China doesn’t believe in capitalism. It doesn’t believe in socialism. It believes in “what-ever-works-ism.” One big problem with economists is that the incentives do not allow you to say “I have no clue what is going on.”

ANyway the UdSSR economy fell 50%, the life expectancy fell 10 years (that s some millions deaths caused by transition to capitalism) any way you look at it the transition era was a disaster.

Is there a better case for a conspiration ?
I mean weren t the Chicago boys so happy to prove the total failure of capitalism ?

Well you may think that the USA gave on purpose bad advices. I just think they were stupid and unaware of the realities. JUst as they ve been stupid and unaware of iraq realities … THe US country is well known indeed for its lack of apprehension of foreign realities and on top of that the lack of knowledge of its economists of the very importance of institutions…
Just look at ROubini s blog. WHat does he discuss : fiscal and monetary policies … He does not even adress regulation ones. Yet anyway you look at it the main problems origin not in fiscal or monetary imbalances … THey origin in the deregulation of the finance industry that has allowed all this foolish lending business with each lender passing the risk to the market hoping that the pollution created would never fall back on its head. I mean instead of turning lemons into lemonade, I would have called it, turning lemons into acid rain. Basically that s what has happened, before people were afraid to buy lemons, now they have been made unaware that all the citric acid has been sent into the sky up above and is just waiting to fall in disastrous acid rains.

Anyway. the UdSSR economy was destroyed by US recommanded economic policies and I don t think the US intentionaly destroyed the UdSSR and then RUssia in order to turn a lleading soviet model into a despotic crony pseudo democracy …

So if they did not do it with UdSSR and russia, I don t think they did it with indonesia.

Besides and on a last note, If you believe in conspiracies then you have to realise that it is highly possible that the chinese have lent to the USA in order to create thE disastrous economic crash ahead, the chinese communists are wise they know capitalism cannot work because of its inner contradictions, they have only pretended to turn to capitalism, but their only aim was to demonstrate what really happend when finance is let free and people can borrow their heaven on earth by indebting themselves and future generations… In 10 years it will be clear that the CHinese successed where the russians failed, they proved the complete failure of the capitalist model by pushing those stupid capitalists to borrow and borrow their way into the garbage of history.

You really think Clinton was worse than Warren Harding or Ulysses S Grant?

DC: The amount of money we are talking about maybe trival in New York City, but the impact from the Hedge Fund currency speculators was completely destructive to the developing nation.

Hedge funds don’t have nearly the resources to destroy a nation intentionally (they can cause a big mess unintentionally but that is something different). Hedge funds that deal with currency are also very rare, and generally lose.

DC: The high growth economies of the Asian tigers were viewed by Clinton Administration policymakers as the primary strategic threat to US global economic hegemony.

The person who runs this board happens to be one of those policymakers, and he seems to think that there was no such strategic aim. I’m also skeptical, because people who have strategic aims in government tend not to be quiet about it. The thing about the people in policy circles that want to “destroy communist China in the name of freedom” weren’t and aren’t quiet about it.

In order to have a policy of “lets destroy Indonesia” you need to have a lot of meetings and rather open discussions. Also people who support a policy usually do so for different reasons, and getting political support is a noisy, messy process.

One has to remember that Clinton was the guy that got China into the WTO. Once that happened you have large sections of the US economy which are now dependent on the continued success of China, and that creates an powerful lobby that has led the “destroy the evil Communists” lobby weak and divided. It is now unthinkable for any US policy maker to think of wrecking the Chinese economy and destabilizing the Chinese government which were ideas that were common in the early-1990’s. If the Chinese economy goes, so does the American economy, and the fact that China and the United States are so tightly intertwined is one of the positive legacies of Clinton.

the medicine that was applied elsewhere clearly didn’t work in indonesia — and the spiral of events that led indonesia into the deepest crash and the loss of life (including many in the ethnic chinese community) is clearly a tragedy.

I am not sure it necessarily is tied to “bad medicine” - though, as you can also make a case that indonesia didn’t really ever embrace the “no more crony capitalism” set of reforms so the proposed policy wasn’t ever implemented. indonesia also didn’t really tighten monetary policy either — it was injecting liquidity hand over fist into the the banks and the funds were flowing offshore. tho here you can argue that closing one corrupt bank before a broader system of deposit insurance was put in place contributed to the run (I think there is something to this argument). the policy makers in dc thought closing a bank tied to suharto would send a clear signal of reform, but to indonesians it sent a clear signal that investments they thought were safe (b/c of the owners political ties) were not as safe as was thought).

I suspect that the reality here is that the doctor didn’t initally get the diagnosis and prescription 100% right, but also that the patient didn’t follow the doctor’s instructions and took some additional medicine on the side that produced some unpleasant and unantcipated interactions.

but whatever, it is hard to argue if you look at monetary aggregates that indonesia pursued a too tight monetary policy at the time. BI’s discount window was open in a big way.

as importantly, I am not quite sure how you think indonesia should have been handled.

There never was an option that was “huge amounts of money with no conditions” to help sustain suharto and the status quo (suharto as you know had very close ties to a group of ethnically chinese businessmen, and a lot of suharto’s familty and friends were also in business in a big way).

so the options were “money and reform” — but here, I think (and this is not the consensus view) the treasury underestimated the extent to whcih reforms that undermined crony capitalism would undermine confidence, not add to it, and thus add to the run. after all folks had lent money to the crony capitalists in part b/c of their close ties (in the same way locals had invested in suharto banks b/c they were too clsoely tied to the regime to fail, or so the thinking went)

or no money and no reforms. but once int. banks decided they weren’t goign to rollover s-term lines to indonesian bnaks and firms, this was sure to cause distress. indonesia really did need the money.

so i am not sure that option would have worked either.

the crisis was also complicated by the fact that a lot of the debt was owed by firms not banks, and for a host of reasons, it is a lot harder to inject emergency liqudity directly where it is needed in those cases.

have you read bailouts and bail-ins by the way? there is an extensive discussion of indonesia’s case there, and after you read it, we might be able to have a real debate on the specific policy choices made in the crisis.

yes, i do defend the clinton treasury. i was there, and on balance, i think the us policy of providing dollars to emerging markets short on cash (and demanding policy changes in exchange) was better than a hands off, no intervention you got into the mess on your own you should get out of the mess on your own policy. and in three cases (mexico, brazil and Korea) I think you can clearly make the case that the coutnryr would be far worse off absent us intervention. thailand is more of a mixed case. indonesia didn’t work, but i am not yet sure i know what would have worked.

turkey more recently also worked. argentina didn’t. but those are part of the bush administration’s legacy more than the legacy of the clinton administration.

In my personal opinion, the Clinton Administration was perhaps the most corrupt in US history. Please read my earlier comments relating to Clinton’s pardon of criminal fugitive Marc Rich. The amount of money we are talking about maybe trival in New York City, but the impact from the Hedge Fund currency speculators was completely destructive to the developing nation of 200 million Indonesian people. The ultimate foreign policy objective of the Clinton Administration wasn’t the deliberate impoverishment of the Indonesian people, but the restructing of Asian economies to the American Neo-liberalism model. Robert Rubin could personally care less one way or another about the Indonesian people. The high growth economies of the Asian tigers were viewed by Clinton Administration policymakers as the primary strategic threat to US global economic hegemony. The Asian Economic Crisis represented a deliberate attempt to destroy the Asian developmental economic model, originated by Japan but emulated across the Asian region. Of course, the strategy ultimately backfired with the Japanese refusal to cooperate with the Clinton Administration in any of their foreign policy objectives. At one point, the Japanese Finance Minister even threatened to dump US Treasury bonds in retaliation. At the Malaysian APEC summit, the Japanese Foreign Ministry blasted the Clinton Administration as incompetent and corrupt for its role in the Indonesian fiasco.

Of course it did. It likely got the staff people with pardons to listen to why Marc Rich should be pardoned. But it’s not as if you can buy the pardon. You can buy an hour to explain to a staffer why they pardon should be given, and maybe there were good convincing reasons, I don’t know Marc Rich.

A lot of what people talk about in Washington is pseudo-corruption. A wants to make B look bad so they bring up the fact that B did the types of deals everything does.

DC: Under then Treasury Secretary Robert Rubin, the ulterior motive of the US Treasury and IMF was destroy the Asian developmental model of state driven industrial capitalism that existed in Indonesia and the rest of Asia.

And they wanted to do that, why? Brad worked for Robert Rubin. I work on Wall Street. Wall Street cares first and foremost about making money, and there is a heck of a lot more money to be made if Indonesia has a good economy. There *are* people in Washington who are willing to destroy a country to preserve American dominance, but they are not secretive about their goals (example Bill Kristol and the Weekly Standard). Rubin isn’t one of them, and Wall Street will have nothing to do with these plans.

I’m concerned that you are so fixed on enemies of China who aren’t real enemies, that you aren’t able to see who the real enemies are and who the real friends are.

WASHINGTON (MarketWatch) — Outstanding commercial paper in the U.S. financial system dropped sharply for a third straight week, indicating that a severe credit crunch has not eased in the market that supplies most large companies with operating funds.

Outstanding paper fell by $62.8 billion, or 3.1%, in the week ending Wednesday to $1.98 trillion, bringing the total decline in the past three weeks to $244 billion, or 11%, the Federal Reserve reported Wednesday.
Commercial paper consists of short-term promissory notes issued by corporations to raise cash for their operational needs. Most of the paper has maturities between 30 days and 270 days; anything longer than that requires a registration statement with the Securities and Exchange Commission.
An estimated $1 trillion in commercial paper will mature in the next few months. As commercial paper expires, companies are forced to rely on previously arranged bank credit lines or arrange other financing. In the current environment, finding financing for maturing mortgage-backed paper has been difficult, and that’s led to a squeeze on mortgage lenders.

I think you are reading things that aren’t there, and missing things that are. Stiglitz has been harsh against IMF policies to third world nations, but I don’t think he things that Rubin was responsible for this.

A few points:

1) The fact that hedge funds and investment banks have close links with Washington is true but irrelevant. In the circles of politics and economics, everyone has close links with everyone else. That doesn’t mean that you can call someone and get X done. There are lots of rules both formal and informal that tell you what and can’t get done. The main thing that campaign contributions get you is that the person you are trying to lobby returns your calls and talks to you. That’s vitally important, but they aren’t going to obey you, just listen to you.

2) The amounts of money you are talking about are trivial. A New York skyscraper is worth about US$2 billion. Ten billion is not much money, and people in the corridors of power are not going to put through a massive conspiracy to get such piddling, small amounts of money. The people involved in high level strategy in NYC think in terms of hundreds of billions and trillions.

3) The problem with conspiracy theorists is that they miss the real conspiracies, and you end up fighting people that are your allies.

The “grand conspiracy” that I’m a part of is this. Financial institutions make money by matching people with money with people that need money and taking a small percentage. If you have large numbers of people with money, then you make money. Have 1.3 billion Chinese needing financial services, and you are looking at assets of the tens of trillions. Ergo, the people I work for are doing everything they can to make China (and the USA, and India and Botswana) rich.

It occurs to me that we are seeing a liquidity-involvency crisis. The carry trade of financing high yielding bond holdings with low yielding ABCP no longer works. As the SIV’s ABCP becomes due, they must either wind themselves up, which may result in insolvency if the price that they can get for their bond holdings is low, or exercise their bank lines and borrow from the banks, who in turn may raise the funds in deposits from the former investors in ABCP (with the central banks making up any shortfall). Thus the sub-prime collapse could actually increase broad money supply!