Geithner, Summers, Bair on Wall Street[Treasury Sec Geithner “We’ve got Unsustainable Deficits"]

FOXNEWS.com ^ | October 16, 2009 | Elizabeth MacDonald

[Son House]

In unprepared remarks given at a Wall Street conference hosted by The Economist magazine yesterday, Treasury Secretary Timothy Geithner delivered this eye-brow-raising comment: “We’ve got unsustainable deficits over a five- to 10-year window.”

Economists have also projected this outsized deficit spending—a $3.6 tn budget, a $787 bn stimulus plan, and health reform veering towards $1 tn over a period of years--is putting the country on track to join Zimbabwe, Italy, and Japan when it comes to rising debt-to-GDP ratios.

Geithner also said the US economy is slowly recovering, but the markets should not expect a V-shaped recovery, as the healing process will take a bit longer. The US is due for a “slower than typical recovery,” he said.

In unprepared remarks, Geithner also said that “major economies look soft” but that the “emerging world will be a much stronger source of strength, it is showing resurging strength that will support us.”

The US government, however, owns stakes in about 600 banks, two car companies, has effectively nationalized an insurance conglomerate, AIG, and has nationalized housing finance giants Fannie Mae and Freddie Mac, both of which have combined balance sheets veering toward half the GDP of the US, once off balance sheet items are included.

Top economist Stephen Roach, now chairman of Morgan Stanley Asia and a renowned bear, said last night at Buttonwood that “there is no exit strategy” when it comes to the Fed’s quantitative easing programs, later adding “we’re stuck” in a hamster wheel of “bubbles perpetuating bubbles” and that the country needs a central bank that “actively prevents asset bubbles.” With mid-term elections approaching in the US, Roach also fears a populist-fueled trade war with China if unemployment continues to rise.

[Iron Munro]

Obama-nomics