himself has been saying recently, but the "proof is in the pudding" as they say, but don't expect to see any meaningful fiscal restraint. Obama is a committed socialist and he's going to blow his wad regardless of what he or his shills say.

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