Tim Geithner At Davos: U.S. Economy 'Not A Boom'

DAVOS, Switzerland — U.S. Treasury Secretary Timothy Geithner said Friday that his country has more confidence now that there is a sustainable expansion – but added that it is not a boom.

"There's much more confidence now that we've got a sustainable expansion," he said at the World Economic Forum, but added, "It's not a boom."

Citing six quarters of growth in the world's biggest economy, Geithner said the back of the financial crisis had been broken and that a recovery was under way, even though the jobless rate has been stubbornly high in the range of 10 percent.

"Unemployment only starts to fall when you see economies grow again. We're only a year-and-a-half into positive growth. As the economy continues this process of recovery, you'll see more people put back to work."

Looking back, he said that the U.S. "made some very substantial mistakes" in how it handled the its financial system pre-crisis and that the fallout would linger for a long time.

"We ran an indefensibly antiquated ... terrible financial oversight system," he said

"There's more confidence that we're going to avoid slipping back into recession. I think that confidence is justified," he said, citing economists who have forecast growth of between 3 and 4 percent this year and next for the United States.

He encouraged China and other emerging economies to "soften their link to the dollar."

Regarding Europe's efforts to reign in debts, he said: "I'm very confident that they will be able to do that."

"They have no alternative but to deliver on their commitment, he said. "They recognize that there is no alternative to the reforms they are taking."

The European debt crisis "had a significant impact (on the United States) in slowing the momentum of recovery at a delicate point."

Comments

[agathacallie]

11:37 PM on 01/30/2011

The "very substantial" mistakes the "US" made in handling the financial system are in fact the mistakes of the Federal Reserve Bank, headed in 2007 by Mr. Geithner. In a speech of March 23, 2007 he had this to say regarding the "innovations" in the credit market:

The Federal Reserve is actively involved in a range of efforts, working closely with the primary supervisors of the major global financial institutions and the critical parts of the financial infrastructure, to encourage further progress. In this context, we are working to put in place a stronger regulatory capital regime and to strengthen the capacity of firms to absorb losses in stress conditions. We are encouraging more sophisticated and more conservative management of credit exposures in over-the-counter derivatives and structured financial products, as well as of exposures to hedge funds. And we are encouraging a range of efforts to modernize the operational infrastructure that underpins the over-the-counter derivatives markets, and to improve the capacity of market participants to manage a major default.

The stronger these shock absorbers, the more resilient markets will be in the face of future shocks, and the more confident we can be that banks will be a source of strength and of liquidity to markets in periods of stress and that the financial system will contribute to improved economic performance over time.

http://www.newyorkfed.org/newsevents/speeches/2007/gei070323.html

[Williamh24076]

08:49 PM on 01/30/2011

What we went through was a bubble, it busted and hopefully we are coming out of it.

China is now where we were in 2006, only a 100 times worse, they have a bubble from hell and when it bursts, it will send credit shock waves around the world.

[fortressfountain]

12:00 PM on 01/30/2011

Not a boom and not even a recovery.

[AZreb]

08:41 PM on 01/29/2011

With Geithner's track record, if he said the sun rose in the east I would have to check every morning for at least a month to verify that statement.

[phoenixx1]

01:08 PM on 01/29/2011

Graffiti Quote:
UNEMPLOYMENT ISN'T WORKING.

[Matt12]

11:38 AM on 01/29/2011

Why is this man still at Treasury? He along with Lloyd Blankfein, Summers, Greenspan, Fuld was an architect of the abolishment of the financial industry's regulations. So where of he speaks about the direction of this country?


The developments in the streets of Tunisia, Egypt, Yemen and other places are about the terrible income distribution, high unemployment and lack of future. The parallels developments in the US vis a vis, demise of the middle class with 30 million unemployed – factored with family members, and the number is four times, or 120 million living in precarious conditions.

Remember, Egypt had wealthy autocrats in key government positions that are probably now fleeing the country. Can this happen in the USA? If the chronic decline of living standards continue, anything is possible

[rtx47]

10:35 AM on 01/29/2011

Problems and Solutions in OUR HANDS.

Seeds of our decline were planted over three decades and before. These seeds are planted today, while we ignore results of what was sowed.

Today, half the marriages end in divorce; 60% babies are born to unwed mothers. About 50% children drop-out of school (70% in major cities); and additional 25% drop-out of college before graduation. These are results after spending billions on school and undergraduate education.

Senior citizens die in hospitals and nursing homes (raising health-care costs); because children refuse to care for them at home in their dying days. Between, end-of-life care and treating preventable illness we spend one Trillion per year; which is added to cost of goods and services.

Leaders in both parties and all levels of govt., various sectors of business, finance, industry, education, media, health-care, are only interested in their selfish well-being; while robbing society and country of billions of dollars in assets. Corporate CEO's are not interested in shareholder value. They want their annual compensation and bonus.

We have to stop the hype and self-glorification. Let's start accepting facts and speaking the truth. Spin has gotten us no where. We live high on the hog; with expectations that "sky's the limit" and we are a rich country. Last three decades should teach us that throwing money at an issue does not solve it. Often it makes the problem worse.

"We cannot have our cake and eat it too!"

[Dunkleberger Karl]

10:17 AM on 01/29/2011

SO JUST LIE ,like bush 2 did,AND THE ECCONOMY COMES BACK LIKE GANG BUSTERS!

[PhilipTaylor]

02:19 AM on 01/29/2011

It is for his BUDDIES - Like Dimon and Blankfein!

[daikon]

10:58 AM on 01/29/2011

Of course that's because they all talked and planned it that way. Government and business, working in harmony.... What a touching sight to see Tim feel such empathy for his friends. Why hasn't the JD properly investigated this love triangle?

[ArabianMoney]

01:14 AM on 01/29/2011

Indeed not, the US is now facing a double-dip recession. Wake up America: http://www.arabianmoney.net/gold-silver/2011/01/29/egyptian-revolution-poor-us-data-herald-a-black-monday-for-stocks/

[themodernleader]

12:28 AM on 01/29/2011

    Geithner has the buffoonery to suggest that China lead the way of replacing the dollar.  The other remarks suggest a leader that can't be trusted for saying anything that jives with reality or past performance.  When this crooked economic system collapses, mobs of hungry, unemployed, desperate masses will spontaneously arise and stand before the Federal Reserve and demand revenge of privilege and discrimination.

[democrats for life]

12:17 AM on 01/29/2011

don't worry folks, everything will be normal by 2021. if you can survive the next 10 years, you will get a bone and handshake from the president that caused this mess, W. Bush

[Robynn Lee Wagner]

10:46 PM on 01/28/2011

"Sustainable expansion" where? with homes being foreclosed on right and left. And that is only going to get worse. No jobs really available and the only sustainable expansion that I see is Wall Street is getting richer and the middle class is disappearing faster then I thought possible. The cost of food is up, the cost of gas is up, the cost of insurance is up, is this what is meant by sustainable expansion.......that things cost more is the what is expanding. Oh how I wish there were jobs available and training available and that I could afford to go back to college, ih right, the cost of tuition went up also.

[Michael GE]

06:36 PM on 01/28/2011

Regarding his comments in Davos, it's for me interesting to see how different the emphasis is your side of the big pond and here on mine.
What is true on both sides of the Atlantic is this: Regardless which hopeful or gloomy outlook we personally have these days, we will find a serious expert or politician or figurehead to just promote that. ... I would guess that's natural, because mass psychology plays a vital part in either direction and depending on that, the experts may be right or wrong. It's reminding me a bit of Heisenberg or Schroedinger.
Back to the reporting: Here in Germany (for example the German Financial Times) emphasized two things: First, Sec. Geithner listed among other things mainly that the US population is - in contrast to Europe - much younger on average and growing. ... True. He was told so a year ago by our Financial Minister when he asked for more German/ European stimulus and got a "no" as answer. I tell this not out of glee, but for a reason: They may be right and maybe (I am no economist) while we need to get back to balanced budgets/ debt reduction as fast as possible, the US could sustain a larger deficit if it's not structural. Like for example: more debt now but with a credible plan to decrease dependency on fossil fuels and military spending in the coming two decades which more than matches the debt of today.

[daikon]

11:05 AM on 01/29/2011

You will not get that from Obama, only tax cuts. And you won't get it from the Repubs, either, for sure. In Germany, people still respect Keynes, but here in the US even Dem pols refuse to mention his name in public in a positive context.

[karen1p]

06:30 PM on 01/28/2011

President Sarkozy to unindicted felon Jamie Diamond:

“The world has paid with tens of millions of unemployed, who were in no way to blame and who paid for everything. It caused a lot of anger. Too much is too much. The world was stupefied to see one of five biggest U.S. banks collapse like a house of cards. We saw that for the last 10 years, major institutions in which we thought we could trust had done things which had nothing to do with simple common sense. That’s what happened… There is an ocean between flexibility and the scandal we saw. So if people present me as obsessed with regulation, it’s because there is a need for regulation. I don’t contest the principle of securitisation, but when one offshore country guaranteed 700 times its GDP, are we in the market economy or in a madhouse? Bonuses don’t bother me, provided there are also … draw-downs when there are losses. When things don’t work, you can never find anyone responsible. Those who got bumper bonuses for seven years should have made losses in 2008 when things collapsed.”

President Obama's response:

**crickets**

[Michael GE]

07:49 PM on 01/28/2011

I really liked his quotes. Especially, since both Germany and France are in sync along these lines politically. And while I guess the upcoming G8/G20 summit itself will not produce spectacular agreements - mostly because the US officially will not have it - I do expect to see that effectively in 2011 the EU and the BRIC will increase control and decrease banking profits.
One could - regarding the EU - compare this to what will happen with the military engagement in AFG: Simply, the kettle among voters is boiling so hot that every government now has to produce visible results (AFG= withdrawel; 'banking' = tax increase, especially a financial transaction tax; more taxes for top incomes). European electorates wont have it that banking business does not contribute to pay for the bailouts. You even have the situation that German business lobby groups are supportive of going after banks, hedge- funds and private equity.
Yes, the basic problems this side and the US side of the big pond are similar; in all field and on all social levels. The difference is, spoken bluntly, a government shaking majority in the EU is aware that there is no "I" in "team".

[WorldisMorphing]

03:58 PM on 01/29/2011

Good one Karen1p...
...And Sarkozy is the 'right' in France...
If Obama kept silent...maybe John Boehner had a particularly enlightening response to that...
" ... "
ROFL...