So the choice between democratic discretion at home and external restraint is not always a choice between good and bad policies. Even when the domestic political process works poorly, there is no guarantee that global institutions will work any better. Often, the choice is between yielding to domestic rent-seekers or to foreign ones. In the former case, at least the rents stay at home! [More here]
All you need to do is to replace ‘global’ with ‘extra-constitutional’ – not just in the above quote but throughout the article and the article applies for the situation we face in India with the Anna Hazare movement against corruption.
Gulzar’s Urbanomics blog sees Dani Rodrik’s post through another prism – equally relevant, of course.
Barry Eichengreen makes it sound so damn easy to implement a Brady Plan for Greece (and Ireland, Portugal and Spain?). Of course, he wants to let banks show the debt at face value! If it is all so easy, then why is Europe not doing it especially since one Jean Claude Trichet knows a lot about it? I think I am missing something here or Barry is missing something.
This is bad news, if the Governor of the Bank of Japan fears about asset bubbles in easing monetary policy in Japan. If there is one country within the G-7 that deserves to run a loose monetary policy, it is Japan and yet, he is cautious:
If a central bank starts to underwrite government bonds, there may be no problems at first, but it would lead to a limitless expansion of currency issuance, spur sharp inflation and yield a big blow to people’s lives and economic activities,” as has happened in the past, Shirakawa said in an April 7 press conference.
The BOJ chief has consistently warned against keeping interest rates too low for too long and planting the seeds for asset bubbles. He reiterated the point in a May 5 speech in Helsinki, saying that the 1980s bubble was brought on in part by “monetary accommodation.”
Any one looking for a classic example of the fallacy of treating economics as a rigid and uncompromising science would have got it in the above paragraphs.