Top Obama Economist Is Living in a Make-Believe World
NORMANDY, France – A family matriarch – such as JFK’s mother Rose Kennedy – may speak for her entire clan…
…former mayor William Donald Schaefer used to claim he spoke for all the people of Baltimore…
…French president Charles de Gaulle, grandly spoke for the French…
…but only a leading economist, or a complete lunatic, would claim to speak for the entire planet.
The Great Fixer
Many adjectives can be applied to Larry Summers: pompous, foolish, asinine. But not small-minded. His brain is big… impossibly big.
Go ahead. Ask him anything. Really, there is no subject so complex, so remote, or so gnarly that it can stump Mr. Summers.
MIT and Harvard alum… former president of Harvard… former secretary of the Treasury… former chief economist of the World Bank… Summers now writes for British newspaper the Financial Times.
In his columns, we find humankind’s problems fixed… the world’s challenges met… galactic issues resolved.
Yes, Larry – one of President Obama’s candidates to replace Ben Bernanke at the Fed and the former director of the president’s National Economic Council – is the Great Fixer.
Never has a situation appeared for which he had no fix. And never has one of his fixes failed so miserably to fix a problem that he didn’t come forth with yet another fix to fix the fix the faulty fix failed to fix.
We will come back to Mr. Summers in a moment. We pause, briefly, to have a look at what’s going on in the markets:
“Wall Street indexes drop 1% as rate hike looms” says a Reuters headline. One percent doesn’t seem like very much. Not in a stock market that has gone up 210% since its low in March 2009.
It would take another 113 straight days of compounding that sort of drop to erase the gains brought by the Fed’s fix.
U.S. stocks went up so much largely thanks to rate cuts and quantitative easing. Rate hikes are likely to send them in the other direction.
This will all probably happen the way it always seems to happen: gradually, then all of a sudden.
Debt – particularly the weakest (subprime) links in the bond market – will stretch, and then give way. Stocks will lollygag around, not sure what to do. Then, investors will rush for the exits.
At least, you should be alert to the possibility. No one really knows what the future holds.
The World’s Shepherd
But that must be why we have people such as Lawrence Henry Summers.
He knows things that other mortals don’t. He has answers to questions the rest of us never even considered worth asking.
Take China, for example. Who knows what is going on in China?
Is that a problem?
Not really. Why do we need to know?
The Chinese householder needs to figure out how to pay for his rice and fish eyes. The Chinese factory owner needs to bribe his local politician and put off paying his debt. The Chinese investor needs to guess which way markets are going – just like investors everywhere.
We all have our challenges, in other words… and tight limits on our range of competence.
Then, along comes Larry Summers. All of a sudden, the barriers of honest thinking and modest fitness are brushed aside. No problem is too big for Larry’s brain. And no detail is too small for his feet to trip over.
He is not even thinking for himself; he has become the brain, the voice, and the shepherd of the entire world. Here’s Summers writing in the Financial Times:
[T]he world lacks shared understandings regarding goals for the evolution of the Chinese economy, the objectives of China policy in the short and medium term, and the institutional structures needed to manage both cooperation and inevitable tensions.
We gasp for air!
What manner of man is this? When did the world ever have a “shared understanding” of anything? How could you have a “goal” for the “evolution” of the Chinese economy?
They let this guy into Harvard?
Evolution happens without goals… without conscious thought. It is a trip without a destination.
It is also the way economies work; they do not respond well to manipulation by self-important meddlers.
But if you are speaking for the entire planet, you have already gone way beyond the theory of evolution.
You are in a world without theory… without science… without experience or history.
You are in a world of make-believe – where pundits pretend to know what they are talking about and newspapers fill space with mythical claptrap. Summers again:
The world cannot expect economic cooperation from Beijing if its objective is to inhibit Chinese economic performance.
Why would “the world” expect cooperation from Beijing? Why would “the world” have any interest in inhibiting “Chinese economic performance?” Why would “the world” give a damn about any of this?
He also claims to know not only what is best for Larry Summers, the Summers family, the members of the Harvard faculty, the people of Brookline, Massachusetts, the Yankees north of the Mason-Dixon Line, the citizens of the United States of America, and all the residents of the Americas, north and south… but also all the people who live on Earth (presumably including its fauna, its flora, and its inanimate objects):
The world is likely to benefit from recognising that its deepest interests lie in China pursuing more not less reform, even at the expense of modest reductions in its contribution to global demand over the next couple of years, and possibly more exchange-rate depreciation than we would prefer.
How does he know these things?
Summers only knows!
Originally posted at Bill Bonner’s Diary, right here.
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