WE'RE STARTING TO DOUBT THE DARTMOUTH ECON DEPARTMENT:

Geithner's Gaffe Briefly Hits Dollar (MICHAEL M. PHILLIPS, 3/26/09, WSJ)

Taking questions at the Council on Foreign Relations in New York, Mr. Geithner said he was "quite open" to the idea of a larger global-finance role for Special Drawing Rights, a melded currency used by the International Monetary Fund. Currency traders took the comment as implied support for a suggestion this week by People's Bank of China Gov. Zhou Xiaochuan that the SDR, or some other cross-border currency, take the dollar's place in central-bank reserves around the world.

The euro surged more than 1% against the dollar immediately after Mr. Geithner's remarks; the dollar also fell against the Japanese yen.

The event's moderator, former Treasury official Roger Altman, appeared to recognize the potential impact of Mr. Geithner's comments and later asked him to clarify his view about the dollar's reserve role. "The dollar remains the world's dominant reserve currency," Mr. Geithner then said. "I think that's likely to continue for a long period of time."

His new remarks calmed the markets.

Thankfully someone who understands economics was there to save him from himself.

Posted by Orrin Judd at March 26, 2009 7:35 AM