Is the Fed fooling anyone?
*AP, by Martin Crustsinger, June 2, 2009
“As the federal budget deficit soars into the stratosphere, Treasury Secretary Timothy Geithner is reassuring the Chinese — the largest holders of U.S. government debt — that the Obama administration is serious about restoring fiscal discipline once the current economic crisis is resolved.
Geithner, making his first trip to China as treasury secretary with an itinerary that included meetings later Tuesday with Chinese President Hu Jintao and Premier Wen Jiabao, used a major economic policy address Monday as well as separate meetings with top Chinese officials to deliver that message.
‘As we recover from this unprecedented crisis, we will cut our fiscal deficit, we will eliminate the extraordinary government support that we have put in place to overcome the crisis,’ Geithner said in a speech to students at Peking University, which Geithner attended as a young college student learning Chinese nearly three decades ago.
Geithner repeated that message in a round of interviews Tuesday with Chinese media as he wrapped up his two days of talks.
‘We are very committed to make sure that when recovery is established, that we go back to living within our means, that we bring our fiscal deficits down to a sustainable level, that we unwind and reverse these exceptional measures that we’ve taken in the financial sector,’ Geithner told Chinese state television.
Geithner said he had found support among Chinese leaders for the actions the U.S. was taking.
‘I’ve actually found a lot of confidence here in China, justifiable confidence, in the strength and resilience and dynamism of the American economy and I think a very sophisticated understanding … of the steps we’re taking and why they’re so important not just to the United States but to China and the rest of the world,’ he said.
In an interview with China Daily, Geithner had praise for the actions taken by the Federal Reserve. Geithner said Fed Chairman Ben Bernanke had done an ‘enormously impressive job in the worst financial crisis in decades.’
Chinese officials did not comment publicly on Geithner’s reassurances, but judging from the reaction of the college students, Geithner may still have some explaining to do.
The students peppered the Treasury secretary with questions about the debt, the administration’s massive amounts of support to the banks and U.S. auto companies and the recent rise in interest rates on U.S. Treasury securities.”
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