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Now the president is in Canada trying to sell his nutty nostrums about borrowing your way to prosperity. Jeremy Warner in Telegraph, UK tells the story.
… President Barack Obama, backed to some extent by Nicolas Sarkozy of France, wants economic stimulus to continue until the global recovery is unambiguously secure. In the opposite corner is Germany’s Angela Merkel, now oddly aligned with Britain’s new political leadership in thinking the time is right for fiscal austerity.
Like much of what Mr Obama says and does these days, the US position is cynically political. With mid-term elections looming and the Democrats down in the polls, the administration hasn’t yet even begun to think about deficit reduction. Obama is much more worried by the possibility of a double-dip recession and the damage this would do to his chances of a second term, than the state of the public finances.
As it happens, the public debt trajectory is rather worse in the US than it is in Europe, yet Obama has adopted an overtly “spend until we are broke” approach in a calculated bid for growth and votes.
Part of the reason he can afford to do this is that the dollar remains the world’s reserve currency of choice. For some reason, international investors still want to hold dollar assets, which for the time being gives the US government an almost limitless capacity to borrow. As we know, not everyone enjoys this luxury.
Mr Obama’s cheerleader-in-chief in arguing the case for continued international deficit spending is the American economist Paul Krugman. This hyperactive Nobel prize winner has achieved almost celebrity status for his extreme neo-Keynesian views. Unfortunately, his frequent polemics on the supposed merits of letting rip public spending long since ceased to be based on objective analysis, and are instead argued as a matter of almost ideological conviction. He’s as much a fundamentalist as the “deficit hawks” he mocks.
As it happens, nobody is asking America to axe and burn with immediate effect, though you might not think this to read Professor Krugman’s ever more hysterical commentaries on the fiscal austerity sweeping Europe. But some sort of a plan for long-term debt reduction, other than blind reliance on growth, might be helpful. …
On Reason’s blog, Tim Cavanaugh reports Paul Krugman is now a fool on two continents.
… Of late, Krugman has had his Irish up at Europeans who are resisting the Obama Administration’s plan to continue spending hundreds of billions on financial stimulus. (Not that he agrees with the administration, which Krugman has been arguing for the last 18 months should be spending trillions, not mere billions, on stimulus.) And in the case of Bundesbank president Axel Weber — whom Krugman called out recently in the daily Handelsblatt for trying to shore up the falling euro at the expense of government job creation — it’s created a backlash. …
Shawn Tully in Fortune says if you want growth – governments should spend and borrow less.
Of all the highlights of Allan Meltzer’s half-century as a distinguished monetarist — advising Presidents Kennedy and Reagan, producing celebrated books on John Maynard Keynes and the history of the Federal Reserve — none proved more memorable than a crisis session at 10 Downing Street in mid-1980.
A group of 346 noted economists had just written a scathing open letter to Prime Minister Margaret Thatcher, predicting that her tough fiscal policies would “deepen the depression, erode the industrial base, and threaten social stability.” Thatcher wanted to make absolutely certain her unpopular attack on huge deficits and rampant spending, in the face of high unemployment and a weak economy, was the right one.
So Thatcher summoned Meltzer, along with a group of trusted advisors, to explain why the experts were wrong. Even leaders of her own party advised Thatcher to make what they called a ‘U-Turn,’ and enact a big spending program to pull Britain out of recession. “Our job was to explain why lower deficits and spending discipline were the key to recovery,” recalls Meltzer.
Thatcher was regally unamused by arcane jargon. “Being right on the economics wasn’t enough,” intones Meltzer. “She made it clear that our job was to explain it so she could understand it. If we didn’t, she made it clear we were wasting her time. She’d say, ‘You’re not telling me what I need to know.’”
Thatcher stuck with draconian policies, invoking the battle chant “The Lady’s Not for Turning.” She launched Britain on years of balanced budgets, modest spending increases, falling joblessness, and extraordinary economic growth. …
Veronique de Rugy charts the dismal failure of Obama’s stimulus.
… Since the beginning of the recession (roughly January 2008), some 7.9 million jobs were lost in the private sector while 590,000 jobs were gained in the public one. And since the passage of the stimulus bill (February 2009), over 2.6 million private jobs were lost, but the government workforce grew by 400,000. ..
John Browne on preparing for a post-dollar world.
… In another ominous sign for the dollar, the Financial Times reported Wednesday that after two decades as net sellers of gold, foreign central banks have now become net buyers. What’s more, more than half of central bank officials surveyed by UBS didn’t think the dollar would be the world’s reserve in 2035. Among the predicted replacements were Asian currencies and the euro, but – by far – the favorite was gold. This is supported by Monday’s revelation by the Saudi central bank that it had covertly doubled its gold reserves, just about a year after China made a similar admission. There is no reason to assume these are isolated incidents, or that the covert trade of dollars for gold doesn’t continue. To the contrary, this is compelling evidence that foreign governments are outwardly supporting the status quo while quietly preparing for the dollar’s almost-inevitable devaluation. What people like Paul Krugman believe to be a return to medieval economics may, in fact, be the wave of the future. …
Toby Harnden agrees the firing of McChrystal showed the president’s weakness.
… No one would pretend that the profane, juvenile banter of McChrystal and his aides was clever or appropriate, never mind in the presence of an iconoclastic Rolling Stone reporter. The general, a legendary combat leader who engaged in fire fights in Iraq alongside SAS troopers while in his 50s, deserved to be reprimanded.
Inartful and ill-advised as the words were, however, they also spoke to a justifiable deep frustration within the US military in Afghanistan and contained a degree of truth about Obama’s civilian officials that made the famously thin-skinned President decidedly uncomfortable.
McChrystal and his “Team America” vented about Ambassador Karl Eikenberry betraying them with a leak; portrayed special envoy Richard Holbrooke as an egotist in fear of losing his job; joked about Vice President Joe Biden being a bit of a blowhard; and suggested James Jones, National Security Adviser, was an ineffectual relic of the Cold War.
These are hardly controversial opinions – even within the White House. Rahm Emanuel, Obama’s chief of staff and a man whose salty language would make a sailor blush, probably says worse things about his colleagues to a reporter before breakfast on most days of the week.
Team America, of course, was a bit dismissive of Obama himself and that cannot have gone down well with the self-regarding occupant of the Oval Office. Even more difficult to take must have been the warm words they had for Hillary Clinton, his Secretary of State, who large numbers of Democrats and even many Republicans now wish had prevailed in 2008. …
Tonight on PBS comes a documentary on the Berlin Wall. WSJ has a review.
… Written and directed by Eric Stange, it begins with vivid images of young Germans celebrating the fall of the Wall juxtaposed with black-and-white footage of armed border guards and deadly failed escapes. “On Nov. 9, 1989, the world changed forever,” narrator Joe Morton says. “The Berlin Wall—the most potent symbol of Communist oppression—fell after 28 years marked by violence and tragedy.” Cut to former East Berliners telling their stories of surveillance and imprisonment by the East German secret police, the Stasi. One is struck by their youth, and by the realization that the Wall, a fixture of the Cold War since August 1961, fell fewer than 21 years ago.
We see JFK delivering his famed June 1963 Berlin speech: “Freedom has many difficulties and democracy is not perfect, but we have never had to put a wall up to keep our people in.” Fast forward 27 years and Ronald Reagan demands of his Soviet counterpart: “Mr. Gorbachev, tear down this wall!” …