Posts Tagged ‘Jeffrey Sachs’

Left uppercut followed by right cross from Jeffrey Sachs

January 2, 2013

In a second hard-hitting round, the ‘born again’ Jeffrey Sachs leaps out of his ring corner with a powerful left-right assault against two slow-footed opponents. His ring performance is reminiscent of Muhammed Ali at the peak of his form:

“Float like a butterfly
Sting like a bee.
Your hands can’t hit
what your eyes can’t see.” Ali

Sachs frames the fiscal crisis confronting America in words that are meaningful and understandable. You will never find such accuracy in the words of our Cellophane President:

“Our federal deficit is…therefore stuck at around 7 per cent of GDP. Yet the two parties just ran the most populist campaigns this side of a banana republic, and I do a grave disservice to banana republics these days to say so. The Republicans wanted to extend the Bush-era tax cuts for 100 per cent of the population., especially for the rich, whom they call ‘job-creators’. The Democrats wanted to extend the Bush-era tax cuts for 98 per cent of the population, whom they call the ‘worthy, hard-working middle class”. Yesterday, these two incisive political forces made a mighty compromise. The Bush-era tax cuts will be extended permanently for 99 per cent of the population. This was a difficult compromise. The Republicans had to swallow a marginal tax rise of 4.6 percentage points for incomes above $450,000. The Democrats had to swallow hard to endear themselves to households between $250,000 and $450,000 in income, who got more of a break than Mr. Obama had pledged during the campaign. To sweeten the deal further, many other tax breaks and temporary spending measures were extended for somewhere between one and five years. What does it add up to? Who knows? These packages are voted without budget forecasts attached.” Jeffrey sachs, ‘That was no cliff. It was a kids’ playground’, The Times, January 2, 2013

Jeffrey Sachs concludes the round with a left uppercut and a right hook that put both of his blundering opponents on the floor for knockout counts, while also, almost but not quite incidentally, flooring the referee:

“The American people want their meagre services and rickety infrastructure, the rich want their tax cuts, the military wants its $700 billion in annual spending; and the politicians want to win re-election. And with their remarkable performance for the local and vested interests, 91 per cent of them did. In the meantime, the debt–GDP ratio has doubled from 36 per cent to 74 per cent since 2007.” Jeffrey Sachs, ‘That was no cliff. It was a kids’ playground’ The Times, January 2, 2013

Welcome on board Jeffrey Sachs. Harvard’s loss is The Locke Institute’s gain!

Jeffrey Sachs is born again: rejects Keynes and embraces Hayek

December 18, 2012

In a remarkable column published in today’s Financial Times, Jeffrey Sachs exhibits a fundamental reversal of his economic thinking. Until now, one of the foremost disciples of John Maynard Keynes, he  openly and categorically rejects that doctrine. As one of the foremost skeptics of Austrian economics, he now openly embraces the economic thought of Friedrich von Hayek.  I choked on my morning orange juice as I took in the magnitude of this rebirth.

1. Sachs on Keynes

“The rebound of Keynesianism, led in the US by Lawrence Summers…Paul Krugman…and… Ben Bernanke…came with the belief that short-term fiscal and monetary expansion was needed to offset the collapse of the housing market…The US policy choice has been fours years of structural (cyclically adjusted) budget deficits of general government of 7 per cent of gross domestic product or more; interest rates near zero; another call by the White House for stimulus in 2013; and the Fed’s new policy to keep rates near zero until unemployment returns to 6.6 per cent…We can’t know how successful (or otherwise) these policies have been because of the lack of convincing counterfactuals.  But we should have serious doubts.   The promised jobs recovery has not arrived.  Growth has remained sluggish. The US debt-GDP ratio has almost doubled, from about 36 per cent in 2007 to 72 per cent this year. Jeffrey Sachs, ‘We must look beyond Keynes to fix our problems’, Financial Times, December 19, 2012

2. Sachs on Hayek

“the zero interest rate policy has a risk not acknowledged by the Fed: the creation of another bubble.  The Fed failed to appreciate that the 2008 bubble was partly caused by its own easy liquidity policies in the preceding six years.  Friedrich Hayek was prescient:  a surge of excessive liquidity can misdirect investments that lead to boom followed by bust.” Jeffrey Sachs, ‘We must look beyond Keynes to fix our problems’, Financial Times, December 19, 2012

I have no doubt that many readers of this column will also choke on their beverage of choice as they read these born again words of revelation from this former sinner:

Amazing grace, how sweet the sound

That saved a wretch like me.

I once was lost, but now am found.

Was blind, but now, I see.”

 


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