Geither’s Loose Lips (Briefly) Sink Dollar Ship (Updated)
My New Atlanticist piece Geithner Dollar Remarks Create Panic” shows how a perfectly reasonable and intellectually defensible comment by a senior official can have an enormous, negative impact.
The bottom line:
Things perfectly fine for public intellectuals to bandy about often require subtlety and sidestepping by public officials. Diplomats must be diplomatic, presidents must be presidential, and treasury officials must be — well, okay, there’s not a word for it. I suspect, however, that “Geithneresque” will not be the choice if such a word is coined.
Much more at the link.
UPDATE (Dave Schuler)
In partial defense of Secretary Geithner I think it’s interesting to consider the results of his comments in the context of PBoC president Zhou Xiaochuan’s comments on the need for a new international currency, republished from a February speech the other day in both Chinese and English which prompted Secretary Geithner’s observation.
Dr. Zhou’s comments were obviously intended as a shot across the bow. As has been noted here in comments this is poker. We know what’s in our hand, the Chinese know what’s in theirs.
Secretary Geithner shot right back and in reaction the dollar fell (temporarily). That means that the value of China’s dollar holdings declined and Americans, at least for a little while, became even less inclined to purchase goods made in China than they had been before. That isn’t good for China.
I think that Secretary Geithner’s remarks however correct they might be were ill-considered but so was the decision to rehash aggressive statements about the need for a new reserve currency. Our hand is much stronger than it’s being given credit for and China’s much weaker.