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Monday, January 19, 2009




When a teacher fails his students

Last updated: January 29, 2009

January 19, 2009


By THOMAS L. FRIEDMAN
Published: January 17, 2009

. . .

In recent years, “whenever other countries — Russia, Thailand, Indonesia, South Korea or Mexico — got themselves into an economic crisis, we lectured them about how they had to adopt ‘shock therapy,’ ” said Moisés Naím, editor of Foreign Policy magazine. “But now that we are the ones in crisis and in need of shock therapy, everyone is preaching gradualism.”

Source: The New York Times

Indeed. Free market experts from the US were advising many East European nations during their transition to free market economy. Jeffrey Sax is the first to come to my mind. Sax was advising the Polish and Estonian governments and for a short period the government of Russia and he achieved a remarkable success with the first two (Russia's failure was not his fault). Now the US is itself in dire need for a good doze of shock therapy when it suddenly comes out that the teacher does not live by what he is preaching.

It's remarkable how, despite the messianic aura surrounding Obama, he is basically just another twist of the same ideology/culture that has brought this disaster on the US in the first place. I don't remember one single time when Obama said something that made any sense economically and practically. On all economic issues from fuel tax through his grandiose green projects to ethanol imports from Brazil he is a disaster about to happen.

George Bush undermined the economy with his senseless tax cuts. Now here comes a person who believes that he can save the economy by issuing decrees. Under Bush America was busy spending its way into this disaster. Now it's about to try to spend its way out. At least under Bush there was still some semblance of macroeconomic sanity. Now the last bits of it went out of the window under the pretext of a Keynesian economic stimulus as if a trillion strong deficit is not stimulating America enough. Truly amazing.


January 29, 2009

By DAVID E. SANGER
Published: January 25, 2009

Nationalization Gets a New, Serious Look

. . .

Another option is for the government to buy the banks’ most toxic assets either through a giant fund, or, more likely, a federally supported bad bank designed to buy up troubled investments. But in that case, taxpayers might well be the losers: They would have all of the banks’ worst assets and none of their performing loans. And unless a deal is worked out to take a larger share of the banks whose bad loans are shuffled off to the government, the taxpayers would not have the chance to benefit by selling the shares back to private investors.

Moreover, cleaning up the banks’ bad assets, without extracting a heavy price for the bank managers, shareholders and their lenders, is exactly what Mr. Summers and Mr. Geithner warned against during the Asian financial crisis.

“We told the Asians that they had to be willing to let banks and companies fail,” said Jeffrey Garten, a professor at the Yale School of Management and a top official in the Clinton administration. “We warned that there was great moral hazard if governments just bailed them out.”

“And now,” he said, “we are doing the polar opposite of our advice.”

Source: The New York Times

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