Simon Johnson Weighs In Again: OS Wishes Someone Would Listen

Simon Johnson is one of those reasoned, credible, experienced voices that keeps repeating, 'No, no matter how much money you print up and throw at places like Greece and Italy, this will not solve the problem. It's not a money problem, it's a cultural problem.'

At least the New York Times prints his words, still.

Lech Walesa famously remarked that it was easier to make fish soup from fish than to do the reverse. So it is with fiscal crises — once fear prevails and markets start to think hard about the stress scenario, it is hard to solve the problem simply with reassuring words or financial support that never needs to be used.

Crisis veterans like to say, quoting former President Ernesto Zedillo of Mexico, that when markets overreact, policy needs to overreact in the stabilizing direction. But what really matters is not overreacting; it is making sure you do enough.

In Europe, the first thing peripheral governments need to do is stop accumulating debt, and quickly. Italian fiscal plans to balance the budget in 2012 look implausible, as they assume unrealistic growth. The planned Greek debt restructuring and increased taxes will not turn that economy around, nor prevent Greece from accumulating further debt. Despite all the reported austerity, the Irish government is still running a budget deficit near 12 percent of gross national product in 2011, while nominal G.N.P. actually declined in the first half of 2011.

Good advice for us, only insert 'state governments', 'federal government', 'Congress', 'White House', etc.

Simon Johnson: Private Gain, Public Loss--The Real Cost Of Too-Big-To-Fail

Simon Johnson is one of those rare economists who knows how to talk about economics in Plain English. He has a breathtakingly strong resume. He does not have any particular political axe to grind. And he pulls no punches. He draws the line of direct relationship between the reckless bankers, the complicit governments, and the miseries created by both on the ground around the world.

OS just encountered this recent address of Johnson, and it is well worth a few minutes spent viewing. He points out, for instance, that Citigroup has blown up three times in the past thirty years, each time rescued by the public sector in one way or another.

Johnson really gets going in his summation at about the 8:00 mark.

Simon Johnson's Words Still Ring True

Simon Johnson weighed in a year ago with sober words about cultures around the world, which all share one characteristic in common: their economies have gone belly-up, and needed to be rescued by the IMF.

Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders. When a country like Indonesia or South Korea or Russia grows, so do the ambitions of its captains of industry. As masters of their mini-universe, these people make some investments that clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon—correctly, in most cases—that their political connections will allow them to push onto the government any substantial problems that arise.

As the great-and-good of the world gather in Canada to plan our futures, his words bear reading again.

Rumblings from the Left--They're not buying Obama/Geithner either

The Atlantic Monthly boasts a loooong tradition as a linchpin of the East Coast Liberal Establishment. How interesting then, to see the editors feature this article by Simon Johnson, the former chief economist of the International Monetary Fund.

His conclusion is sobering, namely that we are on the way to becoming a banana republic (and I don't mean the hip retailer), characterized by an unholy alliance between the political leadership and the heads of the banking establishment.

(Have we noticed that our President had a friendly sit-down the with heads of the banks on Friday, and fired the CEO of GM on Sunday? Have we even wrapped our heads around the fact the the President of the United States fired the CEO of General Motors?)

It isn't just the so-called 'right-wing-nut-cases' saying this. Those guys can easily be dismissed, if one is in the mood not to listen. Simon Johnson, you can't dismiss; he's been there, done that, and has the chilling tales to tell.

In my mis-spent youth, I worked in a banana republic(a country south of here, not the retailer). I was shocked daily by the grinding poverty of so many, the flaunted wealth of so few, the families in the middle running full tilt just to stay in place, and the rampant cynical corruption that permeated the entire society.

The IMF had to be called in when things totally broke down, as did our Treasury. The cost of meltdown was deemed to be too high, and the proverbial Day of Judgement was postponed for about fifteen years(in other words, until now).

Trust me, we don't want to live that way. The article is worth the time you'll spend reading it.

Again, it's not about a weak economy driving culture astray; it's about cultural decay driving the economy over the cliff. It's the only place a decayed culture can drive an economy.