Free Markets, Free People


Compare and contrast this rehabilitation effort of Timothy Geitner:

After his hellish opening weeks, Treasury Secretary Timothy Geithner started inviting White House economic officials across the street to his conference room for hours-long working dinners that have helped get — and keep — the whole team on the same page.


Geithner, a former president of the New York Federal Reserve who once looked like he was floundering in one of the administration’s most scrutinized jobs, is emerging in a new position of strength with the media and the markets, just as he launches President Barack Obama’s high-stakes effort to re-regulate the nation’s financial markets.


The secretary’s advisers acknowledge that his newfound political standing is tied, in part, to the state of the economy, which is now showing early signs of improvement. But Treasury officials also have updated their playbook after his Feb. 10 speech on financial recovery, which was panned by the press and blamed for a 381-point slide in the stock market.

They decided to “let Tim be Tim” and accepted the fact that his strength wasn’t giving a speech in front of a bunch of flags. Rather, they let reporters see him in off-camera, pen-and-pad settings, where he fielded questions with the confidence that his staff saw behind the scenes. He aced an interview with PBS’s Charlie Rose, thriving in a relaxed setting where he could explain issues at length.

… with this bit of economic reality:

China has warned a top member of the US Federal Reserve that it is increasingly disturbed by the Fed’s direct purchase of US Treasury bonds.

Richard Fisher, president of the Dallas Federal Reserve Bank, said: “Senior officials of the Chinese government grilled me about whether or not we are going to monetise the actions of our legislature.”

“I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States,” he told the Wall Street Journal.


The Oxford-educated Mr Fisher, an outspoken free-marketer and believer in the Schumpeterian process of “creative destruction”, has been running a fervent campaign to alert Americans to the “very big hole” in unfunded pension and health-care liabilities built up by a careless political class over the years.

“We at the Dallas Fed believe the total is over $99 trillion,” he said in February.

“This situation is of your own creation. When you berate your representatives or senators or presidents for the mess we are in, you are really berating yourself. You elect them,” he said.

His warning comes amid growing fears that America could lose its AAA sovereign rating.

I guess since the media tried to talk down the economy for the previous eight years, they may as well try and talk it up now that their boy is in the White House. The shame of it is that as the economy worsens, a lot of people are going to be shocked.

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9 Responses to Juxtaposition

  • The shame of it is that as the economy worsens, a lot of people are going to be shocked.

    Shame of it for who exactly?  A situation like that works to advantage if anything

  • Geithner clearly has overcome his early problems and is getting good press and increasingly seen as effective.   The storm he faced at the start was one of those where if you survive you’re stronger, but unless the President really wants you, you probably won’t survive.

    As for the future of the economy, you’re right — Obama and Geithner are gambling.   They realize that doing nothing could lead the recession/depression to spiral in on itself like in the early 30s.  Markets don’t automatically pull themselves out of recession…usually they do, but not always (for a variety of reasons).   Markets aren’t magic or perfect.   So they are trying to do what wasn’t done in 1929 — dramatic initial actions to restore the credit markets and jump start the economy.  The risk is that this could bring inflation/stagflation and make the situation worse.    Moreover, this gamble probably is riskier now than it would have been in 1929 since we started with massive debt already.    It’s a damned if you do, damned if you don’t situation — and for a politician, the doing nothing and let things get worse option is more likely to yield electoral defeat than the ‘try something and hope it works’ response.  After all, FDR’s actions didn’t really work, but he kept getting re-elected.

    • Not only did FDR’s actions not work, they extended the Depression for at least 7 years. Markets will recover on their own, and quickly at that, as long as the politicians don’t mess things up. Obama is messing things up . . .

    • Oh, and I don’t think Obama can get re-elected with FDR level failure. There are enough people who have an understanding of economics to make a case that the failure is the fault of the government, that wasn’t the case in the ’30s.

  • I think Geithner’s ‘newfound political standing’ is due to the fact that people are beginning to see that good, bad or indifferent, this administration is trying and succeeding in taking over the economy. The boss always has good standing.

    First the government sells securities to borrow money to fund its massive spending, then it buys  securities in order to stimulate demand for these same securities. Of course the Chinese are worried. Do the same in the private sector and you go to jail.

     Erb,  there is no gambling involved here. Unless you call drawing  four cards to get a flush a gamble. There is a name for that kind of gambler–loser, and the folks in Las Vegas and Atlantic City will pay your way there.

    Markets may not be perfect, and you are the only one I have ever heard to say that they need to be before we rely on them, but they work better than government, whose lack of perfection is the stuff of legends. Unfortunately  government’s record of running economies doesn’t seem to be in the curriculum of whatever schools you went to.

  • It’s not a matter of “what wasn’t done in 1929” it’s a matter of what WAS done, that damaged the economy and turned a recession into a depression.

    They’re probably making things worse in the long term (possibly short term as well)

    And trust me. It won’t get him re-elected if things go sour

    • I don’t know.   More and more I’m beginning to believe that more and more Americans are a$$holes.
      Obama has that way of lying that just doesn’t offend these folks.

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  • I think that the lack of any easily seen crisis convinces the media that Geithner is doing better.

    How is the program to buy back the toxic assets coming along?

    How about those weak “stress tests?”

    A bear market rally in the stock market does not mean the recession is over – personally, I have not seen business recover back to anywhere close to its previous level.