Asia Sentinel, 18 Feb 2009, Peter D. Schiff
The Obama administration attacks the wrong problem
There is nearly universal agreement that the opening salvo of the US administration of President Barack Obama and its campaign to restore health to the financial system, delivered last week by new US Treasury Secretary Timothy Geithner, fell with a loud and ugly thud.
The most common criticism is that the announcement was short on detail. What is abundantly clear, however, is that the new administration intends to push spending back up to pre-crash levels and to fill the entire credit void that has disappeared into the black hole of the American financial system. Whether or not the prior levels of spending and lending were justified by market conditions then, or now, appears to be largely unexamined.
In the worldview of Secretary Geithner and like-minded economists, credit, rather than savings, is the central figure in the economic equation. Therefore, he sees anything that eases the process of lending to be an effective economic policy. With such a view in mind, the centerpiece of Geithner's plan is the commitment of up to US$1 trillion to revive the collapsed market for securitized debt. In the lead-up to the Crash of 2008 securitization, more than anything else, permitted Americans to borrow more than they had ever borrowed before.
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