The Geithner Put: Good for Australia
Lefty Australian economist John Quiggin is, like most left-of-center economists, pretty dubious about the Geithner plan for the banks. But, crucially, he sees it as good for Australia:
There is an even more fundamental assumption underlying the Geithner Plan. Geithner, like Larry Summers, Robert Rubin and Henry Paulson, is deeply committed to Wall Street and its economic model. Their plans are based on the assumption that, when the crisis is over, everything will return to ‘normal’ as this term has been defined for the past thirty years, with a global financial system dominated by financial institutions like Citigroup, Bank of America and Goldman Sachs.
The resort to yet another publicly provided put option reflects this thinking. Just as with the ‘Greenspan put’ and the ‘Bernanke put’ that created the crisis, the assumption is that governments must support the financial sector at all costs.
On the Geithner is view, some new regulations may be needed, but contrary to the rhetoric of the Obama campaign, real change is neither possible nor desirable. By contrast, Kevin Rudd has recognised that the financial crisis signals a ‘seismic’ change in the economic organisation of capitalism, even if not all his government’s policies reflect this.
What does the Geithner plan mean for Australia? On the whole, it is probably a positive. The fact that it is a bad deal for US taxpayers is less important to us than the magnitude of the stimulus involved. And the decline of confidence in the US dollar, while not helpful to exporters competing with US suppliers, will probably make allow the Australian government, and Australian banks, to borrow on more favorable terms.
Maybe the White House economic team is being secretly controlled by an Australian email list? Someone from RedState or the Glenn Beck show ought to look into this; I feel the right needs to update its conspiracy theories.
13 Responses to “The Geithner Put: Good for Australia”
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March 28th, 2009 at 10:15 am
Don’t wanna hurt no kangaroos.
March 28th, 2009 at 10:29 am
Well, I don’t know whether anyone’s being “controlled”, but the intellectual quality of that JournalList thread that leaked is really, really lame. If that’s an indication of the mental quality of all the “prominent liberal opinion journalists”, I can see why the country is in the mess it’s in.
I’d say that the comment-threads on this blogsite are about 10x as thoughtful, and the commenters 10x as intelligent and well-informed.
March 28th, 2009 at 10:42 am
AND they’s gonna do all this using their new global currency instead of the dollar! (how’s that for 10X thoughtful?)
March 28th, 2009 at 10:47 am
I talk with a guy named FerFal in Argentina — to get a possible preview of coming attractions. He indicates that when things turn to shit, the roses don’t necessarily bloom shortly thereafter.
It’s been 8 years since Argentina’s 2001 crisis, things have gotten worse, and the prognosis for Argentina from Roubini’s RGE Monitor is not good.
If , a year from now, things have gotten worse for the USA and the American people realize that they are stuck with poverty for the long term, then support for Obama will evaporate as quickly as it has disappeared for the populist Cristina Kirchner in Argentina.
I really do not understand why the Democrats have REFUSED to hold Republicans accountable for causing this disaster. The only explanation I can see is that major wealthy Democratic campaign donors are insisting that the Democrats shut up and not start “class warfare”. What that portends for the fairness of our economic policy I leave as an exercise for the reader.
March 28th, 2009 at 10:50 am
Re James Gary at 1: “Don’t wanna hurt no kangaroos.”
———-
Ah yes. Anyone asked Randy how he thinks Obama could cut this Gordian Knot in international Political Science?
March 28th, 2009 at 11:22 am
I suggest reading Yves Smith’s blog and the posts about all this being an end run around Congress. It’s the only thing that makes sense so far regarding the obscure machinations from Treasury.
Because it all involves Democrats sport. They got most of the campaign cash, co-sponsored the Glass-Steagal repeal, denied derivative oversight, pushed Fannie and Freddie to securitize bad debt, and protected them when Bush tried to restrict operations.
March 28th, 2009 at 11:34 am
One of the main problems in Argentina right now is not that Cristina Kirchner is a populist; rather, it’s that she is a horrible, horrible leader and a terrible politician. Her process of heedlessly launching an unplanned battle against major agricultural producers with no clear set of allies nor apparently any plan to get out of it has indicated that judgment entirely. She is reviving nearly single-handedly both the right wing and left wing opposition.
March 28th, 2009 at 11:39 am
“Maybe the White House economic team is being secretly controlled by an Australian email list? Someone from RedState or the Glenn Beck show ought to look into this; I feel the right needs to update its conspiracy theories.”
If Matt’s really interested in who’s controlling the White House economic team he should spend some time at opensecrets and take a good look at who’s bankrolling some of his “progressive” heroes.
March 28th, 2009 at 12:01 pm
“And the decline of confidence in the US dollar, while not helpful to exporters competing with US suppliers, will probably make allow the Australian government, and Australian banks, to borrow on more favorable terms.”
Occam’s Razor, no Australian email list necessary if “John Quiggin” is really one Matthew Yglesias.
Don Williams’s buddy Ferfal has a fascinating blog about life after Argentina’s economic collapse. It has an awful lot of gun talk (which, of course, I mean as a compliment).
“Why handgun and not a long arm? Because things will be VERY Dangerous out there and you’ll be wanting some protection, even when walking the dog, picking up mail, or going to the grocery around the corner, you cant’ do that with a long arm, and THOSE are the times you need to be armed the most.”
http://ferfal.blogspot.com/2008/01/most-important-need-in-first-few-days.html
March 28th, 2009 at 8:28 pm
For interest, Paul Keating had a few choice words for Geithner:
…
Worse, Keating argued, Geithner’s misjudgment had done terminal damage to the credibility of the IMF, with seismic geoeconomic consequences: “The IMF is the gun that can’t shoot straight. They’ve been making a mess of things for the last 20-odd years, and the greatest mess they made was in east Asia in 1997-98, so much so that no east Asian state will put its head in the IMF noose.”
…
Keating went on to argue that, by frightening the Chinese into building their vast $US2 trillion foreign reserves, Geithner was responsible for the build-up of tremendous imbalance in the world financial system. This imbalance, in turn, according to Keating, contributed to the global financial crisis which has since devastated the world economy.
China invested most of its reserves in US debt markets. Keating again: “So we have this massive recycling of funds into the system by [the former US Federal Reserve chairman Alan] Greenspan’s monetary policy so even if you are greedy Dick Fuld [the former head of the collapsed investment bank Lehman Brothers] or you are hopeless Charles Prince at Citibank, you’re being told there’s an endless supply of money at a low interest rate and no inflation. So of course the system geared up to spend it.
April 8th, 2009 at 4:22 pm
Great post I really enjoyed it and will be coming back shortly and linking back to your site from mine.
April 8th, 2009 at 10:26 pm
The style of writing is quite familiar to me. Did you write guest posts for other blogs?
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