From SCDigest's On-Target E-Magazine
Sept. 14 , 2011
Supply Chain News: US Treasury Secretary Touches on a Number of Supply Chain Issues in Live CNBC Interview
Speculators not Responsible for High Oil Prices, US must Better Incentivize Companies to Build Goods Here versus Abroad, Trade Deals will Go Through and Set Stage for Others, Geithner Tells Jim Cramer
SCDigest Editorial Staff
CNBC held at investor conference in New York City today, and one of its hosts, the well-known Jim Cramer, spent about 30 minutes interviewing US Treasury Secretary Tim Geithner, who touched in the end on several issues related to the supply chain.
Though Geithner was often vague in his responses, Cramer in the end was excited that the Secretary told him relative to the European debt crisis, which right now is the main cause of global economic concern and recent slowing in growth rates across the world, that "there will be no more Lehman Brothers."
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Geithner said that "The long term growth prospects of this country depend overwhelmingly on one thing, which is making sure that we improve the incentives to create and build more things in this country [versus overseas], and export them.
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What Do You Say?
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This meant that European and perhaps even other countries such as the US and China will not allow a major European bank or banks to go under as a result of the sovereign debts crises in Greece, Portugal and other countries. When Lehman was allowed to go under in the US in Sept. 2008, it precipitated a series of chain reactions across many other financial institutions that led to the global financial crisis.
Geithner said this would not be allowed to happen to a Euro bank, although he did not make clear how such a rescue would be handled.
On the supply chain, Cramer stated that oil prices were too high given the weak position of the global economy, and then asked Geithner whether an investigation could be held to look at "if oil was being "cartelled" by hedge funds so that oil was being hoarded, and that's why it's too high."
Geithner said that in his view, the price of oil is in fact usually driven by the fundamentals, even though "there are periods of time when financial activity can amplify what is happening with oil prices," noting that prices now are down quite a bit from earlier in the year, reflecting the slowing economy and reduced demand.
That's sounds like a "No" on idea of an investigation, as it appeared Geithner was not really concerned about the role speculators could be playing in driving oil prices higher. He added that at these prices, oil costs were not really an impediment to economic growth.
SCDigest would note that missing from that statement was the fact that if the economy does start to see real growth again soon, it is likely that oil prices would quickly rise back up to over $100 a barrel, where it does start to be a real barrier to sustained growth.
On the subject of US manufacturing, Geithner said that "The long term growth prospects of this country depend overwhelmingly on one thing, which is making sure that we improve the incentives to create and build more things in this country [versus overseas], and export them to meet the huge demand you are going to see in the next decade from China, India, Brazil, all those countries around the world."
Geithner added that "We are much better positioned than all the other major economies to benefit from that long boom in emerging markets," saying that tax policy, regulatory policy, education, and infrastructure all need to "work together to reinforce a strategy that makes it more compelling to invest to build and create things in this country to meet that global demand."
Specifics on those policies, however, were left out, other than perhaps the $50 billion infrastructure proposal released by the administration last week as part of the $400 billion+ new stimulus plan.
(Supply Chain Trends Story Continued Below)
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On the subject of free trade agreements, Geithner immediately shot out that he "is for them," to which Cramer rejoined, "Ok, why don't we make them so that they have to buy our cars, they have to buy our stuff. We always have to buy what they want. Why don't they ever have to buy what we want? "