Fiscal Austerity and America’s Future
By SIMON JOHNSON
NYT
Simon Johnson, the former chief economist at the International Monetary Fund, is the co-author of “13 Bankers.”
There are three main views of the financial crisis and the most recent recession. In the first two views, the debate over the fiscal deficit is quite separate from what happened in the crisis. But in the third view, the financial crisis and likelihood of fiscal austerity are closely linked.
The first is that something went wrong with the financial plumbing central to the world’s economy. Failed plumbing is a serious business, of course — great real estate can be ruined by a burst pipe. But it’s a technical issue; nothing deeper is at stake.
The Dodd-Frank financial reform legislation ended up addressing a myriad of technical issues. Clearly, “fix the plumbing” is Treasury Secretary Timothy Geithner’s interpretation of what we need to do – he insists that making the system safer just requires “capital, capital, capital.” Note, however, that the leading global experts on capital think that the Treasury’s specific approach is wrong-headed, not making progress and likely to lead us into great danger.
(More here.)
NYT
Simon Johnson, the former chief economist at the International Monetary Fund, is the co-author of “13 Bankers.”
There are three main views of the financial crisis and the most recent recession. In the first two views, the debate over the fiscal deficit is quite separate from what happened in the crisis. But in the third view, the financial crisis and likelihood of fiscal austerity are closely linked.
The first is that something went wrong with the financial plumbing central to the world’s economy. Failed plumbing is a serious business, of course — great real estate can be ruined by a burst pipe. But it’s a technical issue; nothing deeper is at stake.
The Dodd-Frank financial reform legislation ended up addressing a myriad of technical issues. Clearly, “fix the plumbing” is Treasury Secretary Timothy Geithner’s interpretation of what we need to do – he insists that making the system safer just requires “capital, capital, capital.” Note, however, that the leading global experts on capital think that the Treasury’s specific approach is wrong-headed, not making progress and likely to lead us into great danger.
(More here.)
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