You probably haven’t seen much of Treasury Secretary Timothy Geithner of late, not on television, not at this week’s G20 economic summit, not at President Obama’s side, not even playing one of his awesome games of tennis.
No, you see, the Treasury Secretary is at war, and it’s a war he is determined to win and which the US consumer may be a casualty.
It’s not about hearts and minds, it’s about dollars and cents.
Geithner’s enemy isn’t Larry Summers or Peter Orzag — they were quickly vanquished this summer. No, the Treasury secretary is battling the US dollar.
In good times, Treasury secretaries from Alexander Hamilton to Henry Paulson protected the greenback with actions, words and deeds that ensured it was indeed King Dollar.
Such actions weren’t just a show of pride. A strong dollar was the shield against imported inflation, whether Americans were buying oil or flat-screen TVs.
But with interest rates at essentially zero and the economy not responding to the emergency medicine, devaluing the greenback has become de facto policy at the treasury — a stealth war against our very own currency.
And these secret moves against the dollar allow prices on imported products to soar higher.
Think gasoline, toys and gifts, cars, wine and plenty of raw materials, which drive up the costs of everything from prescriptions to household appliances.
Like most wars, at the start at least, this war against the dollar has some good and clear goals.
By printing more dollars and lowering the value of the greenback, a nation of US debtors will be able to pay back their bills with a currency that isn’t worth as much as the one they borrowed back in, say, 2002, when they bought that five-bedroom home.
Meanwhile, a less-muscular dollar lets US exporters price their software and autos and textiles at prices that are more competitive abroad.
The lower dollar also allows us to import inflation, negating some of the deflationary demons that keep Fed Chairman Ben Bernanke awake at night.
This type of warfare has been tried before, most recently — and with limited success — by the Japanese.
But the Bank of Japan didn’t have the shock and awe we have in Washington. Indeed, Geithner has a monetary arsenal at his disposal that even General David Petreus would envy.
By virtue of an unstoppable printing press, churning out the world’s reserve currency, Geithner can print as many dollars as he wants until the US economy begins to heal.
And Geithner has something else on his side. Unlike most developed nations, where currency rates are displayed on the front page of every paper, Americans are blissfully ignorant about the value of their buck, until it is too late.
Indeed, a recent survey showed that fewer than one in twenty Americans knew the value of the euro. Politically, it’s a lot easier to devalue a currency when the populace doesn’t know what it’s worth in the first place.
All of this money printing can be wildly inflationary, which is one reason why the voting members of the Federal Reserve have been deeply divided on the question of currency debasement, otherwise known by the name of its evil twin — quantitative easing.
Natural resources like oil, priced in dollars, become incrementally more expensive every time the dollar loses some of its purchasing power. It won’t be long before Americans figure that out.
So there will be pain. Perhaps quite a bit of it.
But given the choice between jobs and inflation, the administration seems to have sided with jobs. Generals Geithner and Bernanke clearly believe this is a war of necessity, and they’re in it to win it.
As in any war, there will be consequences, and investors are wise to keep an eye on the dislocations on the horizon.
Already, markets have responded, with the S&P gaining 12 percent since June, and gasoline rising 4 percent in recent weeks. Gold is up more than 8 percent and just off its record highs.
Emerging economies are also likely to be benefit as well, as billions of newly created dollars come to their shores.
Of course, all of this money-printing can go horribly wrong.
But there is little doubt that Geithner & Co. believe this is a war of necessity, and they’re in it to win it.
terrykeenan@email.com