Geithner's Decade of Incremental Austerity

The Worst is Yet to Come
by Tony Cartalucci

Bangkok, Thailand May 1, 2011 - In a one hour April 26, 2011 talk before the Council on Foreign Relations (CFR), Secretary of the Treasury (and CFR member) Timothy Geithner laid out a frightening picture of America's economic future. Despite a myriad of metrics used to assure the audience that economic disaster had been averted before Geithner took to the podium, Geithner himself would stress the need for Democrats to cut back on programs while Republicans would need to rethink tax cuts as part of the long journey to real recovery.

Geithner specifically said, "this is a war of necessity. There is no alternative. Democrats have to understand that our capacity as a country to finance things Democrats believe in like education, like a minimal guarantee of protection in health care and the safety net, require demonstrating we can live within our means; and Republicans have to understand, of course, that deficits matter, that they are unsustainable and they hurt growth left unaddressed. Tax cuts don't pay for themselves." In other words, more taxes and less services would help repair damage caused by the reckless degenerate gambling dens lining Wall Street who were protected and facilitated by Washington and its band of ineffective, if not entirely nonexistent, regulators.

Geithner would go on to say that the "cuts and reforms" required to repair the economy "have to be phased in over time to avoid damaging the expansion. The biggest mistakes countries make in financial crises, apart from waiting too long to act in the face of the gathering storm, is they put on the brakes too early." Geithner continued, "they shift too prematurely to abrupt contraction-rate strategies that put at risk the incipient expansion. So you have to be -- you have to lock these reforms in, but you have to phase them in to reduce that risk to the economy as a whole."

While drastic austerity measures have been decried from Europe where they are being put into place, to the United States where they are being proposed, Geithner seems to believe that by implementing cuts incrementally over a longer period of time, resistance can be avoided. Geithner said "the president laid out this $4 trillion deficit reduction plan over a 12-year period -- again, same broad magnitude of cuts that the Republicans embraced, much more balanced package, and you found Democrats largely embraced that imperative."

While the devastating effects of America's bankrupted Ponzi-economy have yet to be fully realized, Geithner himself is saying that it will be over a decade before the full range of austerity measures are "locked in." Even if this was mathematically, financially, or politically possible, it would require such efforts to be made within an economic environment free of further abuse. As we will see however, Geithner has no intention of creating such an environment.

Addressing the Cause of the Economic Crisis

Not surprising is the minuscule amount of time Geithner spent addressing the underlying causes of the economic collapse in the first place. When questioned about the "dearth" of criminal prosecutions resulting from the economic collapse, Geithner responded by saying, "you had this colossal loss of basic trust and confidence in the integrity of the system, and we have to rebuild that." He would go on to explain, "it's going to come from making sure that you have a credible enforcement capacity that people believe will be a little bit more proactive, hold people accountable. And you need -- you need to demonstrate that that will be there in the future, because you need the deterrent power that brings to affect behavior. And I agree that we have some ways to go to rebuild -- to rebuild that confidence."

Apparently, credible enforcement doesn't currently exist, and when asked by moderator Dan Doctoroff if Giethner thought it was really possible "to have the regulators stay equal to or ahead of the regulated, given all the incentives that exist among the regulated," he responded that more emphasis should be put on absorbing the effects of "when firms make mistakes and court failure." Geithner would claim that such failures could not be predicted or preempted.

However, the derivative hysteria was not only predictably catastrophic, it would have been easily preventable if this criminal behavior was reined in by "credible enforcement." Furthermore, the "dearth" of criminal prosecutions in the wake of the resulting collapse and the 12 year planned fleecing of the American people to cover the losses of these degenerate institutions only emboldens further economic atrocities in the future.

Geithner himself explains it best when he talked about "the understandable desire businesses always have to lower their tax burden and make sure they get more influence over the basic regulatory framework in which they operate." It appears that "businesses," and in particular the corporations and banking firms that sponsored Geithner's talk at the CFR last month, have completely seized the "regulatory framework in which they operate," effectively distributing all their losses upon the American people and alleviating themselves from any form of accountability.

Bottom Line

Geithner's talk might have reassured the crooks on Wall Street that America's conversion into a corporate plantation is right on schedule, but for the people of America who have lost during the 2008 collapse, and are still losing, and will continue losing as the US Dollar collapses and confidence rightfully ebbs from America's economic prospects, it is a signal that not only are things going to continue getting worse, they will do so for at least a decade to come.

Should Geithner's plan to incrementally bleed the American public over the course of several years be accurate, and barring any catastrophic collapse before then, Americans would be wise to follow the example of governments and institutions around the world as they migrate away from the US dollar. Diversifying dollar holdings into land, tools, physical gold and silver, and just about anything else of tangible, useful value would be a good start.

Additionally, as Geithner noted in his talk, even nation-states like China are attempting to move away from exports and economic interdependency (globalization). So too should we as individuals move away from our servile dependency on the corporate dominated, criminally degenerate global economy and instead focus on building a self-sufficient local economy. By doing so we insulate ourselves from the irresponsible, admittedly unregulated, unenforced Ponzi-markets, and ensure that when the house of cards falls for Washington and Wall Street, Main Street is still standing on the solid foundation of rugged independence that America was built on.

Video of Timothy Geithner's talk before the CFR can be found here. A full transcript can be found here.