U.S. Treasury Secretary Timothy Geithner stunned the world markets today with a bombshell that the U.S. might back a world currency. With this bombshell by Geithner the U.S. dollar plunged against the euro, yen and sterling as Geithner seemed somewhat supportive of China's plan to have a world currency backed by the International Monetary Fund (IMF).
Once Geithner realized the huge gaffe he made, he backpedalled by stating that the U.S. dollar would be the "world's dominant reserve currency ... for a long period of time". Once he realized how severe his gaffe was on the global markets, he further expanded - "I don't believe that there is a need for a global currency. The reason the dollar is strong right now is because investors consider the United States the strongest economy in the world with the most stable political system in the world."
At least now we know what Geithner really thinks about the U.S. dollar, and why he Geithner has been so passive in keeping the dollar strong. But what Geithner is doing is keeping China at ease, given they buy so much of our sovereign debt.
Geithner should really be looking for ways to make the dollar strong, rather than looking for the easy way out of exploring a possible world reserve currency not based on the U.S. dollar. Geithner also needs to exert some fortitude on reigning in the spending at the U.S. Treasury. Maybe this expectation is too high for an admitted tax cheat.