QUENTIN
04-05-2009, 12:58 PM
Hey all,
I hoped you might appreciate a few really fascinating articles I've read recently on the current financial crisis. The first is by Simon Johnson, the Chief Economist of the International Monetary Fund in 2007 and 2008, Senior Fellow at the Peterson Institute for International Economics, and Professor of Entrepreneurship at MIT that was published in The Atlantic recently:
The Quiet Coup (http://www.theatlantic.com/doc/print/200905/imf-advice)
by Simon Johnson
One thing you learn rather quickly when working at the International Monetary Fund is that no one is ever very happy to see you. Typically, your “clients” come in only after private capital has abandoned them, after regional trading-bloc partners have been unable to throw a strong enough lifeline, after last-ditch attempts to borrow from powerful friends like China or the European Union have fallen through. You’re never at the top of anyone’s dance card.
The reason, of course, is that the IMF specializes in telling its clients what they don’t want to hear. I should know; I pressed painful changes on many foreign officials during my time there as chief economist in 2007 and 2008. And I felt the effects of IMF pressure, at least indirectly, when I worked with governments in Eastern Europe as they struggled after 1989, and with the private sector in Asia and Latin America during the crises of the late 1990s and early 2000s. Over that time, from every vantage point, I saw firsthand the steady flow of officials—from Ukraine, Russia, Thailand, Indonesia, South Korea, and elsewhere—trudging to the fund when circumstances were dire and all else had failed.
Every crisis is different, of course. Ukraine faced hyperinflation in 1994; Russia desperately needed help when its short-term-debt rollover scheme exploded in the summer of 1998; the Indonesian rupiah plunged in 1997, nearly leveling the corporate economy; that same year, South Korea’s 30-year economic miracle ground to a halt when foreign banks suddenly refused to extend new credit.
But I must tell you, to IMF officials, all of these crises looked depressingly similar. Each country, of course, needed a loan, but more than that, each needed to make big changes so that the loan could really work. Almost always, countries in crisis need to learn to live within their means after a period of excess—exports must be increased, and imports cut—and the goal is to do this without the most horrible of recessions. Naturally, the fund’s economists spend time figuring out the policies—budget, money supply, and the like—that make sense in this context. Yet the economic solution is seldom very hard to work out.
No, the real concern of the fund’s senior staff, and the biggest obstacle to recovery, is almost invariably the politics of countries in crisis.
Continue reading...
http://www.theatlantic.com/doc/print/200905/imf-advice
It's not a short, blurb-based fluff piece. It's fairly long, but very substantive, clear, and from an invaluable expert on failing economies. In it, Johnson argues that the problem with the American economy differs in many ways from previous economic crises and failures, but that at its heart is it the same as the recent crises in Indonesia, Russia, South Korea, Ukraine, Thailand, and America's own previous Great Depression in that the principle cause is a top financial sector of oligarchs with enormous, unchecked control over a government they have all but purchased to suit their aims. Historically, he demonstrates, those struggling or failing economies that righted themselves and survived are those that successfully rid some of the influence of these irresponsible financial oligarchs -- precisely the opposite of what we're now doing.
The second is a more impassioned, less expert but no less informed piece from independent journalist and Civil Rights attorney Glenn Greenwald whose blog I regularly follow. He illustrates how deeply corrupt the top regulators, financial advisers, and the Treasury Secretary are and how indebted they are to the banks and businesses we're now unaccountably bailing out with $2 trillion of taxpayer money. He also highlights an emerging pattern of the Obama Administration of publicly denouncing something and posing populist rage while privately pillaging our wallets and removing the People's role in their government's operations. There's also an important allusion to something I bring up a lot on this forum, how surface, uninformative, and outright misrepresentative the mainstream media is in its coverage of such vital issues.
Larry Summers, Tim Geithner and Wall Street's ownership of government (http://www.salon.com/opinion/greenwald/2009/04/04/summers/index.html)
White House officials yesterday released their personal financial disclosure forms, and included in the millions of dollars which top Obama economics adviser Larry Summers made from Wall Street in 2008 is this detail:
Lawrence H. Summers, one of President Obama's top economic advisers, collected roughly $5.2 million in compensation from hedge fund D.E. Shaw over the past year and was paid more than $2.7 million in speaking fees by several troubled Wall Street firms and other organizations.
Financial institutions including JP Morgan Chase, Citigroup, Goldman Sachs, Lehman Brothers and Merrill Lynch paid Summers for speaking appearances in 2008. Fees ranged from $45,000 for a Nov. 12 Merrill Lynch appearance to $135,000 for an April 16 visit to Goldman Sachs, according to his disclosure form.
That's $135,000 paid by Goldman Sachs to Summers -- for a one-day visit. And the payment was made at a time -- in April, 2008 -- when everyone assumed that the next President would either be Barack Obama or Hillary Clinton and that Larry Summers would therefore become exactly what he now is: the most influential financial official in the U.S. Government (and the $45,000 Merrill Lynch payment came 8 days after Obama's election). Goldman would not be able to make a one-day $135,000 payment to Summers now that he is Obama's top economics adviser, but doing so a few months beforehand was obviously something about which neither parties felt any compunction. It's basically an advanced bribe. And it's paying off in spades. And none of it seemed to bother Obama in the slightest when he first strongly considered naming Summers as Treasury Secretary and then named him his top economics adviser instead (thereby avoiding the need for Senate confirmation), knowing that Summers would exert great influence in determining who benefited from the government's response to the financial crisis.
Continue reading...
http://www.salon.com/opinion/greenwald/2009/04/04/summers/index.html
I'm sure you're busy, but these things have a hefty impact on all of us and these articles (particularly the first) present I think a very convincing, non-partisan or rhetoric-filled account of something we've discussed a lot here in the past few months.
Curious to hear the thoughts of anyone who's willing to read through them.
I hoped you might appreciate a few really fascinating articles I've read recently on the current financial crisis. The first is by Simon Johnson, the Chief Economist of the International Monetary Fund in 2007 and 2008, Senior Fellow at the Peterson Institute for International Economics, and Professor of Entrepreneurship at MIT that was published in The Atlantic recently:
The Quiet Coup (http://www.theatlantic.com/doc/print/200905/imf-advice)
by Simon Johnson
One thing you learn rather quickly when working at the International Monetary Fund is that no one is ever very happy to see you. Typically, your “clients” come in only after private capital has abandoned them, after regional trading-bloc partners have been unable to throw a strong enough lifeline, after last-ditch attempts to borrow from powerful friends like China or the European Union have fallen through. You’re never at the top of anyone’s dance card.
The reason, of course, is that the IMF specializes in telling its clients what they don’t want to hear. I should know; I pressed painful changes on many foreign officials during my time there as chief economist in 2007 and 2008. And I felt the effects of IMF pressure, at least indirectly, when I worked with governments in Eastern Europe as they struggled after 1989, and with the private sector in Asia and Latin America during the crises of the late 1990s and early 2000s. Over that time, from every vantage point, I saw firsthand the steady flow of officials—from Ukraine, Russia, Thailand, Indonesia, South Korea, and elsewhere—trudging to the fund when circumstances were dire and all else had failed.
Every crisis is different, of course. Ukraine faced hyperinflation in 1994; Russia desperately needed help when its short-term-debt rollover scheme exploded in the summer of 1998; the Indonesian rupiah plunged in 1997, nearly leveling the corporate economy; that same year, South Korea’s 30-year economic miracle ground to a halt when foreign banks suddenly refused to extend new credit.
But I must tell you, to IMF officials, all of these crises looked depressingly similar. Each country, of course, needed a loan, but more than that, each needed to make big changes so that the loan could really work. Almost always, countries in crisis need to learn to live within their means after a period of excess—exports must be increased, and imports cut—and the goal is to do this without the most horrible of recessions. Naturally, the fund’s economists spend time figuring out the policies—budget, money supply, and the like—that make sense in this context. Yet the economic solution is seldom very hard to work out.
No, the real concern of the fund’s senior staff, and the biggest obstacle to recovery, is almost invariably the politics of countries in crisis.
Continue reading...
http://www.theatlantic.com/doc/print/200905/imf-advice
It's not a short, blurb-based fluff piece. It's fairly long, but very substantive, clear, and from an invaluable expert on failing economies. In it, Johnson argues that the problem with the American economy differs in many ways from previous economic crises and failures, but that at its heart is it the same as the recent crises in Indonesia, Russia, South Korea, Ukraine, Thailand, and America's own previous Great Depression in that the principle cause is a top financial sector of oligarchs with enormous, unchecked control over a government they have all but purchased to suit their aims. Historically, he demonstrates, those struggling or failing economies that righted themselves and survived are those that successfully rid some of the influence of these irresponsible financial oligarchs -- precisely the opposite of what we're now doing.
The second is a more impassioned, less expert but no less informed piece from independent journalist and Civil Rights attorney Glenn Greenwald whose blog I regularly follow. He illustrates how deeply corrupt the top regulators, financial advisers, and the Treasury Secretary are and how indebted they are to the banks and businesses we're now unaccountably bailing out with $2 trillion of taxpayer money. He also highlights an emerging pattern of the Obama Administration of publicly denouncing something and posing populist rage while privately pillaging our wallets and removing the People's role in their government's operations. There's also an important allusion to something I bring up a lot on this forum, how surface, uninformative, and outright misrepresentative the mainstream media is in its coverage of such vital issues.
Larry Summers, Tim Geithner and Wall Street's ownership of government (http://www.salon.com/opinion/greenwald/2009/04/04/summers/index.html)
White House officials yesterday released their personal financial disclosure forms, and included in the millions of dollars which top Obama economics adviser Larry Summers made from Wall Street in 2008 is this detail:
Lawrence H. Summers, one of President Obama's top economic advisers, collected roughly $5.2 million in compensation from hedge fund D.E. Shaw over the past year and was paid more than $2.7 million in speaking fees by several troubled Wall Street firms and other organizations.
Financial institutions including JP Morgan Chase, Citigroup, Goldman Sachs, Lehman Brothers and Merrill Lynch paid Summers for speaking appearances in 2008. Fees ranged from $45,000 for a Nov. 12 Merrill Lynch appearance to $135,000 for an April 16 visit to Goldman Sachs, according to his disclosure form.
That's $135,000 paid by Goldman Sachs to Summers -- for a one-day visit. And the payment was made at a time -- in April, 2008 -- when everyone assumed that the next President would either be Barack Obama or Hillary Clinton and that Larry Summers would therefore become exactly what he now is: the most influential financial official in the U.S. Government (and the $45,000 Merrill Lynch payment came 8 days after Obama's election). Goldman would not be able to make a one-day $135,000 payment to Summers now that he is Obama's top economics adviser, but doing so a few months beforehand was obviously something about which neither parties felt any compunction. It's basically an advanced bribe. And it's paying off in spades. And none of it seemed to bother Obama in the slightest when he first strongly considered naming Summers as Treasury Secretary and then named him his top economics adviser instead (thereby avoiding the need for Senate confirmation), knowing that Summers would exert great influence in determining who benefited from the government's response to the financial crisis.
Continue reading...
http://www.salon.com/opinion/greenwald/2009/04/04/summers/index.html
I'm sure you're busy, but these things have a hefty impact on all of us and these articles (particularly the first) present I think a very convincing, non-partisan or rhetoric-filled account of something we've discussed a lot here in the past few months.
Curious to hear the thoughts of anyone who's willing to read through them.