Secretary of the Treasury Timothy Geithner has told President Barack Obama that he has decided that yes, he will stay on through 2012. Mr Geithner, who commutes back and forth from his home in New York, had originally made noises about leaving for personal reasons; the time spent away from his family was bothering him. Mr Geithner is the last member of the President’s original economic team left on board, and Mr Obama asked him to stay.
I can’t say that I’m sure why: Mr Geithner, the guy overseeing the collection of all of our federal taxes but couldn’t even get his own right, doesn’t exactly have a sterling record for getting things right. From Bloomberg:
Fox Business reporter Peter Barnes began his televised interview with Treasury Secretary Tim Geithner two days ago with this question: “Is there a risk that the United States could lose its AAA credit rating? Yes or no?”
Geithner’s response: “No risk of that.”
“No risk?” Barnes asked.
“No risk,” Geithner said.
It’s enough to make you wonder: How could Geithner know this to be true? The short answer is he couldn’t.
All you have to do is read the research report Standard & Poor’s published on April 18 about its sovereign-credit rating for the U.S., and you will see it estimated the risk of a downgrade quite succinctly. “We believe there is at least a one-in-three likelihood that we could lower our long-term rating on the U.S. within two years,” said S&P, which reduced its outlook on the government’s debt to “negative” from “stable.”
There you have it: Geithner says the chance of a downgrade is zero. S&P says the odds it will cut its rating might be greater than one out of three. So who are you going to believe? Geithner? Or the people at S&P who actually will be deciding what S&P will do about S&P’s own rating of U.S. sovereign debt?
It would be one thing to express the view that a downgrade would be unwarranted, or that the chance of it happening is remote. Either of these positions would be defensible. Geithner went beyond that and staked out an absolutist stance that reeks of raw arrogance: There is no risk a rating cut will occur. He left no room for a trace of a possibility, ever.
Note the date: that was last April. Then, Standard & Poor’s did just what they said they would do.
The Bllomberg original continues to note that wasn’t the only time Secretary Geithner made such an unequivocal statement: in February of 2010, he stated, in an interview with ABC News, when asked if the United States could lose its AAA rating, he responded, “Absolutely not. That will never happen to this country.”
Well, Mr Geithner didn’t say the following, but he was probably thinking along similar lines, given the Federal Reserve’s “quantitative easing” program. This was former Chairman of the Federal Reserve Board Alan Greenspan, on NBC’s Meet the Press yesterday:
The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default.
Well, if it was that simple, why do we have a huge national debt? Heck, we don’t even need to turn on the printing presses, the way the Weimar Republic tried to get itself out of debt; in these days of electronic transfers and instant communication, why couldn’t the Federal Reserve just simply decide to add $2 trillion or $4 trillion to its cash accounts? After all, there’s nobody who can bring suit against the Fed for bank fraud for doing that? Then, when the Treasury has to make interest payments and redeem mature Treasury Bills, why there’s that extra $2 trillion or $4 trillion, created out of a few electrons, in the accounts with which to write that check. Who’s going to tell the US Treasury that their check bounced?
And as long as China has bought our bonds, denominated in US dollars, they’re stuck, right? All we have to do is hand them the check, and it goes into their accounts, giving them dollars to buy goods we export to them, right?
Heck, if it’s that easy, we can just declare that we have an additional $14 trillion in the Treasury, and buy back the entire national debt! And if our creditors accepted the checks, wouldn’t that actually count as the creation of money?
And there’s certainly no need for Republicans and Democrats to argue about taxes and spending. Since the government can just create money any time it wishes, by simply adding digits to the accounts, Uncle Sam can write out any checks, for any amount, to provide any service, to anyone who needs or wants it, and as long as they accept those checks and the bank credits the checks to their accounts, money has been created, right? Not only would there be no need to raise taxes, there would be no need for federal taxes at all.
Now, this didn’t work for the Weimar Republic, because those evil ol’ Allies insisted on their reparations payments in something other than Deutschmarks. But the United States dollar is the world’s reserve currency; everyone takes dollars, and all of our debts are denominated in dollars; we are not required to exchange them for anything else in order to pay our debts. Since our currency is Legal Tender for all debts, public and private, we could print up 14 million of these, and they’d be perfectly good! And, since the Phoenician has said we could, why I know that it’s true.
Now why President Obama wants to keep Mr Geithner on as Secretary of the Treasury is beyond me; after all, he wasn’t smart enough to come up with a simple and effective plan like this!