The Current Account Deficit
The basic problem with the U.S. economy is that we don't make things — usually high tech things — that can be exported. Consequently we live off foreign borrowings. In the long run that's unsustainable: either the situation will correct itself through gradual adjustments or we'll have a crash. Not a little crash, like we're having now. A Great Depression style crash. In a big picture view trade imbalances are part and parcel of income and wealth inequalities, tax policies that encourage looting of the American economy through offshoring and financial speculation, and misguided Federal spending priorities, so logically those things need to be fixed first. But heuristically it's critical to understand the basics of international financial plumbing. Unfortunately, not many people do. That's why I'm greatly encouraged by Barack Obama's (reported) choice of Tim Geithner as Treasury Secretary, by far the best choice for a cabinet position that he's made to date.
In one of my earliest interviews for the EP podcast (if I remember right it was with Paul Craig Roberts), I noted a speech that Tim Geithner had given in January 2006, in London, in which he recognized that the U.S. current account deficit is a serious problem. The money quote (pun):
"The United States needs to produce a substantial reduction in its structural deficit over the medium term and begin to reduce the more dramatic longer term gap between resources and commitments. And the United States needs to restore a reasonable cushion in its structural budget balance to help deal with future shocks."
The financial press reported Geithner's speech at the time but the establishment paid little attention.
I might quibble with some details in his London speech's analysis but the point is, he was one of the only, perhaps even the only, senior government official to even broach the subject. Don't take my word for it, but I'm reasonably well tuned in to discussions of the current account deficit problem and I think I probably would've known of others.
Geithner has also, from a relatively early period, publicly voiced concern about hedge funds and suggested that further regulation is in order.
Other than that I don't know much about him. But that's OK. From what I do know he's not only more than qualified for the job of Treasury Secretary, he's probably the best person who could be found.
The markets, perhaps for different reasons, seem to agree.
Posted by George Kenney on November 22, 2008 7:20 AM 
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