In German Finance Minister calls Fed “Clueless”; G20 Showdown with China; Why Geithner’s “Non-Plan” is Nothing but Hot Air I quoted a Reuters article that called the Fed “clueless”.

It seems there is a bit of a translation error to “clueless”

Michael from Germany writes …

Hi Mish,
have been a follower of your writings for a very long time now – many thanks for all your work !

Please allow one remark to the “clueless” quote from German finance minister Schäuble.

While his comment was indeed very strong language for a German official towards the USA, the “clueless” quote is not the proper translation of what he said.

In German, he used the adjective “ratlos”. Literally, that means “helpless”, “at a loss what to do”, “baffled”, “perplexed”. That is definitely less strong language than “clueless” – which I believe also implies that Bernanke does not understand how he got himself into the mess.

And “Ratlos” also does not have that colloquial touch to it.

Having said that, however, I cannot recall that German officials have ever commented any Fed decision less favourably than they did last week.

Hope that helps a bit,
Please do keep up your excellent work,
kindest regards from Germany,

Thanks Michael. Always happy to make a correction as appropriate.

Geithner Backs Off His Own Plan

As long as we are doing corrections, it seems Geithner, perhaps under pressure from China and emerging markets, has abandoned his plan to save the world via current-account targets.

Bloomberg reports G-20 Conflict Risk Eases as U.S. Says Surplus Goal Unrealistic

U.S. Treasury Secretary Timothy F. Geithner refrained from pushing for current-account targets while China softened its stance on the Federal Reserve’s quantitative easing days before a summit of the Group of 20.

“It looked like there was going to be quite a lot of conflict or lack of agreement going into the G-20 but this suggests there may be a bit more accord,” said Mitul Kotecha, the Hong Kong-based head of global foreign-exchange strategy at Credit Agricole CIB. “There is some toning down of the rhetoric on the Fed’s policy but in return, the U.S. will be looked upon to tone down” its push to shrink trade and investment imbalances.

While the Treasury chief said last month that 4 percent of gross domestic product was “likely to emerge as the basic benchmark countries look to,” he refrained from repeating that guideline in Kyoto. He instead noted policy makers have tried to address persistent trade and investment imbalances since the 1940s, and “it’s a process that’s going to take some time.”

Since we have had problems since 1940 and since the problems dramatically worsened after Nixon took the US off the gold window, it is safe to point out that the process has already taken one hell of a long time.

Now that Geithner has backed down off a plan that cannot possibly work, there is less chance of fireworks.

This is what I wrote earlier about Geithner’s plan …

Geithner’s Non-Plan is Just Hot Air

Geithner’s plan to limit current account surpluses and deficits to 4 per cent of gross domestic product is flat out silly. Actually there is no “plan”, just hot air.

For starters, why would the surplus countries who want to increase exports agree to it? Even if they did agree to it, pray tell what is the enforcement mechanism?

Unless Geithner proposes an enforcement mechanism that can actually stick, there is no plan.

The key point here is there is no enforcement mechanism, nor any discussion of one. There has been no enforcement mechanism since Nixon closed the gold window. That is all you need to know.

Thus, G20 will fail to accomplish anything. However, the show might produce some exciting fireworks for a change, given that currency wars have escalated.

Fireworks may be on hold. It’s too bad. We needed some. Now all we are likely to see is a bunch of lies regarding agreements to agree at later date.

Fireworks would be more entertaining and with some massive fireworks there would be a better chance (although still slim) of accomplishing something.

Mike “Mish” Shedlock
Click Here To Scroll Thru My Recent Post List