Last night, President Barack Obama expressed confidence in the dollar and declared: "I don't believe that there's a need for a global currency."Normally, that would settle the issue. But in the past 24 hours two of Obama's top economic advisers have signaled an openness to such a new global currency -- in one form or another. What's going on?
Politico's Ben Smith reports that Treasury Secretary Timothy Geithner said this morning that he was open to a new global currency to replace the dollar, as proposed by a Chinese central banker. Geithner, according to Smith, said that the proposal -- which he has not yet read -- is less transformative that headlines have suggested. "We’re actually quite open to that suggestion – you should see it as rather evolutionary rather building on the current architecture rather than moving us to global monetary union," Geithner said.
Later, the moderator, per Smith "apparently sensing a gaffe," asked Geithner to clarify his remarks. Geithner walked back his earlier comments and said he does not see the dollar being sidelined by a new currency.
But Geithner wasn't the only top Obama adviser who refused to rule out a transition to a global currency. White House economic adviser Austan Goolsbee said much the same thing yesterday afternoon in an interview with CNN's Wolf Blitzer. Although he characterized such a change as "unlikely," Goolsbee twice declined to rule out such a global currency despite being pressed by Blitzer. "I haven't seen the details of the proposal," Goolsbee said. The entire exchange follows:
BLITZER: The Chinese suggesting today, this dollar, U.S. dollar, should be replaced as international currency, because they are beginning to have concerns that you are printing, the U.S. government is simply printing too many of these dollars and will lose its value as an international currency.
What's your reaction?
GOOLSBEE: It strikes me as probably unlikely.
Different people have in the past argued for world currencies or new -- new currencies before. I believe the U.S. at this point is the safest place to invest in the world. And it's likely to remain that the dollar is a critical currency in the years ahead.
BLITZER: So, you -- you don't like some new international currency that some Chinese are proposing?
GOOLSBEE: Well, look...
BLITZER: I assume that's right, right?
GOOLSBEE: I haven't seen the details of what they are proposing.
I mean, the dollar is the dollar. If people don't want to buy it, they don't buy it. But I think you have seen sort of a flight to the dollar in -- in times of trouble.
[from CNN]
