Oh my… Tim Geithner is back. The former US Secretary of the Treasury tells us that thanks to him and his fellow fixers, the US was able to “prevent another Great Depression…”.
“We put out the financial fire”, he claims, “not because we wanted to protect the bankers, but because we wanted to prevent mass unemployment”.
In the event, he prevented at least one person from being unemployed – himself. After his tour of duty at the Treasury, he turned up his nose and told the world that he was not just another corrupt bureaucrat slipping through the revolving door to Wall Street. Then, a few months later… whoosh… and there he was in a private equity firm.
Our job is to connect the dots, and today we connect a few more.
The definition of democracy is this: two wolves and one sheep decide on what to have for dinner. The wolves, no doubt, are with Pope Francis. The Pope thinks governments should redistribute the wealth. Many people agree with him.
They want to see the lucre passed around. But it is a shame Francis did not bother to wonder how the wealth got where it is in the first place. He may have taken a closer look at Mr Geithner.
Maybe God – with his invisible hand – let the chips fall where He wanted them, following the crisis of ‘08. Or, maybe Mr Geithner and his Wall Street cronies got their fat mitts on the loot first.
Everyone – believers and heathen alike – thinks he knows the mind of God, or claims to. Reforestation, recycling, redistribution and economic recovery! Surely, the Big Man is for them all.
And then, you let it be known that you favour higher marginal income taxes (on someone else, of course); this puts you on the side of the angels, too. But for all we know, the angels prefer strip mining and flat taxes and driveing down the highway throwing beer cans out of the window.
The mind of God, like the future, is unknowable. But that doesn’t seem to stop anyone. The former Treasury Secretary’s book comes out this week. It’s called Stress Test. As the title suggests, Geithner claims he was tested by the financial crisis in ’08-’09. He thinks he passed. And now he’s peddling his version of the story, complete with God in his pocket and the future on the teleprompter.
In the autumn of 2008, for example, Mr Geithner knew what was coming. As his colleague Meg McConnell put it, “there will be shantytowns and soup lines across the country”. How did she know that? Because “panics kill economies”, says Geithner.
On the evidence, panics actually help bring economies to life. Like forest fires, they burn off the dead wood. That happened twice in the early 20th century.
There was a panic in 1907 and another in 1920. The stock market fell by half between June 1907 and January 1908. The economy retreated too. But by mid-’08, stocks were back to their highs and the economy was booming.
Again, between July 1920 and June 1921, the stock market lost half its value. And again, the feds did nothing. The economy went into a depression, with double-digit unemployment and 30% less smoke belching from factory chimneys.
Instead of running stimulative budget deficits, the federal government posted a surplus. No TALF, no TALC. No ZIRP. No QE. Despite, or perhaps because of this government neglect, the fire burned hot for a few months. But by the summer of 1921, the tinder was consumed and the flames died out. Within 18 months, people were back at work.
That was the last time federal firefighters let an economic blaze have its way. Since then, every conflagration has been met with smoke jumpers and water bombs. The Panic of ’29, for example, was fought by Hoover, and then by Roosevelt. Together, they dumped so much water on the economy, it was soggy for a whole decade.
More recently, Alan ‘Smokey’ Greenspan extinguished the campfires of ’87 and 2001. Then, it was Geithner’s turn.
Yes, it was “messy”, he admits. And yes, there were some “collateral beneficiaries” (he doesn’t mention himself by name – there was no need to do so). “But this is the only way to ultimately protect the innocent victims of the crisis from the calamitous damage of economic depressions”.
St Timothy to the rescue. Hallelujah.