Wednesday, March 11, 2009

Geithner Calls for "Dramatic Expansion" of NAB and the FSF

In a "pen and pad" press conference held by Treasury Secretary Timothy Geithner this afternoon, he called for countries around the world to provide "substantial and sustained" government "stimulus" to their economies, not only in 2009, but also in 2010.

Further, he called for "dramatic expansion" of the New Arrangements to Borrow (NAB). NAB is an "emergency" IMF resource. He said the NAB should be increased by up to $500 billion and that membership should be enlarged to include more G-20 countries. China is not an NAB member, but Geithner welcomed their participation.

Geithner also called for major expansion of the Financial Stability Forum (FSF) as an international regulatory agency "so that it can play a more effective role alongside the original Bretton Woods institutions in strengthening the financial system." The FSF consists of senior representatives of national financial authorities (e.g. central banks, supervisory authorities and treasury departments), international financial institutions, international regulatory and supervisory groupings, committees of central bank experts and the ECB. The chairman of FSF is Mario Draghi, Governor of the Banca d'Italia. Draghi was formerly (imagine my surprise) a managing director of Goldman Sachs and vice-chairman of Goldman Sachs International..

Ron Paul, during his recent Liberty Forum speech in Washington D.C., mentioned that he suspects the U.S. government knows that the dollar may not last as the world's reserve currency and that he suspects that plans are being developed to replace it. It looks like he nailed it. The FSF appears to be the vehicle that will be used to launch the restructuring away from the dollar.

This is clearly where Geithner's head was at as, even in his prepared statement, he brings up the old collapsed Bretton Woods monetary agreement in relation to the FSF:

We need to reform and strengthen the Financial Stability Forum (FSF) so that it can play a more effective role alongside the original Bretton Woods institutions in strengthening the financial system.

Why would you bring up Bretton Woods if you weren't thinking monetary restructuring?

Also, of note, during the Q&A, a question was asked about the use of SDR's as part of NAB money. Geithner did not swat the idea down. Paul mentioned that SDR's might be the new reserve currency that the U.S. might want to move into position if the dollar collapses.

It looks like the Administration is going to use the upcoming G-20 meeting to launch an aggressive new campaign to restructure world finance, with the insiders, lead by Goldman Sachs people, firmly in charge. The international reaction will be, to say the least, interesting. When Geithner used the words "dramatc expansion", he wasn't kidding.

1 comment:

  1. See the op-ed in today's FT by George Soros, who calls for expanded use of SDR's (and calls them by name), all in the name of helping underdeveloped nations. While Soros says it is too soon to use the April 2 meeting to commit to any plan, he urges Obama to raise the issue. If Obama starts mentioning SDR's around the conference, I would expect it's a done deal.