The WSJ reported on Treasury Secretary Timothy Geithner's trip to Europe to push his agenda for financial reform and commented that:
"Mr. Geithner's European tour is reminiscent of the Asian financial crisis of a decade ago when many current Obama economic officials, including Mr. Geithner and White House economic adviser Lawrence Summers, traveled Asia doling out advice and worked behind the scenes at the International Monetary Fund to keep bailout cash flowing. Time magazine dubbed a trio of U.S. officials 'the Committee to Save the World.'"
It is worth noting that this prior effort at salvation did not turn out very well. In fact, it laid the groundwork for the current crisis. The IMF austerity plans were considered so painful that developing countries decided that they never wanted to be in a situation in which the IMF could impose the same sort of austerity plans on them. As a result, they began to accumulate massive amounts of reserves mostly in dollars. This reversed the normal flow of capital, with capital now going from poor countries to rich countries.
This led to the over-valuation of the dollar, which in turn caused the U.S. to run a massive trade deficit. The inflow of foreign capital, coupled with the trade deficit, also laid the basis for the continuation of the stock bubble in the 90s and the housing bubble in the next decade.The collapse of this bubble is the cause of the current economic crisis.
Hopefully, this effort at salvation will turn out better than the last one.
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