America must invest in infrastructure and education to spur economic recovery, but it will not devalue its currency to gain a competitive advantage over other nations, U.S. Treasury Secretary Timothy Geithner told an audience in Palo Alto Monday afternoon.
Geithner, who served as president of the Federal Reserve Bank of New York before becoming Treasury Secretary on January 2009, defended the Obama administration's efforts to revive the economy after the Great Recession and addressed America's ongoing dispute with China over the yuan's value.
He also pointed to several signs that the governments efforts to spur the economy is working. People are slowly coming back to work and lowering their debt burdens and private investment in increasing, he said.
"The economy is definitely healing," Geithner told an audience at the told a crowd at the Oshman Family Jewish Community Center. "We're making some progress and repairing a damage caused by the crisis, but it's still a very tough economy."
Geithner's speech, which was organized by the Commonwealth Club of Silicon Valley, came at a time of economic anxiety both domestically and abroad. With Election Day just three weeks away, Obama's stimulus plan continues to get slammed by Republicans, particularly those affiliated with the Tea Party. Internationally, foreign leaders have been warning about an "international currency war" and U.S. officials have accused China of keeping the yuan's value low.
Geithner said Monday that China's currency remains "significantly undervalued" but said that the United States would not lower the dollar's value to boost exports.
"It's not going to happen in this country," Geithner said.
"The United States and no country around the world can devalue its way to prosperity."
Geithner, who is one of the chief architects of Obama's economic policy, defended the use of aggressive government intervention at a time of economic crisis. He also stressed the need to improve government oversight of financial institutions -- oversight that he said the government "allowed to grow rusty."
"No human could look at our financial system and say it did an adequate job of meeting the basic needs of the country," Geithner said.
One of the lessons from Japan's "lost decade" of the 1990s is that governments need to move very quickly and with "overwhelming" force to break financial panics, he said.
"If you're not aggressive with the full arsenal of tools governments have you will be consigned to long periods of under-performance in growth," Geithner said.
Geithner said he was confident that the reforms in the Dodd-Frank Wall Street Reform and Consumer Protection Act, which became law in July, would make America's economy more resilient and stable. An important part of the reform effort is making sure America's financial institutions are run with less leverage, he said.
He also stressed the need for America to provide businesses with incentives and to invest in education, research and development and infrastructure.
When asked about California's proposed high-speed rail system, Geithner said infrastructure projects such as high-speed rail are valuable because they benefit the people who have been hit particularly hard by the recession -- those in manufacturing.
"Investing in public infrastructure is one of the highest returns on the dollar of taxpayer resources," Geithner said.
The Palo Alto Weekly tweeted Geithner's talk as it happened Monday. To read more quotes from his speech, go to www.twitter.com/paloaltoweekly.