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Getting Involved in Bitcoin
10 years ago
Saturday, February 20, 2010
Question: Obama worries me more than Greece or anything else so far. Let me know if I should change my viewpoint on the guy...
Don't discount Greece yet. It may be a small country, but the domino effect could be severe (remember subprime? it was a tiny portion of the US mortgage market). Obama unfortunately, has no understanding of economics and has been relying on a financial intelligentsia (Bernanke, Geithner, etc.), who were instrumental in getting us into this mess, to get us out of it. The result is that the U.S. is following the footsteps of Japan and its "zombie banks" and dire fiscal situation (not to mention the fantastic moral hazard risk brought on by bailing out bank bondholders). To me the only good news since Obama took office is that Volcker seems to be getting a bigger and bigger voice in this administration. I hope this is a sustainable trend.
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That McKinsey report is a must-read, as is the Rogoff and Reinhart book. I'm afraid however that each financial crisis (and post-crisis environment) is different.
ReplyDeleteNotably, this one started and affected the "core" countries of the world economy (US, UK, Europe and Japan), as opposed to the periphery as was the case in a large part of the sample studied by McKinsey and R&R.
The closest precedent is the 1930's, although the differences are still quite important: first regarding the policy response. Second, with the fact that the largest economy, in which the crisis erupted, was already a net international debtor and borrower with a not so good fiscal outlook.
I have heard good things from The Balance Sheet Recession, by Richard Koo as well.
ReplyDeleteThe US and Japan (as of the early 1990's) are extremely different: Japan was a net lender and a net creditor, and it wasn't the global engine of growth and consumer of last resort.
As I said, each crisis is different, and this one doesn't escape the rule.