The Laugh Heard ‘Round the World
“The shot heard round the world” is a phrase that has been used to describe events of historical significance like the beginning of the American Revolutionary War or the shot that killed Archduke Ferdinand and plunged Europe into World War I. Something more potent than a shot was heard in the last two weeks. It was a laugh. “The laugh heard round the world.” This laughter was the result of Treasury Secretary Tim Geithner speaking to a group of Chinese students about the strength and safety of the U.S. Dollar as an investment.
The Chinese students could have booed. They could have held up signs and protested. They could have thrown rotten apples. But they didn’t. They did something far more damaging. They did something that no secret service agent could have protected the Treasury Secretary from. They laughed at him and his policy. It was sudden. It was immediate. And in one split second it said more about what the world really thinks about U.S. economic policy than any amount of speeches or diplomatic missions could ever reveal.
Any other response from the Chinese students could have been dealt with, defended or explained away. But laughter over such a serious topic means Secretary Geithner has become a caricature of himself. His policies are not only making a laughing stock out of himself and the Obama administration, they are making laughing stocks out of all Americans. When leaders are no longer taken seriously, they rapidly become obsolete.
The rest of world understands that we have made a mess of the U.S. Dollar because we have created so many of them out of thin air with no production to back up their existence. The rest of the world gets it. Many in the U.S. do not. You had to look far and wide to see any coverage of the Geithner laughing incident here in US. It received much more coverage internationally.
Some people imply that questioning the strength of the dollar is somehow unpatriotic. What’s unpatriotic is perpetuating the illusion of a strong dollar when in fact it is not. This is what Tim Geithner and Ben Bernanke are guilty of. I want a strong dollar. But I want a strong dollar that is for real. A dollar that is somehow linked to something that is already strong, like gold.
There’s a lot of talk from China and Russia the past several weeks about creating a new international currency to replace the U.S. Dollar as the world reserve currency. Something like this may well occur. There are a variety options being discussed like SDR (special drawing rights).
When the next financial cataclysm rips a hole in the global markets, you can bet that a new and improved, faster, better and stronger world reserve currency will be discovered waiting in the wings, ready to be ushered in at a moment’s notice. That will be the moment when investments like gold will no longer be a four-letter word.