Monday, November 09, 2009

Larry Summers is in charge -- may God help us all

When I first typed in the title, I wrote "Gold" instead of "God". Freudian slip (if I were an Austrian).

Just a quick quote from Vanity Fair on Larry Summers, the man behind Geithner:
Summers has plenty of other things figured out as well, including the origins of the current financial crisis, for which he has crafted a cogent explanation worthy of his reputation as a policy wonk and his days as a college debating champion at M.I.T. “I think crises like this get made by multiple cascading misjudgments,” he explains, and then catalogues them: too much government spending, not enough private-sector saving, too much dependence on foreign debt, too much demand for “riskless” financial instruments that weren’t, in fact, riskless …
Unfortunately, Government spending was too small and this did not fund private savings sufficiently, foreign debt merely improves our terms of trade (and is therefore a net plus), and Govt actions have made the gap between credit analysis and lending worse, not better.

This is why the policy response will be a spin of the roulette wheel. The doctors believe in phlogiston.

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