Sydney Morning Herald
Peter Hartcher
If anyone in the US media had thought to ask a former Australian prime minister for his assessment, they would have heard a different view. And they would not have been so surprised at Geithner's performance since.
In a speech to a closed gathering at the Lowy Institute in Sydney on Thursday, Paul Keating gave a starkly different account of Geithner's record in handling the Asian crisis: "Tim Geithner was the Treasury line officer who wrote the IMF [International Monetary Fund] program for Indonesia in 1997-98, which was to apply current account solutions to a capital account crisis."
In other words, Geithner fundamentally misdiagnosed the problem. And his misdiagnosis led to a dreadfully wrong prescription.
Read the rest here.
Why is this important? Thailand has this knack for following international trends instead of coming up with it own policies based on its own interests, because, if you have been following Thai Crisis's blog at all, Thai economic bureaucrats are insecure, inept and contradictory. It doesn't seem like they have a clue as to what they are doing, so they just copy somebody else.
But, guess what? This incompetence is not limited to Thailand. The incompetence is universal. I have been following economic news closely in Thailand and the rest of the world fairly closely for the last 15 years or so. The thing I have discovered is that most of these bureaucrats and politicians in the upper echelons of power are just winging it. Sometimes they get it right, sometimes they get it wrong. They are gambling, but they are playing with odds worse than slot machines. These great brains coming out of Harvard, Yale, Princeton, London School of Economics don't have such great brains after all. Their record speaks for itself.
I like Obama personally, but I think his policies are disastrous. Throwing money at problems and hoping for the best is not sound fiscal policy. But it seems Abhisit is doing exactly the same thing, both on the fiscal and monetary front. Abhisit has decided to go for broke on the simulus front, by borrowing from foreign capital at a premium, and bringing interest rates down to zero. Just like Obama. These policies won't work unless the world economy turns around quickly, but that is nothing but a pipe dream. For Thailand especially, Abhisit's policies are unsustainable. Thailand needs to go into bunker mode instead of relying on lame policies such as tourist fee waivers and flowery language about inviting non-existent foreign capital in for investment.
The interesting paradox of the 1997 crisis is that if Thailand never had the crisis, the country would probably be in economic ruins, and if the US had been paying attention and learned the lessons from that crisis, the world wouldn't be in the shape it is in right now.
4 comments:
Paragraphs 1 & 2 in relative agreement. Paragraph 3: Can you be more specific on your hunker down solution? If the private sector is not spending, then the government has to act as a spender of last resort. If there is no spending from either the government or private sector, then demand shrinks further and it becomes a even faster downward spiral. Spending is not a guaranteed solution to the crisis--it is more about confidence than anything else.
What happens if everyone goes into bunker mode?
I think governments need to be spending, but I also think they should be more thoughtful on how the spending is done with jobs and climate change the primary focus.
I like Keating (I'm amongst the minority in Australia!), and I like what Obama says, but like Abhisit, there is big difference between the words and the actions.
This economic crisis is probably the best opportunity there is going to be to make fundamental changes away from the old greed/growth at all costs model - but so far it looks like that opportunity is going to be blown.
PS, it's good to see you blogging regularly again.
Fonzi was rather late to notice that the global (read that the U.S.) economy had suddenly gone asthmatic but late is better than more late.
I think it was around July or August last year when I wrote (at my discontinued ThaiFoodFolitics&Fiction blogsite) that something is obviously going very wrong at the rising multi-billions of global bank losses and I raised my concern that "what if there are even more very serious wrongs going on and we are all being lied to?"
The difference now is it seems we are no longer being lied to . . the central bankers of the world (and the Federal Reserve) are now honestly telling us how deeply in shit the global economies and global banks are . . . and they are groping for answers but in the meantime will be throwing caution out the windows and opts for all-out stimulus that requires printing tons of fiat money and even more easy credit/money (which was one of the key causes of the current crisis) to prevent the world from drifting into depression/deflationary spiral.
Fonzi was suggesting that Thailand should have hunkered down instead of the stimulus path.
The 'hunkering down' approach was tried in the 1930's which led to the Great Depression. Federal Reserve Chairman Bernanke is an avid student of 'the depression' . .. and the very 'stimulative' 'very inflationary' easy credit easy money approach being taken right now is what they believe will prevent another Great Depression.
We can all only wait and see . . . how this 'new experiment' will work out.
But if I remember my Economics lessons still . . . it is very very difficult to fight the strong turbulence of economic cycles. The latest economic bust was brought about by unrelenting excesses (remember Greenspan's irrational exuberance and unchecked capitalistic greed of Wall Street & bankers with their exotic financial derivatives) and the eagerness of the whole world, from Mumbai to Beijing to Bangkok to feed America's insatiable quench for credit and consumables.
Personally I believe Obama/Bernanke is futilely fighting a strong economic hurricane. We know hurricanes can not be fought . . . hurricanes only dissipate by itself. Only after the global economies of the world had rid itself of excesses: excess industrial capacities, excess leverages, excess credit cards (I only carry two credit cards to my name btw), excess super-size houses and super-size mortgages . . . in short excess appetites (sufficiency economy anyone - - specially Andrew Walker and Bangkok Pundit?) will the e-c-o-n-o-m-i-e-s of the world start getting to near normal.
But that is my theory and I can be wrong or right as the next economic expert around.
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