An Illustrated Guide to Tim Geithner’s Strong Dollar Policy

The Wall Street Journal wrote up an article today with the following headline: Geithner Affirms Strong Dollar Policy

I almost choked on my drink when I read this. I could not believe that this guy is out there pulling the same stunt in front of the same people yet again. Honestly, how dumb do these bankers have to be to believe this guy?

If I were Japan or China I’d be clamoring to get out of my dollar holdings as quickly as possible. This charade has been going on long enough, but I guess the Japanese and the Chinese take Tim Geithner’s words at face value:

TOKYO — U.S. Treasury Secretary Timothy Geithner said Wednesday that maintaining a strong dollar is “very important” for the country’s economy, sticking to his mantra on foreign-exchange policy as the U.S. currency continues its broad downtrend.

“I believe deeply that it’s very important for the U.S. and the economic health of the U.S. that we maintain a strong dollar,” he said at a roundtable discussion with Japanese reporters. “We bear special responsibility for trying to make sure that we are implementing policy in the U.S. that will sustain confidence not just among American investors and .. savers but investors around the world” that the U.S. will fix its budgetary problems as its economy improves.

One word for you: BULLSHIT!

Take a look at this point and figure chart of the US Dollar Index. I have annotated it so that the Japanese and Chinese bankers can better understand the meaning of Mr. Geithner’s rhetoric:

As you can plainly see, it’s backwards day at the treasury…every single day. It’s no wonder there is so much chatter about creating a new reserve currency. On top of that, it’s no wonder gold is currently trading at $1,121.00 Just take a look at this annotated gold chart as well:

It’s also no surprise that countries such as India and China are buying gold like it’s going out of style. I think India’s reasons for buying gold have more to do with the fact that the India SBI Prime (Prime lending rate of the State Bank of India) is up around 11.750% and less about diversifying reserves, however, this is merely conjecture.

I have written about our now infamous “Strong Dollar Policy” before. Additionally, I have written about the Global Experiment in Zero Interest Rate Policy that we are currently living through. Not only that, but I have also written about the Death of The Dollar. All of these pieces of the puzzle are intertwined.

If things keep up the way they are going, our dollar may look something like this:

Lucky for you, I have saved the best for last: Tim Geithner’s comments are quite hilarious towards the end of the WSJ article. I will first present you with the his quote, and then I will translate it so the Chinese and Japanese bankers can understand it:

“I don’t want to say more than what I’ve said in the past, which is that China has laid out this very broad direction of reforms’ to invigorate domestic demand, Mr. Geithner said. “It’s a very complicated mix of policy changes. As part of that, they’ve recognized that it’s in their interest over time to move to a move flexible .. exchange rate.”

Those reforms being undertaken by China “take time,” he said.

What Tim Geithner is really saying goes something like this:

“I’m going to keep my mouth shut about how screwed the US Dollar happens to be. If anyone asks I’ll just reply with ’strong dollar policy’. If I say it enough maybe they will believe me. On top of that, China has been kind enough to tell us that they are going to systematically destroy our economy. Since the Chinese have agreed to do this slowly, this gives us the opportunity to feel the pain over what could possibly amount to many long years.”

Tagged as: china, dollar, Economics, Gold, japan, strong dollar policy, tim geithner, us treasury