Have Fed and Treasury actions helped or hurt the economy and health of the dollar?
*Bloomberg, by Rebecca Christie & Peter Cook, July 16, 2009
“Treasury Secretary Timothy Geithner said there are ‘durable’ signs that financial markets are on the mend, while repeating that the U.S. must not withdraw its stimulus measures before an economic recovery is entrenched.
‘We’re seeing durable signs of greater confidence’ in markets, Geithner said in an interview with Bloomberg Television during a visit to Paris today. At the same time, he warned that withdrawing stimulus too soon would ‘weaken the basic fabric of the economy,’ and ‘that’s not something we can afford to do.’
Geithner’s remarks reflect an economy that’s showing signs of pulling out of its deepest recession in half a century, with at the same time little momentum for a recovery. The Treasury chief stressed today that the Obama administration’s efforts are focused on restoring the U.S. to a path of growth, then reining in budget deficits later to buttress the value of the dollar.
In a later Internet chat with Les Echos newspaper today, the Treasury chief said “the dollar’s role in the international financial system places special responsibilities on the United States — to sustain confidence in our financial system, to bring our fiscal deficits down when recovery is in place, and to preserve the Fed’s strong record of price stability.”
A Treasury report today showed foreign investors sold a net $22.6 billion of Treasuries in May, the most since November. Japan and Russia cut their holdings of U.S. debt even as China — whose foreign-exchange reserves have now surpassed a record $2 trillion — enlarged its portfolio.”
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