Comments on: How does Tim Geithner change his mind? A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: robertwaldmann Mon, 27 May 2013 00:31:44 +0000 There is one very important difference between Indonesia in 97/8 and the USA in 2008/9. Debtors in the US (including the Treasury) had borrowed in dollars and debtors in Indonesia (including the Treasury) had borrowed in dollars.

The mismatch of Rupiah revenues and dollar debts made the exchange rate matter in different way than normal. This made the current Geithner proposal for cases like 2008 wrong for Indonesia. Just declaring that debts are in Rupiahs not dollars might have worked. But expansionary monetary policy without such semi-default not so likely.

Since IIRC most Indonesian companies went bankrupt, it couldn’t have made things much worse, but it wasn’t clear that that was going to happen. Notably no other East Asian country had a recession anything close to as severe as the Indonesian recession.

By: NCimon Sun, 17 Feb 2013 23:50:38 +0000 Hello Felix. At the time of the Indonesian crisis, there were severe critics of the IMF policy, people such as William Greider. They saw the IMF’s tactics as simply a way to bail out large global investors who inflated that bubble of hot money Hartcher discusses. The suits would have lost their shirts without that bailout, one that was done right on the backs of the Indonesian people.

To me the key quote from Geithner is this one:

“The financial deleveraging feeds on the economic weakness, the economic weakness forces more financial deleveraging, and you have this vicious spiral.”

I simply don’t believe that Geithner didn’t understand what would happen once that bailout was put in place. More money leaving even faster given the promised tap into the Indonesian economy? That’s a no-brainer.

This also gives us insight into the current situation I believe. The largest banks have been stood up once again, after having fallen victim to the self-inflicted wounds of a globe-girdling bubble they were completely responsible for feeding.

But an enormous economic hole was created directly through the TARP – money pumped into the economy so that the bankers would have someone left to do business with if and when they did revive – and indirectly through the lost tax revenue from a business cycle that nearly collapsed, and the resulting loss of eight million jobs.

How to fill that hole? Why on the backs of the people, of course. Same endgame. That’s even as the economy gradually revives promising more revenue to strapped governments.

I’ve been sure to tell friends that, while I wasn’t around for the great depression, I did make this one. I’m not going to forget the greed, arrogance or stupidity of the gals and guys who like to see themselves as the smartest people in the room. Moreover, they are out of their league at this point. The international financial marketplace having become one exquisitely convoluted dynamical system with lots of feedback. They can’t predict the next collapse, even as they will completely entagled in it. No one can. These systems don’t work that way.

The sooner they are pushed aside and the levers of regulation once again brought to bear, the better. We won’t make the next round without that.

By: johnhhaskell Fri, 08 Feb 2013 16:02:17 +0000 It’s ok to prescribe surgery without anesthetic for the Indonesians, who are little brown people. For Americans, not so much. I doubt Geithner actually changed his mind at all.

By: fresnodan Fri, 08 Feb 2013 10:51:41 +0000 How does Tim Geithner change his mind

Either Bobby Rubin or Lloydy Blankfein tell him too.

By: crocodilechuck Thu, 07 Feb 2013 20:38:13 +0000 Felix

You nailed it.

Having lived in Indonesia in ’97/’98, I’ll never forget this image: camdessus-untuk-soeharto.html

By: dsfan Thu, 07 Feb 2013 19:42:16 +0000 “There he will work closely with (and was probably recruited by) Bob Rubin, setting up Advisory Committees and Workshops and Independent Task Forces and Plenary Sessions and Invitation-Only Roundtables, all the while mingling with the bankers and policymakers and politicians who might delude themselves that they’re working for the greater good, but who are convinced that the rest of us just couldn’t handle being exposed to what goes on behind the CFR’s expensively-paneled doors.”

Did this not sound incredibly petty when you were composing it in your head? I understand as a journalist you want to have access to events, but believe it or not, there are many reasons a person might want to have a conversation and not have it blasted across the NY Times or Reuters, and it doesn’t mean that they are “convinced that the rest of us just couldn’t handle” it.

By: stonewafer Thu, 07 Feb 2013 19:34:44 +0000 <> <> <>

What’s that sound? It’s Felix’s catty claws popping out.

Looks like that CFR membership has been postponed another decade or so … but at least you’ll always have Davos!

By: stonewafer Thu, 07 Feb 2013 19:31:21 +0000 <> <> <

What’s that sound? Felix’s catty claws popping out!

Looks like that CFR membership has been pushed back another decade or so … but at least you have Davos.