Wednesday, August 12, 2009

These little piggies...
By Kenneth Rogoff

So what is the game plan now? There is talk of regulating the financial sector, but governments are afraid to shake confidence. There is recognition that the housing bubble collapse has to be absorbed, but no stomach for acknowledging the years of slow growth in consumption that this will imply.

There is acknowledgement that the US China trade relationship needs to be rebalanced, but little imagination on how to proceed. Deep down, our leaders and policymakers have convinced themselves that for all its flaws, the old system was better than anything we are going to think of, and that simply restoring confidence will fix everything, at least for as long as they remain in office.

(The era of Nancy Capitalism will not be short-lived. Socialized guts will lead to diminished glory. That is not to suggest that prudential regulation isn't important, it most certainly is. Without prudential regulation Marx{not Groucho} looks prescient. -AM)

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