German finance minister Wolfgang Schauble left little question about his view of the wisdom of the economic policies of the Obama Administration. Schauble called the U.S. plan to pour trillions of dollars into the bailout fund “stupid” and said it would destroy the AAA ratings for the members — precisely what occurred to the U.S. this year. There is rising criticism of the economic views of Timothy Geithner, who some view as steering the U.S. into massive and unproductive spending.
It is rare to see such a public rebuke in diplomatic circles and highlights the lingering questions of the Administration’s policies of pumping huge amounts of money into the market and into jobs programs.
The Obama jobs plan has received little support on the Hill where critics are charging that the plan will cost $200,000 a job — an assertion defenders have called misleading. ABC News reported “Treasury Secretary Timothy Geithner didn’t dispute a Harvard economist’s estimate that each job in the White House’s jobs plan would cost $200,000, but said the pricetag is the wrong way to measure the bill’s worth.”
I tend to be a bit skeptical of the government being able to prime the pump with huge bailouts and stimulus handouts. Similarly, the last stimulus fund created for shovel-ready projects appears to have been largely a failure from a cost-benefit perspective. That perspective is not helped with President Obama now saying that there is “no such thing” as shovel-ready jobs after using the pitch to sell the last massive fund.
What do you think?
Source: Telegraph
Loviatar, I’m all for stimulus, it’s those get-out-of-jail-free bailouts that suck. Giethner is Or certainly seems to be) proposing a bailout and calling it a stimulus. If the Europeans let Americans anywhere near solving their financial problems they are in, or more precisely, “the little people” are in, for a world of hurt based on the most recent example of the acumen displayed here in the US. Just look where us little people are.
IMO If the President had put Krugman in charge of the purse-strings and policy instead of recycling the same band of merry thieves that benefit with ever downturn and corrupt practice deregulation encouraged the US would be in much better shape today. Actually, the Europeans could do worse than hiring Krugman as a consultant and filing suit against the rating agencies for fraud.
I don’t disagree with any of your proposals to get the industry on track except I’d like to see the CFPB be an agency, have subpoena power and and the justice department follow up on any action requests sent their way. Actual perp walks and jail and receiverships and the like have never been on the table so demanding them is fruitless.
Smugness doesn’t have anything to do with it.
Loviatar,
I agree with Gene’s statements. I also want to echo the earlier statements that my money is on Krugman, and not the German minister or the Teapublicans.
@ Gene H.
Finnish mythology. I read this quote in a book I was reading and loved it.
“No man in his right mind will stand in the way of Loviatar, Goddess of Hurt, Maiden of Pain.”
You may sneer at the “little people,” but I am one of those.
And having my social security dismantled so that some Greek public servant can retire with 53 in his villa strikes me as profoundly unfair.
Your comment about “bank bailouts” seem to indicate that you don’t understand that this isn’t a bank crisis but a sovereign debt crisis.
The money (less than 6 billion euro) private German banks own of the Greek sovereign debt isn’t really the problem.
Sure they can deal with a haircut, have a go at it!
The problem is that most of the Greek sovereign debt is held by state actors (the biggest creditor for the Greek sovereign debt is the ECB with roughly 50 billion euros).
A haircut of 1/4 would mean that the German federal (and state) budget(s) would take a hit of ~5 billion euros (plus the German part of ECB and so on).
Which would lead to austerity and “suffering” for the German taxpayers, because that money has to come from somewhere.
Loviatar,
I not only like your way of thinking in re common sense suggestions, but your nick as well. D&D player or Finnish mythology buff?
Its amazing to me how when you have, the have nots become a theoretical exercise.
No where in my postings did I write that Geithner’s recommended course of actions was correct. What I tried to point out was the insufferable smugness of the first few comments on this thread, a waving of the hands of, oh the stimulus didn’t work lets not try that again. No it did work and millions can attest to that.
As far as the German Finance minister goes, he has an agenda and that agenda does not have the German people first.
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Regarding my suggestions as for what would work in both Europe and America:
– Immediate write down of 1/4 to 1/3 of underwater bank held debt
– Bank bailout contingent on accepting write downs
– Return of Glass–Steagall or something similar
– Immediate implementation of CFPB
– Investigations of the Financial industry and jail time for executives who committed wrongdoing (length of time served would be similar to time served for a bank robbery)
These are all seemingly common sense suggestions, I’m sure there are Nobel prize winning economist out there who could give a more detailed recommendation.
@ Blouise
And your suggestion is….
lottakatz,
Keep writing, I’ll keep reading … your words help me understand this mess …”It sounds like Giethner is proposing a bailout and calling it a stimulus” is exactly how it sounds to me and thus far no one has provided words that show error in that reasoning.
@ Berliner
“Look at these numbers and you’ll see that Schäuble doesn’t so much protect the banks but the German taxpayer.”
Since the advent of the Eurozone and the tighter integration of European economies self serving parochial decisions doesn’t cut it any longer. The Greeks own the German banks and god help the German people when they figure it out.
I’m paraphrasing here:
If you owe the bank thousands of dollars,the bank owns you. If you owe the bank billions of dollars, then you own the bank.
@Loviatar: How much Greek sovereign debt do you think private owned German banks hold? And how much Greek sovereign debt do you think the German state (federal and state) holds, directly and indirectly?
Look at these numbers and you’ll see that Schäuble doesn’t so much protect the banks but the German taxpayer.
Oh, that was said in public. Let’s be positive and focus on all the nice things that are said about our plutonomy in private.
Loviatar: “Damm those little people, don’t they know a we tried a stimulus already and it didn’t work to our satisfaction. And no I don’t care that most economist said it kept millions employed and kept us out of a deeper recession”
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There are (bank) bailouts and then there are economic stimulus packages. The bailout in the US was simply another opportunity to loot the taxpayers. Banks should have been put into receivership, assets seized and owners sent to prison and their ill gotten gains recovered, just like with any criminal enterprise.
The actual stimulus was as much tax breaks as putting people to work. It didn’t work because it wasn’t big enough or long enough.
It sounds like Giethner is proposing a bailout and calling it a stimulus, I can’t see how it will work any better in Europe than it worked here.
Yeah, they mean that Paul Krugman – the guy who has been right more often than all the very serious people in DC but is dismissed anyway.
We are fighting a couple of problems & deficits are not one of them. First, real wages have been stagnant for over 30 years. People have less money to spend today even when they are working than they did in 1980. Most of that has been hidden by problem number 2 – moving jobs over seas. There are fewer jobs in America today & they don’t pay well because they can be moved to India or China.
This stagnation, along with the mindless tax cut crusade leaves the government with less money to provide services to more people. I’m not even sure a WPA like program will make the difference as companies will simply use the new money to create more jobs in China.
I did a gig for an IP law firm a while ago & they have a lot of their work done by lawyers in India. Its cheaper than even para or clerk wages here. Mayo Clinic is opening a branch in India, how long before those lab reports & radiology assessment come from cheaper doctors there? Welcome to third world America.
Ahh, don’t you just love the smell of smug entitlement in the morning.
Damm those little people, don’t they know a we tried a stimulus already and it didn’t work to our satisfaction. And no I don’t care that most economist said it kept millions employed and kept us out of a deeper recession.
Paul Krugman who, oh you mean the Nobel prize winner, who predicted the original stimulus plan was too small, but accepted it as better than nothing. The same Paul Krugman who also predicted that the too small stimulus would be used by the nay sayers to argue against any needed follow up efforts.
I know what will work, lets do another tax cut, they’ve worked so well so far, I mean look at the economy over the past 10 years.
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Is this the same German finance minister Wolfgang Schauble, who would rather see millions suffer in the eurozone because he refuses to allow the German banks take a hair cut on their investments. Is this the same finance minister who was appointed at the recommendation of the major German banks with the number priority to fight against any writing down of debt. Yeah I’m going to take his word as an honest broker in this matter.
Past is prologue. We lived this situation nearly 100 years ago and the economics are clear.
Why everyone keeps trying to defy common understood models of economic behaviour and impose some sort of “morality” against the “evils” of spending is beyond me. But you “austerians” have Greece as your model, so have at it….
European banks had a lot of money invested in worthless American investments. Investments that the rating agencies were saying were platinum though they weren’t. So when our bubble burst it destabilized the European banking industry and Euro, which was the dollar’s greatest rival. The bail-out and a subsequent lack of reform gets our rating dropped (by the same folks that helped engineer it) and sets us up for another crash but we can still ‘win’ if Europe buys into the same no-accountability-for anybody plan. It doesn’t look like they’re going for it. I’m thinking the big European investment bankers aren’t going to get 10 million Euro bonus’ this year.
Anon,
Krugman says inflation is your friend. Doesnt that make you feel all better? Dont worry your silly head. People who know alot more than you will figure this all out for you.
http://krugman.blogs.nytimes.com/2010/02/13/the-case-for-higher-inflation/
Calling this plan stupid is the understatement of the century. Not to mention, that this will be the second time in less than 5 years american taxpayers are being called on to bailout the reckless and destructive actions of an international banking cartel to the tune of trillions of dollars. The fact that these banks reside in europe as opposed to the united states is of absolutely no consequence.
subscribe.
Does Hyperinflation ever enter into anyone’s mind…even though Germany’s economy was based on gold etc….they did have such a thing happen….