♠ Posted by Emmanuel in Cheneynomics,Credit Crisis
at 7/07/2009 01:42:00 PM
I was watching Bloomberg TV--financial news for sane people--when the normally sane and competent Laura Tyson (at least during the Clinton years) started spouting Obamanite "deficits still don't matter"-style rhetoric:The U.S. should consider drafting a second stimulus package focusing on infrastructure projects because the $787 billion approved in February was “a bit too small,” said Laura Tyson, an adviser to President Barack Obama.And then we come to the fun part about the US foisting its debts on the rest of the world:
The current plan “will have a positive effect, but the real economy is a sicker patient,” Tyson said in a speech in Singapore today. The package will have a more pronounced impact in the third and fourth quarters, she added, stressing that she was speaking for herself and not the administration.
Tyson’s comments contrast with remarks made two days ago by Vice President Joe Biden and fellow Obama adviser Austan Goolsbee, who said it was premature to discuss crafting another stimulus because the current measures have yet to fully take effect. The government is facing criticism that the first package was rolled out too slowly and failed to stop unemployment from soaring to the highest in almost 26 years.
Obama said last month that a second package isn’t needed yet, though he expects the jobless rate will exceed 10 percent this year. When Obama signed the first stimulus bill in February, his chief economic advisers forecast it would help hold the rate below 8 percent. Unemployment increased to 9.5 percent in June, the highest since August 1983. The world’s largest economy has lost about 6.5 million jobs since December 2007.
Tyson, 62, later told reporters that the U.S. can afford to pay for a second package, even as the fiscal deficit soars. She said the budget shortfall is “likely to be worse” than the equivalent of 12 percent of gross domestic product that the administration forecast for 2009 and the 8 percent to 9 percent it projected for next year. [But hey, deficits still don't matter, right? I guess this is why there's a CBO.]However, we get to the crux of her plan of action fast:
The professor at the University of California’s Walter A. Haas School of Business downplayed worries from China and other countries with dollar reserves that the U.S. will let inflation soar as the deficit expands. “The concern is that the U.S. will have to inflate away its debt. I do not think that is a valid concern,” she said. “The Federal Reserve is not going to let the U.S. government inflate away its debt.”
Tyson said the U.S. should shift away from its dependence on consumption to grow, and promote expansion through investment and exports. The dollar will need to weaken in the longer term to promote export-led growth, she said.Isn't dollar debasement normally associated with, well, inflation? My opinion, which should be evident to anyone who has visited these pages, is that the US is mightily screwed anyway regardless of what is does. Throwing good money after bad through ineffective measures isn't likely to do anything other than add to America's endless obligations...and dig a deeper hole in the process. The US should just lay back and receive what it has long had coming to it. Call it political-economic justice: if you act like a bozo, nobody feels sorry for you when you have to pay the price for doing so despite endless, repeated warnings.
As an aside, it puzzles me how the Chinese refuse to show the US who wears the pants in the global economy when it does not hesitate to use force at home to quell dissent and promote a "harmonious society." Tyson's dream scenario is of the Chinese still acting like wusses and buying American junk paper. All I can say is, the Chinese acting foolishly will have consequences for them as well. Think of the fun riots that will happen when all those reserves go "poof" via Tyson's dollar debasement strategy
In the meantime, bring on the $7.87 trillion stimulus package or whatever foolishness these people are up to. And, most important of all, charge it to the burghers of Beijing. In many ways, the world is even more messed up than it was prior to the credit crisis.
