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Willem Buiter in his Financial Times blog,
http://blogs.ft.com/mavercon/2009/03...e-us-treasury/
writes that the US Treasury has been out to lunch, since the Obama administration took over on January 20.
Sir Gus O'Donnell, cabinet secretary, "has attacked the 'absolute madness' of the US spoils system, where a new Federal administration replaces the entire stop stratum of the civil service with new officials possessing the right political connections and leanings...
It is a system designed to produce protracted policy paralysis......Gus O'Donnell ....found that when they ring the US Treasury, either nobody answers the phone or they get put on hold and have to listen to Vivaldi's Four Seasons for hours on end."
Buiter claims that Larry Summers has "jumped into the macroeconomic policy fray....with(out) the benefit and backing of careful analysis. He summarized Summers' 'Keynesian cross' position and then attacked it on the sufficient 'fiscal spare capacity' issue.
"In addition to (1) and (2) being met, there must be sufficent 'fiscal spare capacity' - confidence and trust in the financial markets and among permanent-income consumers, that the government will raise future taxes or cut future public spending by the same amount, in present discounted value terms, that they want to boost spending or cut taxes today.....
Fear of future monetisation of public debt and deficits, or of future sovereign default will cause nominal and real long-term interest rates to rise. Ultimately, the sovereign will be rationed out of its own debt market. The US government (and the US economy as a whole) will encounter a 'sudden stop'.
These are not tales to frighten the children".
So kids, if you want to read more frightening tales, turn to Buiter's uncondensed version at the Financial Times blog.
http://blogs.ft.com/mavercon/2009/03...e-us-treasury/
http://blogs.ft.com/mavercon/2009/03...e-us-treasury/
writes that the US Treasury has been out to lunch, since the Obama administration took over on January 20.
Sir Gus O'Donnell, cabinet secretary, "has attacked the 'absolute madness' of the US spoils system, where a new Federal administration replaces the entire stop stratum of the civil service with new officials possessing the right political connections and leanings...
It is a system designed to produce protracted policy paralysis......Gus O'Donnell ....found that when they ring the US Treasury, either nobody answers the phone or they get put on hold and have to listen to Vivaldi's Four Seasons for hours on end."
Buiter claims that Larry Summers has "jumped into the macroeconomic policy fray....with(out) the benefit and backing of careful analysis. He summarized Summers' 'Keynesian cross' position and then attacked it on the sufficient 'fiscal spare capacity' issue.
"In addition to (1) and (2) being met, there must be sufficent 'fiscal spare capacity' - confidence and trust in the financial markets and among permanent-income consumers, that the government will raise future taxes or cut future public spending by the same amount, in present discounted value terms, that they want to boost spending or cut taxes today.....
Fear of future monetisation of public debt and deficits, or of future sovereign default will cause nominal and real long-term interest rates to rise. Ultimately, the sovereign will be rationed out of its own debt market. The US government (and the US economy as a whole) will encounter a 'sudden stop'.
These are not tales to frighten the children".
So kids, if you want to read more frightening tales, turn to Buiter's uncondensed version at the Financial Times blog.
http://blogs.ft.com/mavercon/2009/03...e-us-treasury/
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