Let's Give The Currency Markets A Good Roil, Shall We?

The Indispensable Man finally had a good day Monday. The Street liked his toxic assets plan - what's not to like when taxpayers will be subsidizing virtually their entire "investment" in said assets - giving him some much needed breathing room, but now he's back to "normal."  Geithner Comments Send Dollar For a Ride.

In a blink of an eye, the U.S. dollar has collapsed against the Euro, Japanese Yen and other major currencies. The trigger was comments from Tim Geithner who said that the U.S. is "quite open" to China's suggestion of moving towards a Special Drawing Right (SDR) linked currency system. If the world adopts the SDR, which was created by the IMF as an international reserve asset, it would mean that countries around the world would need to hold less U.S. dollars. The U.S. is probably open to this suggestion because a weaker dollar is stimulative for the U.S. economy and would relieve the U.S. from having to implement effective monetary policy while balancing the international demand for a reserve currency.

God forbid he would stand up for his country and his currency. Instead, he ends up kowtowing to an economically hostile initiative from a country that doesn't really wish us well. 

Paul Volcker has come out of his "undisclosed location" where the Administration has secreted him away, and has shown the Indispensable Man how a real man defends America's economy and currency: Geithner And Volcker Back The Buck

Paul Volcker, the former Federal Reserve chairman, threw cold water Wednesday on a Chinese proposal to downgrade the dollar, the second day in a row he has supported the greenback's primacy.

"I understand restiveness about the lopsided nature of the present international monetary system that's so dependent on the dollar," Reuters quoted Volcker as saying at a panel with Prime Minister Gordon Brownof Britain at New York University.

Volcker first spoke out against the Chinese proposal Tuesday, saying at a Wall Street Journal conference that the Chinese, "are a little disingenuous to say, 'Now isn't it so bad that we hold all these dollars.' They hold all these dollars because they chose to buy the dollars, and they didn't want to sell the dollars because they didn't want to depreciate their currency."

Was it really that hard to say all that?