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Tim's Gotta Go
The following are portions of Treasury Secretary Tim Geithner’s final
communiqué to the G20 and my comments. The full communiqué can be found Here.
Last year, the G-20 acted
to restore growth to a world in crisis. The IMF expects global growth to
exceed 4 percent in 2010 and 2011.
to restore growth to a world in crisis. The IMF expects global growth to
exceed 4 percent in 2010 and 2011.
Tim, that is not what the IMF said. From Reuters:
"An IMF report presented at the G20 meeting earlier
estimates that coherent adoption of the adjustment policies could
increase global growth by as much as 2.5 percent annually over a
medium-term five year period."
The head of the IMF
Strauss-Kahn had this to say on growth prospects:
"I am totally comfortable" with a final communique calling
for troubled euro zone countries to accelerate fiscal consolidation.
They have to consolidate strongly even if it has some bad effect on
growth."
So Tim, the IMF does not share your rosy views on
global growth. In fact they are worried that the necessary fiscal
consolidation will result in slower growth. Geithner’s statement was
read by every finance minister at the meeting and around the world. They
will read Tim’s words and just conclude that he is selling a story to
the newspapers and has no substance to offer. So much for financial
statesmanship.
The US is in its 4th
quarter of solid growth.
quarter of solid growth.
Solid growth Tim? This is just a lie and he and the other heads of state
know it. The recovery to-date has been tepid by any comparison to any
recent US post recession cycle. We have unemployment at 9.7%, a 50 year
high and we can’t create 50,000 jobs a month without massive fiscal and
monetary stimulus. We are growing because of a very big inventory cycle
and the continued stimulus measures. Were it not for those factors we
would be looking at negative real organic growth. Tim is selling a bag
of crap to an audience who knows better.
European authorities gave
us an update on their reforms and financial programs. Our discussions
were focused on our two core priorities: growth and financial reform.
us an update on their reforms and financial programs. Our discussions
were focused on our two core priorities: growth and financial reform.
On growth, we reaffirmed
our strong interest in making sure we reinforce the ongoing recovery in
private demand across the G-20. As we do so, we agreed on the need to
undertake and credible commitments to restore fiscal sustainability over the medium term.
our strong interest in making sure we reinforce the ongoing recovery in
private demand across the G-20. As we do so, we agreed on the need to
undertake and credible commitments to restore fiscal sustainability over the medium term.
This stupid sentence did not go unnoticed. The focus was on the words, “medium
term”. In this case what Tim was really saying:
“We all know what we are doing is not sustainable and it may
kill us if we continue, but we have to keep kicking the can down the
road for at least two more years. That way my boss has at least a chance
of being re-elected and I might keep my nice job”.
Tim
wants the world to do what he is doing at home. Deficits in excess of
10% of GDP. Debt levels that are approaching annual GDP. Debt levels
that far exceed GDP when the D.C. mortgage debts are included. He wants
ZIRP to last forever, even though he knows it is killing savers. He
wants an unending stimulus program for housing, cars, agriculture and
every other segment of the economy. And he wants to do this when our
country is in a protracted and expensive war. There is no leadership.
In the United States,
we’re moving forward with important reforms of health care, education,
and our financial system—together with substantial investments in
innovation, basic science and research and development, and
infrastructure. All these initiatives are designed to provide a stronger
foundation for future economic growth.
we’re moving forward with important reforms of health care, education,
and our financial system—together with substantial investments in
innovation, basic science and research and development, and
infrastructure. All these initiatives are designed to provide a stronger
foundation for future economic growth.
More lies. The health care reform was a joke that was rushed through in
the dark of night. The assumptions used were bogus. The whole thing is
going to have to come back on the table in less than one-year it is so
badly flawed. About those investment in science and research, is that
why the administration gutted NASA?
What Tim and his cohorts did in the past 18 months is wrack up an
additional $2 trillion in debt to keep things going. They have not done
one thing that I can think of to, “provide a stronger foundation for
future economic growth”. There is a great deal of empirical evidence
that economies have a difficult time of sustaining any growth when debt
to GDP exceeds 100%. We are functionally there today. Tim has done
nothing to help us long term. If anything, his plans will mute growth
for decades.
Within the G-20, we
discussed how the ongoing shift toward higher saving in the United
States would need to be complemented by stronger domestic demand growth
in Japan and in the European surplus countries, and sustained growth in
private demand, together with a more flexible exchange rate policy, in
China.
discussed how the ongoing shift toward higher saving in the United
States would need to be complemented by stronger domestic demand growth
in Japan and in the European surplus countries, and sustained growth in
private demand, together with a more flexible exchange rate policy, in
China.
Tim is begging the rest of world to help him out. He wants Japan, China
and Germany to help him out? Those folks are not listening and Tim knows
it. He was just in China and the issue of exchange rates was not
addressed. There is little prospect for “flexibility” by China anytime
in the near future. He failed miserably on this issue. Japan has 200%
debt to GDP and Tim thinks they are going to be the source of global
growth? This country has 1/3 our population and 1/3 of our GDP. They
will not assume the role that the Treasury Secretary wants.
For me, the most significant response to Timmy’s plea for more deficit
spending came from the head of the ECB, J.C. Trichet:
“The impact of narrower budget gaps on growth could not be
considered negative because it would improve confidence. The need for
such action is clear in old industrialized economies.”
Trichet
has said he will not play in Tim’s sandbox. I love that he stresses the
point that confidence is now a central issue in global economies. He is
admitting that without sane policies confidence will be lost and when
confidence is lost the mother of all depressions will follow.
When Trichet says, “old industrial economies” he is talking about
the USA. These folks choose their words carefully. They are diplomatic.
When Trichet said this it was equivalent to a punch in the nose in the
real world. While Tim shed no blood, this comment hurt. It was a strong
rebuke. Damn near an insult. Do not look for the ECB to bailout the US
or Europe for that matter. Consider also the comment from the head of
the German Central Bank, Wolfgang Schaeuble:
"I made no bones about the fact that I share the IMF's
underlying philosophy only in a very limited way,"
The ECB
and the Bundesbank have spoken as one. They both have said “no” to Tim.
This exchange should not be ignored. It has significant implications as
to how far the Germans are prepared to go in support of the EU. My read
on this is that the answer to the question, “How far should we go?” is
“Not far at all”.
Fiscal consolidation
should be “growth friendly”—as the IMF puts it—with the pace and
composition of adjustment varying across countries.
should be “growth friendly”—as the IMF puts it—with the pace and
composition of adjustment varying across countries.
“Growth friendly” = big deficits = Death. Tim relies on words
from the IMF. He is using this as a way to defend what he wants. He is
hiding behind the skirts of the IMF technocrats? A very weak place to
hide.
The United States is
moving aggressively to fix things we got wrong and to strengthen our
economic fundamentals.
moving aggressively to fix things we got wrong and to strengthen our
economic fundamentals.
Moving aggressively? What is he talking about? Fin Reg? That is also a
joke. Timmy G has gone out of way to avoid addressing the problem the
country faces with the mortgage agencies. These beasts now represent an
off balance sheet of commitment in excess of $7 trillion. They continue
to write 97% LTV loans and suffer double digit defaults. They are 90% of
the current mortgage market. The GSEs represent a far greater systemic
risk than any other component of our economy. Yet the Treasury Secretary
thinks these problems are too difficult to confront. The result will be
over $400b in losses born by the public.
Tim is going to get hit in the face with a two by four on December 1st
when the Fiscal Commission comes public with its recommendations on how
the US can return to fiscal prudence. On that day everything that Tim
has been calling for will be trashed. The Fiscal Commission was made
necessary to some extent because the Treasury Secretary was too weak to
lead a proper response. But the job of selling and implementing the
spending cuts and tax increases that will be recommended will fall to
the Treasury Secretary. There is not one chance in a hundred that he
will succeed in that role. He is wedded to big debt and big government
spending. He is the wrong guy to lead us in the right direction. If we
are going to make it to 2015 without a major financial collapse we need
some leadership.
Time's up Tim. You gotta go.
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Notice how the other finance ministers are smiling and looking away.
In general I pray each night before I go to sleep for bad things to happen to him, summers, and bernanke. perhaps Al queda will do us the favor of flying a plane into the treasury or federal reserve next time instead of the twin towers or the penatagon. Boy they realy blew that choice.
Geithner is just a saleman. He's really selling the mouse, the talk about numbers and whatnot is just that, talk.
'Mouse', you ask?
Ueah, mouse as in 'Mickey', as in Hollywood, televsion, stars, celebrities, fabulousness.
Too damned bad that's all the country has left to sell besides "Change we all can believe in!".
Ironic that both are fables.
It would be nice to hear from the SecTreas a plan to stabilize credit markets in Europe, even if it was complete BS. In the good ol' days the US was the international 'Big Brother' who pretended to lend a helping hand to allies with cash flow problems. Not any more!
At least Geithner has a couple of things going for him: one is the endless gusher of oil in the Gulf which is putting heat on his boss (and distracting attention from him and 'best friend' Bernanke). Another is that most of the G20 nations are in far worse economic shape than is the US.
At least we have the mouse.
Here's for a genuine Change we can believe in shirt: http://www.istockphoto.com/stock-photo-7952937-gold-coins.php, to add to a Yes we can't shirt with the usual suspects' mugs - or is it Yes we canned?
Yawn (aimed at Geithner, not your post)
Wake me up when Turbo Timmy and the G20 actually DO SOMETHING that will solve the situation. Until then, the constant jabber jawing is past it's expiry.
All this additional QE and money printing nowadays have a 12 hour life-cycle (if even that long). Next half-life cycle of adding a trillion will be 6 hour, then 3 hours, etc.
"Another is that most of the G20 nations are in far worse economic shape than is the US."
This is a widely believed opinion that I struggle to find facts to support.
Fe, fi, fo, fum what bean stalk you fall from? Mind you after having been kicked off a high quality financial site for talking about "midget wars in the white house" and "tax cheat timmy at it again" i think it's time to let this boy "shoot that hoop" which is exactly what he did in China and why he has that job and you never will. Indeed not only must Tim Geithner stay, he needs to start muscling a little finanical "buzz saw" around all those fat and bloated federal agencies. The Post Office is already under his purview: eliminate it lock, stock and two smoking barrels. Then start going after the entire education system. The word "internet" comes to mind and "home schooling."
You think they'd give up their indoctrination system? Furthermore the US doesn't have any idea how affordable private education could work. Generations of crappy schools will do that to a nation.
More soldiers though, that's good.
We home schooled our kids all the way through. You would be surprised how hostile the system is against home schooling. Kids are now in college with straight A's, despite the fact that the system propagates the myth that home schooling is an inferior education.
What I always get a kick out of is the morons who reflexively say, "Oh, well your kids won't be properly 'socialized' if you home school."
When I hear that I ask them, "Exactly what part or aspect of 'society' is organized like public school? When exactly in real life are you ridgidly segregated, based purely on age, into groups of 20-30 with someone older than you telling you exactly what to learn/say/do?"
Public school de-socializes you.
Timmy boy can stay! I'm shorting the market right now and doing good so if the guy does what he does best, I'm in! :)
But if he needs to go, I think Tyler should send the man a ZH T-shirt. And maybe a 10000 DOW hat (he won't be able to sell them this year anyway so...)
BK....
Absolutely correct....Here it is....
Timmy has taught the US how to max out its credit cards without having a future job to pay for it....
And here is the sad part...
The govt. has okayed the accounting rules to let loan holders cheat by not marking their assets to market.
Picture it this way....
Suppose there is a economic box...
Previously there was $70 Trillion in buying power.
There is now $40 Trillion in buying power....
This is deflationary by 40/70's...
Now suppose money is printed ....maybe $10 Trillion....
The government thinks that the ratio becomes 50/70...
when actually the 40 portion is being further diluted to 30....
This is the story in a nutshell....
Furthermore a strong economy requires strong savers ?
The US govt. has imposed 0% interest rewards for savers....
So what is the reason to save ? The govt. has actually pushed the riddance of savings....and the elderly into higher risk areas....
Lastly higher taxes just mean higher costs and prices....The question being just how does this make the US more competitive ? Answer... it doesn't...
Thus the govt. in effect is actually doing just the opposite of what they really should be doing....
And just who are govt. officials working for ?
Not US citizens...this is for sure....
I wonder how the elderly are coping. Lets say a working type couple worked hard and saved their entire lives, and saved $500,000. This would be a great feat. They retired, planning on traveling and enjoying their senior years. They had been advised that it would be safe to pull 5% per year from the $500,000. This would be $25K, plus social security. They would be comfortable. But, now with the market being unsafe, they are forced into CD's paying 1.5%, or $7,500 per year.
I wonder how retired or recently retired folks are coping with this.
"I wonder how retired or recently retired folks are coping with this."
Probably not well, based on what I see out there. The typical cycle for the retired is that as rates start to drop, they start "reaching" for yield, through longer dated bonds and high yield bonds. We all know what happens next. The market for these bonds starts to crack. They start to see their principal go down, just as when they were in stocks (prior to going into the CD's due to the stock mkt. crashing.) So, now that their high yield bonds and long-dated bonds are crashing, they turn back to CD's as they don't trust the market and feel they are better earning a sure 1%-2% rather than fight the markets. They cut back where possible.
Now, if they'd have put 12-24 months worth of income in a cash equivalent account and used that money to live off of, while their interest and dividends were used to 'replenish' their income account, they wouldn't have this problem of rotating into and out of investments at precisely the wrong time. Of course, their "financial professional" is not interested in having them leave that much money on the non-commish ledger, so they will fight them hard not to do it this way, but it does work.
Just a thought (or was it two?)
12-24 months of cash equivalent on hand solves their cash flow problem, but would it not be the same as spending principal? That is what worries savers.
I think the new normal will be to work till the day you die, and hope you do not get sick.
I have an idea, there is a local bagel store I have be going to regularly for about 15 years, used to always be staffed by 18-25 year olds, even managers usually young, sometimes a manager would be 30ish...then a couple years ago, a few older managers showed up (not ones that had aged on job, were new, fresh to the company), maybe 50-55 ish, they were downsized refugees, then some 50ish staff workers showed up, they say things like, "just happy to have a job"...now recently, two guys that have to be at least 65 are working the line.
what they really should be doing....
What "they" should really be doing is committing Hari Kari.....so we can live our lives in Peace!
At the least get the phukout'a'da way!!
FYI--The Fed sets interest rates, NOT the US gubmint. Time for more research my man.....
The Fed doesn't set interest rates, it simply follows the 3 month treasury bill. The Fed is just a wholesale counterfeiter for member banks.
+ !!!!!
The man is either so hopelessly naive it is a national embarassment or so blatantly disingenuous he should be forever written off as a political Obankstafone. Either way he is...
THE NEW CONTAGION:
http://williambanzai7.blogspot.com/2010/06/geithner-contagion.html