This one is by OldVet…
Incredulous over coffee this morning we read this story reporting that Secretary Paulson of Treasury is in South Africa talking up a “strong dollar.”
“He told reporters traveling with him that the six-year expansion would continue and that growth would ultimately be reflected in the value of the currency.” Talking to foreign central bankers and investment bankers and global bankers is one thing. Spouting nonsense is another.
With credit markets all-but-frozen in the United States, especially in mortgage markets, and a severe slowdown occurring in key sectors such as automobiles and real estate, and the Everybunny consumers faltering at the retail level, and massive losses being declared by banking and investment institutions across the country – we hear this from our Treasury Department?
So who does our newspaper most often-read by expatriates abroad, the International Herald Tribune, quote prominently in support of Sec Paulson? A spokesman for his old firm Goldman Sachs, as follows: “He’s trying to instill a bit of confidence in the market, in the dollar,” said Jens Nordvig, senior global markets economist at Goldman Sachs in New York . “That’s the purpose of this. This is what European policy makers want to hear, Canadians as well.”
I think the operative phrase here is “what European policy makers want to hear. . .” Mr. Paulson knows better. Talking about the long run when you have a severe situation in the short run is misleading the markets, IMHO. Time and time again I’ve been told, “To be right in the long run and act on such beliefs in the short run is to be WRONG.” I’ve proven that to myself by first “shorting” the Financial Index of stocks in the US in 2006, and dropping that “short” after a while, only to watch the Financial Index nosedive in 2007. I’ve proven it again and again. Markets don’t reward clairvoyants with early returns, but rather punish them. The same should happen to Mr. Paulson.
What foreign central bankers and traders need to hear is the truth, and the American public as well. As conditions change, and the huge credit cycle moves toward more cautious values and lending conditions, and prices of financial assets arrives at some new level and direction of movement, then and only then should Mr. Paulson be making the kinds of statements that he made in South Africa. Forming a huge chorus of cynical optimists and all singing the Happy Song should be left to Hollywood , prisoner populations hoping for amnesty, and nursing homes.
Mr. Paulson, How about making a speech about what Washington is going to do to reduce official deficits, raise interest rates to squeeze off inflation, punish Wall Street greed, and improve wages for the middle class?
This one was by OldVet.