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Timothy Geithner: Old Rhetoric to Solve New Economic Crisis?

New America Media, Commentary, George Koo Posted: Jan 27, 2009

The actions President Obama has taken in the first days of office reinforce our audacity to hope that much needed change will take place to set America on the course to economic recovery.

The announcement to close the Guantanamo detention camp suggests his desire to return America to a moral high ground. The calling of world leaders on his first day of office reflects his desire to rejoin the international community and replace the go-it-alone approach with cooperation and consensus building.

But the nomination of Timothy Geithner as the new treasury secretary and the statement Mr. Geithner submitted in his pre-confirmation hearing about China's alleged currency manipulation is deeply troubling.

First of all, it's hard to see how the old accusation, regardless of validity, will solve America's current economic ills. Mr. Geithner,, who was sworn in on Monday, will not be able to explain how the exchange rate of renminbi to the dollar caused the creation of the sub-prime mortgages and naked derivatives, the mess responsible for the collapse of Wall Street. Nor, can he explain how the Chinese currency caused Detroit to persist on building Humvees and gas guzzlers, thereby taking the auto industry to the brink of bankruptcy. Nor, can he come up with a logical way to blame China for our SEC that facilitated Madoff in absconding with billions from investors around the world.

Since Mr. Geithner is said to be a capable man and slated to be Obama's point person in overcoming the economic difficulties, he probably does understand that America's economic woes are not China's fault.

Since the United States pressured China off the peg to the dollar, the yuan has appreciated about 20 percent. The appreciation did not materially alter the economic balance between the two countries and to assume further appreciation will have any impact on the current mess would be shockingly naive.

Perhaps, Mr. Geithner feels that he needs to pay lip service to members in the Senate or to certain constituents of the Democratic Party that are still spoiling to blame China for our problems.

However, to pull out of the "worst economic crisis since the Depression" (Obama's words), Mr. Geithner needs the courage (and audacity) to explain to the Congress and the American people that we need China's cooperation rather than enmity.

We need China to continue to buy our Treasury notes and hold on to dollars. We need China to want to continue to invest in Fannie Mae and Freddie Mac and in America.

It's now obvious to everyone in the world that the economic crisis is a global one and the solution will depend on close collaboration of all the major players, the most prominent being China and the United States.

The road to economic recovery will be long and uphill all the way. It will be up to Mr. Geithner and the rest of Obama's economic team to focus on the real issues in order to successfully reach the end of the road.

To dilute their attention and energy on bogus issues because of domestic politics will surely be disastrous for America.

Chinese version: 陈词滥调能否解决新问题?(Translated by Jun Wang, NAM Chinese Media editor)

Dr. George Koo is a retired international business consultant and a board member of New America Media.

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