Tim Geithner assured the Saudis that we’re aware that we can’t go on borrowing and spending like this forever. He also predicted that the economy will recover in fits and starts:
“This crisis has been brutal in the extent and severity of damage to economies around the world,” Geithner said in a speech today in Jeddah, Saudi Arabia. “Given the extent of damage to financial systems, the loss of wealth, the necessary adjustments to a long period of excessive borrowing around the world, it seems realistic to expect a gradual recovery, with more than the usual ups and downs and temporary reversals.”
Economies will need to start growing again before jobs can be created, he said. He also said credit conditions will remain “unusually tight,” even though markets have opened up somewhat in response to government actions.
And as to our ballooning deficits and debts:
The U.S. yesterday reported a $1.1 trillion budget deficit for the fiscal year that began Oct. 1. Geithner’s visit to Saudi Arabia and the United Arab Emirates, two of the oil-exporting countries that are the fourth-largest holders of Treasury debt, comes as the U.S. braces for a projected 2009 budget deficit of $1.8 trillion, more than four times the previous fiscal year’s $459 billion shortfall…
The U.S. Treasury chief sought to address [the concern that there no one will lend us the money and that the borrowing will destroy the dollar], saying that U.S. government policies are consistent with a ‘strong dollar.’ He pledged that the U.S. would take steps to rein in its borrowing while also attempting to address health care, financial regulation and other long-term issues.
“The United States was on an unsustainable fiscal path before this crisis, and we will not succeed in establishing sustainable recovery without a credible commitment to address our long term deficits,” Geithner said. He added during a question and answer session that the U.S. was committed to bringing “down our fiscal deficits.”
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