Key News

• The M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history.
  ...
• "It’s frightening," said Professor Tim Congdon from International Monetary Research. "The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly," he said. (Telegraph) [my emphasis].

Quotable

“It is simply the way Lutheran society operates, in deep contrast to the way Latin society operates – a cultural clash that should have given pause for thought before Europe's elites launched headlong into their adventure.”

                           Ambrose Evans-Pritchard

FX Trading – Now Germany knows how we feel.

(First, let me quick thank the fellows over at the Telegraph for the inspiration behind today’s Currency Currents.)

Perhaps it’s just too entertaining to ignore.

As mentioned, Treasury Secretary Geithner made his way to Europe this week. Here’s one subsequent quote from none other than Mr. G, as reported by the Telegraph:

“The big lesson of the US financial crisis is that you have to act quickly and with force.”

And why not? His “markets want to see action” approach parallels the same skewed thought process that got President Barack Obama elected – it doesn’t matter what we do, it matters that we just do something. It’s only natural that Geithner thinks immediate action is the answer. That’s what the US did, and all empirical evidence proves that the administration succeeded. And that is why White House economic czar Larry Summers is recommending an additional stimulus package ...

Errrrr ... huh? More stimulus? Maybe I am missing something here. You know, it is baseball season now; why am I even reading and writing about Geithner et al? Anyway ...

We were sent this comment yesterday by a friend:

GEITHNER IN EUROPE POURS OIL IN THE FIRE: Treasury Secretary Geithner’s visit to London and Frankfurt today and to Berlin tomorrow are intended to convey two messages to Europe:

1. “Do not just talk about the 750 billion rescue package, implement it!”
2. “Germany should cease and desist from unilateral regulatory actions in the financial markets; all regulation should be internationally agreed!”

The German press, which is viewing Geithner’s intervention as anti-German, is already questioning the American’s visit and pointing out that his public utterances so far have the sole effect of raising doubts and questions about Europe’s ability to deal with its debt crisis.

Now Germany knows how we feel every time Geithner opens his mouth on the US dollar or, well, anything else for that matter. It makes no sense, in our view, for Mr. Geithner to publicly stir the pot in Europe when there is already major dissension in motion. He has a way of saying the wrong thing at the right time and gives the impression the sitting US Treasury Secretary is gravitas challenged.

As a side note, I wanted to bring in an excerpt from that same Telegraph article mentioned earlier and then get some third-party perspective:

But it appears that Europe is deeply divided over the way banking reform should be conducted. Michel Barnier, Europe’s Internal Market Commissioner, yesterday unveiled a radical framework for a bank levy on assets, liabilities or profits to be introduced across the 27 member state.

Mr Barnier said: “I believe in the 'polluter pays’ principle. We need to build a system which ensures that the financial sector will pay the cost of banking crises in the future.”

The Commission stressed that the money would not be used for bailing out or rescuing banks but “only to ensure that a bank’s failure is managed in an orderly way and does not destabilise the financial system”.

Ensure that a bank that’s become big enough (too big) to throw the system into a tailspin, if it were to unravel (to fail), does not destabilize the system? Hmmm, this got me thinking – what would Yogi say?

“It’s like déjà vu all over again.”

Mr. Geithner would be proud ... if they would just get on with it already.