US Secretary of Treasury When considering Timothy Geithner’s, US Secretary of Treasury, obsession to cast Europe as the most serious obstacle to the global economic recovery it seems that he has a secret dream: to become EU’s first minister of finance considering his obsession with casting the EU crisis as the world’s biggest economic challenge. He already provoked the indignation of the EU’s finance ministers during a recent visit to Europe by offering his method for success out of the crisis.  At the APEC summit the Treasurer insisted and declared: "In fact you could say that the discussions last night over dinner and certainly in the hallways were still overwhelmingly dominated by what you're seeing unfold in Europe."

The difficulty associated with the European debt looks like the flames of the European crisis are masking the American fire. Geithner's real message is of course subtler and the European crisis allows him to give his other message without being too direct. There are indeed two main issues hidden behind Geithner's European crisis.

First is global growth and trade. During the last ten years, the US growth was financed by an unsustainable increase in borrowing. The future economic growth in the United States will have to come more from exports (products and investments). How to twist things? As the emerging economies are export dependent, they have a strong interest in reducing that vulnerability, as Europe and the US are having more difficulties to import. By stimulating their domestic growth the emerging economies will be less vulnerable  - and they would be able to buy more U.S. exports. 

The second key message concerns the dollar/yuan exchange rate. The re-evaluation of the yuan will have a double effect. It will increase the purchasing power of the Chinese middle class to buy imported products and it will reduce the desire and capacity of developed countries to buy more expensive Chinese products. U.S. households will spend more money—for those who can afford it—either because they insist on buying Chinese goods or because they will turn to more competitive American products. The risk of inflation is high in both cases. This is the reason why the Chinese Central Banks continues to warn Americans about an abrupt adjustment in the exchange rate. For the U.S. to offer more competitive products it would require investment in the American industrial sector. Or to create selected zone of free exchange like the one incorporated during the same APEC summit with 21 countries: it will bring taxes neutrality for import and export.  In such a case, President Obama’s employment plan makes sense. But doesn’t this magnificent plan come too late given that the election race has already started?

Looking at the future, Timothy Geithner's professional outlooks are bright. Indeed, three jobs would suit him. Not only could he could become the first "Secretary of Treasury of the EU", given the fact that he is so concerned with it, but he could also become the next WTO Director General as he puts himself in the position to rethink the global channels of trade and investment. Were he to miss these two opportunities he could still become "US Secretary of Employment", a man to bring back the U.S. industrial jobs that were once outsourced to the emerging countries.

Back to the present time with APEC, the next chairmanship will move from the U.S. to Russia with one key issue: to make sure financial systems work better for small entrepreneurs and individuals. There is no doubt that Russia is not the perfect model for this position. But who knows, the Russians could always follow the example of Timothy Geithner and explain that the overall issue is related to the difficulties in the financial system... in Europe, the US or China.


(Photo © AFP)