Obama chooses a free trade ideologue for Treasury
By Howard Richman and Raymond Richman
The hopes that President-elect Obama might actually get the U.S. out of the worldwide depression were dashed when he chose Timothy L. Geithner as his Treasury Secretary. Geithner is an ideological free trader who sees nothing wrong in the statistic that in 2007 our imports from China amounted to $3 30 billion while our exports to China amounted to $ 79 billion. Our total trade deficit amounted to $ 708 billion which would require 7 million American manufacturing workers to produce. Without a major reduction in the trade imbalance, no economic stimulus package will produce a recovery from the depression.
Timothy L. Geithner's January 2007 speech to the Council of Foreign Relations is breathtaking in its delusions. Here are some quotes from it, followed by our comments:
Obviously he didn't at all understand that the current financial crisis was coming.
Geithner thought that the emerging market countries were following sound monetary policies. But China, the main emerging market, was following an excessively tight money policy to keep their people from borrowing, because they wanted to keep their country's savings high while sending them to the United States. Geithner saw this as a good thing.
Geithner heralds the confidence that people around the world had in future economic and financial stability. Turns out, however, that they were wrong to have that confidence.
According to Geithner the "sustained period of substantial official accumulation of dollar reserves" was a natural result of "exchange rate regimes tied in some way to the dollar" and those exchange rate regimes were natural in order to preserve stability. No understanding, whatsoever, that these countries were accumulating dollar reserves as part of their mercantilist strategy of maximizing exports and minimizing imports in order to steal our industries.
In other words, Geithner thinks that mercantilism will end all by itself if we do nothing. It will end by itself, all right, but not until the mercantilist governments finish stealing what remains to be stolen of our industry. Then they will start withdrawing their money and send us into a currency crash that will leave us in poverty.
He thinks that trade will balance itself, and that balancing U.S. government budget deficits would make the process more stable. Certainly balancing the budget would be important as trade is brought into balance, but trade is not going to balance itself.
Geithner thinks that the Doha Round should have been passed. But it would not have reduced the huge trade imbalances which are causing the worldwide depression. The WTO is broken! Doha was not the solution!
According to Geithner and his mentor Lawrence Summers, the main challenge is to sell the American people on the benefits of letting foreign governments steal our industries. Summers, by the way, is being chosen by Obama to head his National Economic Council. Obama won Indiana, Michigan, Ohio, and Pennsylvania, largely because he advertised that he would do something about unfair trade. That was before the election.
Dr. Howard Richman is executive director of a nonprofit (Pennsylvania Homeschoolers Accreditation Agency) and an Internet economics teacher. Dr. Raymond Richman is professor emeritus of public and international affairs at the University of Pittsburgh with a Ph.D. in economics from the University of Chicago. They are co-authors with Jesse Richman of the 2008 bookTrading Away Our Future published by Ideal Taxes Association.
Get weekly updates about new issues of ESR!