Wednesday, May 26, 2010

Geithner in Europe

If you have read Andrew Sorkin's book published last year, "Too Big to Fail," you know already that Geithner shoots from the hip. His solution, no doubt with the blessings of Ben Bernanke, is to throw as much government at a problem that you can and to bail out everyone in sight. Laws, history, patience go out the window with Geithner. Largely untrained in economics, Geithner nevertheless wanders the world lecturing the Chinese and now the Europeans about how the government should steer their economies. No economy in the history of the world (with the possible exception of Singapore) has ever done better because of an active government policy. The US in the 1930s is a great historical testament to the damage that the government can do an economic recovery. The current period will be another testament to the foolishness of government's response to a crisis.

If they are listening to Geithner, this does not bode well. He never believes in making foolish investors pay the price of their foolishness. Bankruptcy is a word he doesn't understand. Instead he believe in putting the taxpayer up front and center. Europe is a big enough mess without Geithner giving them advice. (The Chinese, no doubt, did not listen to him. They should be fine).

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