From a reader:
I agree with Tarpmeister Tim to a point — interest rates were low across the developed world before the deluge. But one thing you can pretty much count on is that if you pay people to hold your currency, they’ll hold it, and if you don’t, they won’t, and exchange rate movements will reflect that.
So if Geithner wants to divert the blame to other central banks, there should be plenty of central banks whose currency fell significantly against the U.S. dollar over the period leading up to the credit crisis (say, 2004-2007? — that would be an easy one to check).
Commodity currencies (CAD, AUD, NKR, SEK)? Nope.
Emerging markets (BRL, CNY, INR, MXP)? Nope.
Here are the currencies (according to the US Fed’s year-end 2007 stats
release) that fell against the greenback during that period:
HK Dollar — 0.16%
Japanese Yen — 8.9%
SA Rand — 9.4%
Sri Lankan Rupee — 9.2%
Venezuelan Bolivar — 13.7%
One — count ‘em, one — significant reserve currency, trying to reflate a large national economy.
Two special situations (HKD and ZAR), a country in a civil war, and a petrocurrency that ran out of gas.
Those naughty foreign bankers and their printing presses. Oughta be a law.