Insiders Warned: U.S. Debt Crisis Could Explode at Anytime
by Robert Wenzel: An
Inside Look at Global Money Center Bank Activities
insiders are starting to gather in Davos, Switzerland for this week's
World Economic Forum. JPMorgan Chase's Jamie "Obama's Favorite
Banker" Dimon will be there, as will be Treasury Secretary
arrive and check in, they will be given their badges and a copy
of a special Davos magazine, prepared especially for the event.
In the magazine will be an article by Robert Rubin. He is an insider's
insider. Participants will read the article. Rubin is so wired in
that when insiders think of the people who are operating behind
a president, it is names like Rubin's that come to mind. Jacob Lew
the new director of the Office of Management and Budget is connected
to Rubin. The old director of OMB, Peter Orszag, was connected to
Rubin. The new head of the National Economic Council, Gene Sperling,
is connected to Rubin, as was the previous NEC head, Larry Summers.
It goes on. Rubin served as Treasury Secretary under Bill Clinton.
He was former co-CEO of Goldman Sachs. He is co-Chairman of the
Council on Foreign Relations. Got the idea? Insiders will read what
he has written.
The first part
of the article is about what the United States needs to do to get
the economy going. It is a desperate shot taken at the buzzer from
beyond half court. Rubin knows this. He is also a Keynesian, so
his recommendations call for more spending that he hopes can be
reversed in two or three years, once the economy "gets going".
It won't work. The shot will fall short of the rim.
part of the article is much more significant. It is the breakdown
of what is going wrong in the United States. An abbreviated version
of the "Davos Warning" has been printed
of our fiscal position are serious and multiple. And while
these risks become more severe over time as our debt position
worsens, all of these either have begun to materialise or could
do so in the near term, so we should act now.
shapes could the crisis take? Rubin writes to the Davos insiders
To be specific
about the risks, deficits could crowd out private investment,
which could choke off a private investment recovery. Moreover, the
capacity for public investment is already diminishing, and could
be exacerbated by growing entitlement costs and mounting interest
the rest of the article
Economic Policy Journal
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