Like most politicians, Treasury Secretary Tim Geithner likes to talk out of both sides of his mouth, generally saying contradictory things in sound bites that may sound reasonable at first glance, but look idiotic upon closer inspection.
For example please consider Private sector must drive economy: Geithner
During an interview on NBC’s “Meet the Press,” Geithner also said the government has big plans for reforming Fannie Mae and Freddie Mac, the housing finance giants that now stand behind most of the mortgages in the U.S. after being bailed out by taxpayers during the 2008 financial crisis.
Geithner said Sunday that he doesn’t expect a double-dip recession, citing encouraging signs in the economy. “The most likely thing is you see an economy that gradually strengthens over the next year or two,” he said. Watch Geithner on Meet the Press.
Businesses are still “very cautious” and are trying to get as much productivity from current employees as possible, Geithner explained.
“They are in a very strong financial condition though. I think that’s very promising because there’s a lot of pent-up demand and there’s a lot of capacity still for them to step up and start to invest and hire again,” he added. “The government can help but we need to make this transition now to a recovery led by private investment.”
There’s a “good case” for the government to support small businesses, the unemployed and help states keep teachers in classrooms, but the transition to growth led by the private sector must happen, Geithner said.
Still, he stressed that the current system of housing finance has to change.
“We’re not going to preserve Fannie and Freddie in anything like their current form. We’re going to have to bring fundamental change to that market,” Geithner said.
There’s still a good case for the government preserving some type of guarantee to make sure that people can finance a house even in a very damaging recession, he explained.
“We’re also going to have to take a look at the broad set of policies we put in place to help encourage home ownership and particularly help low income Americans get access to affordable housing,” Geithner said. “We’re going to take a very broad look at how best to do that.”
No Pent Up Demand
For starters Geithner is wrong about pent up demand. The only pent up demand is in the opposite sense Geithner suggests.
Pent Up Demand Reality
- There is pent up demand for baby boomers to save more
- There is pent up demand for baby boomers to downsize
- There is pent up demand for banks to dump shadow housing inventory on the market and that will further suppress housing
- There is pent up demand for anyone with credit card bills to pay them down given outrageous interest rates banks charge for revolving credit vs. what one can make in CDs.
Although those are all necessary, nothing in that list remotely have anything to do with a private sector recovery in the manner Geithner presumes. Indeed, I expect a Expect Second-Half Housing and Durable Goods Crash.
The key reason is consumer spending plans have crashed as noted in Consumption Inflection Point – No One Wants Credit; Consumer Spending Plans Plunge
Thus, in regards to pent up demand Geithner is a fool, is lying, or both.
If that was not bad enough, we have to suffer with Geithner talking out of both sides of his mouth. While I certainly agree that the private sector needs to drive the economy, note his many statements to the contrary.
- “The government can help but we need to make this transition …”.
- “There’s a good case for the government to support small businesses …”
- “There’s still a good case for the government preserving some type of guarantee to make sure that people can finance a house even in a very damaging recession …”
How long is the “transition”?
Geithner does not say, so I will offer a translation: Forever.
Geithner is a clueless Keynesian clown who has no idea how the economy works. Not only do we have to put up with his blatant lies, we have to deal with his hypocritical never-ending government solutions.
Mike “Mish” Shedlock
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