ABC News’ Matt Jaffe reports: Treasury Secretary Tim Geithner caused a stir in the markets today when he said he was "open" to Chinese calls for a new global reserve currency. But is he?
During a Q & A session today at the Council on Foreign Relations, here’s what he said:
QUESTION: One, the Chinese government proposal about a… about a global currency, and about the IMF regulations that would… the new IMF idea about, you know, the general agreements to borrow and having a faster ability to disburse to emerging markets.
GEITHNER: On the, on the first question, I haven’t read the governor’s proposal. He’s a, a remarkable, a very thoughtful, very careful distinguished central banker. Generally find him sensible on every issue. But as I understand this proposal, it’s a proposal designed to increase the use of the IMF’s special drawing rates. And we’re actually quite open to that suggestion.
The dollar fell on Geithner’s comments, but rose again when, at the end of his appearance in New York, Geithner clarified his remarks:
MODERATOR: I’d like to ask one final question, in effect on behalf of the market. It might be useful if you tried to clarify your earlier comment on the reaction to the central bank governor of China’s idea, and… so let me ask the question this way. Do you see any change over the foreseeable future in the basic role of the dollar as the world’s key reserve currency or the reserve currency?
GEITHNER: I do not. I think the dollar remains the world’s dominant reserve currency. I think that’s likely to continue for a long period of time. And as a country, we will do what’s necessary to make sure we’re sustaining confidence in our financial markets and in — and in the productive capacity of this economy and our long-term fundamentals.
And in an interview with CNBC later in the day, Geithner again reiterated the importance of a strong dollar:
GEITHNER: I want to say this very clearly: a strong dollar is in America’s interest. We’re going to make sure we’re pursuing policies that improve the long-term fundamentals of the U.S. economy.
In case there was any doubt about Geithner’s stance, at yesterday’s AIG hearing the Treasury chief replied "yes" when asked if he would "categorically renounce" China’s suggestion:
[REP. MICHELLE] BACHMANN: Would you categorically renounce the United States moving away from the dollar and going to a global currency as suggested this morning by China and also by Russia, Mr. Secretary?
GEITHNER: I would, yes.
- Matt Jaffe