A tightening in financial conditions is under way but its principal architect won’t be the Federal Reserve.
The Great Debate
from Rolfe Winkler:
Tim Geithner's appearance in front of Congress today was another embarrassment, perhaps more for the people's representatives than the Treasury Secretary. Still, Geithner offered a clumsy defense for paying out 100¢ on the dollar to AIG's counterparties, which included more than Goldman Sachs.
Auditing the Federal Reserve may or may not be a good idea, but one thing seems pretty sure: just discussing it seriously will tend to drive the price of gold higher.
New studies from the Federal Reserve and European Central Bank show that, whatever else, a recovery in the economy is not being supported by a resumption in bank lending, raising concerns about how exactly growth will become self-sustaining when official stimulus ebbs.
- James Saft is a Reuters columnist. The views expressed are his own –
Even putting aside the spectacular but hard-to-measure risks of a financing crisis or the loss of its special status, the dollar faces really serious headwinds from boring old fundamentals.