Geithner says U.S. 'will never' intentionally devalue the dollar
Treasury Secretary Timothy Geithner on Thursday tried to counter growing concerns that the Federal Reserve's recently announced effort to pump $600 billion into the financial system is intentionally weakening the dollar to boost the American economy, declaring that "the U.S. will never do that."
"We will never seek to weaken our currency as a tool to gain competitive advantage or to grow the economy," Geithner told CNBC from Seoul, where he is attending the G-20 summit of major world economies. "It's not an effective strategy for any country and it's not for the U.S. We'll never do that."
Unfortunately for Geithner, that's exactly what some world leaders, notably those in Germany and China, think the Fed is doing as part of its second round of quantitative easing, the huge purchases of Treasury bonds known in the monetary policy world as QE2. That view was bolstered Wednesday by someone who arguably should be skilled at interpreting Fed actions -- former Fed Chairman Alan Greenspan.
In an opinion piece in the Financial Times, Greenspan wrote that "America is ... pursuing a policy of currency weakening." With China holding down its currency, the result is increased exchange rates for other countries.
Geithner pushed back, saying that while he has "enormous respect" for Greenspan, "that's not an accurate description of either the Fed's policies or our policies."
The Obama administration has been rallying around the move led by Fed Chairman Ben S. Bernanke to add some sizzle to the lukewarm U.S. economic recovery. Geithner's defense came after President Obama took the unusual step of publicly commenting on the Fed's actions, saying in India this week that the move was good for the global economy.
-- Jim Puzzanghera