President Obama is on his way to Saudi Arabia, and Secretary Geithner is done with his major initiative in China. In part, this is just the US normalizing its relations with the rest of the world and rebuilding some basic diplomatic niceness. But it’s also about reshaping – or not – the way the world’s economy works after the crisis.
From all appearances, President Obama will ask the Saudis to continue their efforts to stabilize the oil market, including by bringing new production on stream, and the Saudis will offer – to the best of the abilities – to play exactly this role within OPEC. Of course Secretary Geithner just asked the Chinese to continue their efforts to stabilize the market for long Treasuries, including by investing their current account surplus in US secruties, and the Chinese have agreed – with some pretend grumbling – to play this role.
It looks like adding up to a big mistake – just ask Mikhail Gorbachev. Continue reading “What Would Gorbachev Say? On The US, China, And Saudi Arabia”