Ex-IMF Official: the U.S. is coming to resemble Argentina, Russia(washingtonpost.com)
washingtonpost.com
Ex-IMF Official: the U.S. is coming to resemble Argentina, Russia
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/25/AR2009032502226.html
6 comments
Another ex-IMF economist saying very similar things: http://www.theatlantic.com/doc/200905/imf-advice
(A great read, by the way - even if you are already familiar with Simon Johnson's opinions by way of NPR's "Planet Money" podcast.)
(A great read, by the way - even if you are already familiar with Simon Johnson's opinions by way of NPR's "Planet Money" podcast.)
> Desmond Lachman, a fellow at the American Enterprise Institute
If there is a lesson to be learnt in the last 30 years of the American experience with economics, it is to keep the American Enterprise Institute and anyone associated with it as far away from policy-making as possible.
http://delong.typepad.com/sdj/2009/02/debt-to-gdp-since-the-...
These people have zero credibility on anything debt-related until they repudiate their party's economic policies under Reagan and Bush II, both periods when it should not have been necessary for the US to radically increase its debt burden. The sudden concern of these people for US debt levels is entirely transparent, and entirely hypocritical. Lest we forget they were also a major proponent of social security reform (translation: Republican-championed efforts to invest Social Security funds directly in the stock market in ways that would generate private management fees).
Good thing that didn't happen. As controversial as bailing out the banks are, it would be worse if the Democrats now had to bail out people who just blew everyone's retirement savings too.
If there is a lesson to be learnt in the last 30 years of the American experience with economics, it is to keep the American Enterprise Institute and anyone associated with it as far away from policy-making as possible.
http://delong.typepad.com/sdj/2009/02/debt-to-gdp-since-the-...
These people have zero credibility on anything debt-related until they repudiate their party's economic policies under Reagan and Bush II, both periods when it should not have been necessary for the US to radically increase its debt burden. The sudden concern of these people for US debt levels is entirely transparent, and entirely hypocritical. Lest we forget they were also a major proponent of social security reform (translation: Republican-championed efforts to invest Social Security funds directly in the stock market in ways that would generate private management fees).
Good thing that didn't happen. As controversial as bailing out the banks are, it would be worse if the Democrats now had to bail out people who just blew everyone's retirement savings too.
> These people have zero credibility on anything debt-related until they repudiate their party's economic policies under Reagan and Bush II, both periods when it should not have been necessary for the US to radically increase its debt burden.
Reagan's spending was during a recession, which is when the standard theory says that govts should go into debt. I note that the folks on the left didn't want less spending at that time - they wanted far more. And, they were in a position to cut a lot of spending and refused.
As to Bush II, the only opposition from the left to any of his spending increases (other than Iraq) was that it wasn't enough. Since debt is the difference between revenue and spending, anyone who advocates increased spending when revenues are not increasing even more is advocating increased debt.
> Lest we forget they were also a major proponent of social security reform (translation: Republican-championed efforts to invest Social Security funds directly in the stock market in ways that would generate private management fees).
Because Ghod knows that a govt worker will always do the right thing and for less.
Reagan's spending was during a recession, which is when the standard theory says that govts should go into debt. I note that the folks on the left didn't want less spending at that time - they wanted far more. And, they were in a position to cut a lot of spending and refused.
As to Bush II, the only opposition from the left to any of his spending increases (other than Iraq) was that it wasn't enough. Since debt is the difference between revenue and spending, anyone who advocates increased spending when revenues are not increasing even more is advocating increased debt.
> Lest we forget they were also a major proponent of social security reform (translation: Republican-championed efforts to invest Social Security funds directly in the stock market in ways that would generate private management fees).
Because Ghod knows that a govt worker will always do the right thing and for less.
Are you referring to that massive unregulated and unfunded liability known as social security which is supposed to be even better than people saving for themselves? (Even if people's retirement assets were shaved by 50% - surely this is a better outcome than the likelihood that in 20 years time the US government is going to have to shave benefits by considerably more to pay for all the retired people?).
That's the problem with these deficit projections now - things are going to get so much worse in the future with unfunded pension and social security liabilities that aren't reported. Government reporting is conveniently at a much lower standard than corporate/public reporting or else we'd really be getting worried.
That's the problem with these deficit projections now - things are going to get so much worse in the future with unfunded pension and social security liabilities that aren't reported. Government reporting is conveniently at a much lower standard than corporate/public reporting or else we'd really be getting worried.
And a good Simon Johnson interview by Bill Moyers can be seen here : http://www.pbs.org/moyers/journal/02132009/profile.html
When I saw this story on front-page I actually thought it must be the Simon Johnson one; strange how similar the two stories are.
I am very seriously trying to get my head around all of this, so as to position myself properly. Short bonds, long gold, etc. for the impending inflation and our battle with it. Like the author, I also share a deep unease with this level of spending.
However, in reading this piece, I felt it was overdone. I've been paying attention, and I haven't noted many of the things that the author notes. Paulson and Geitner and Bernanke"at sea", for instance. I haven't seen evidence of that, except for Geitner's "we plan to have a plan soon" speech, but he's since rectified that. I also haven't seen evidence of Wall Street being overly influential in Washington, but instead, Washington is now overly influential on Wall Street. I just feel he stretched a little far on this article, with a definite goal to scare anybody that hadn't been paying attention.
However, in reading this piece, I felt it was overdone. I've been paying attention, and I haven't noted many of the things that the author notes. Paulson and Geitner and Bernanke"at sea", for instance. I haven't seen evidence of that, except for Geitner's "we plan to have a plan soon" speech, but he's since rectified that. I also haven't seen evidence of Wall Street being overly influential in Washington, but instead, Washington is now overly influential on Wall Street. I just feel he stretched a little far on this article, with a definite goal to scare anybody that hadn't been paying attention.
One also must consider that the IMF and the people associated with the IMF probably have their own agenda, and the US has unique resources at its disposal.
Makes for a good headline though, doesn't it?
Makes for a good headline though, doesn't it?
Any official talking about this will say "Argentina" or "Russia" because it is politically incorrect to say "Weimar Republic".
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Accepting the savings rate and current account balance must be brought back to a sustainable level does not mean the current turbulent readjustment should not be counteracted. This is not inconsistency, it's a timing issue. Ignoring this fact is plain populism, which doesn't surprise me coming from a fellow at a Rpublican think tank.
Secondly, the comparison to Russia in particular is ridiculous. Russia is uniquely dependent on oil and gas. Looking back at Russia's depression and its current troubles, it's hard to ignore the correlation with crude prices (http://www.wtrg.com/oil_graphs/oilprice1947.gif). Oil revenues pay for everything in Russia.
There's another unique feature in the comparison to emerging market crises that he ignores. All these Asian and Latin American countries were indebted in foreign currency and much of their troubles were connected to rapidly changing exchange rates that increased their debt. The US debt, however, is USD debt. The US cannot default on USD debt as the government can print money and inflate the debt away. That's what the Chinese are so scared of.
Also, the US has a huge domestic market, a very broad industrial basis as well as an unrivaled culture of innovation and entrepreneurship.
The current crisis is bad and there are indeed huge issues to overcome. The crisis will continue, but comparisons with the Asian crisis of 1997 or the Russia of 1998 are meaningless. If things should go catastrophically wrong in the US, they will do so in a unique way, not based on some emerging markets template from the 90s.