–Lawrence Summers: Failing to the top

Mitchell’s laws: The more budgets are cut and taxes inceased, the weaker an economy becomes. To survive long term, a monetarily non-sovereign government must have a positive balance of payments. Austerity = poverty and leads to civil disorder. Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.

The Peter Principle holds that employees tend to rise to their level of incompetence. They are promoted until they arrive at a position where at which they no longer are competent, where they remain forever.

While the Peter Principle usually describes one company, a variation of it can apply to the ability of some people to rise to a high level in one organization, fail there, then move to another organization at a high level, fail there, and continue to fail, always finding jobs at a high level, the previous title being more important than the previous results.

Common example: Sports managers often are fired, only to be hired as managers elsewhere.

In that vein, I give you Lawrence Summers, who became Secretary of the Treasury from 1999 to 2001, under President Clinton. Summers helped create the disastrous Clinton surplus which led to the 2001 recession (as deficit growth reduction usually does).

Based on his previous title, Summers was hired to be president of Harvard University from 2001 to 2006, then was forced to resign after a no-confidence vote by the faculty. One of several reasons: He said few women were scientists because they had a “different availability of aptitude at the high end.”

Based on these failures, President Obama made Summers director of the White House National Economic Council. (What’s wrong Mr. President, wasn’t Cosmo Kramer available?)

All of which brings us to:

Financial Times
April 29, 2012
Growth not austerity is best remedy for Europe
By Lawrence Summers

Once again Europe’s efforts to contain its crisis have fallen short. It was perhaps reasonable to hope that the European Central Bank’s longer-term refinancing operation to provide nearly $1tn in cheap three-year funding to European banks would halt the crisis for a while if not resolve it.

“Reasonable” only if one agrees with lending money to nations, that because they are monetarily non-sovereign, have no means to repay.

It is now clear it has been little more than a palliative. Again, both Europe and the global economy approach the brink.

What a surprise! Who could have predicted that?

The premise of European policy making is that countries are overindebted and so unable to access markets on reasonable terms and that the high interest rates associated with excessive debt hurt the financial system and inhibit growth. So, the strategy is one of providing financing while insisting on austerity.

Unfortunately, Europe has misdiagnosed its problems and set the wrong strategic course. Outside Greece, which represents only 2 per cent of the eurozone, profligacy is not the root cause of problems.

In this, Summers is right, although profligacy is not the cause of Greece’s problems, either.

Its financial problems stem from lack of growth. The right focus for Europe is on growth. In this context increased austerity is a step in the wrong direction.

At this point, I thought the old Lawrence Summers had disappeared, and a new, well-informed person had taken his place. But it was not to be.

Yes, there will ultimately be a need to raise retirement ages, reform sclerosis-inducing regulations and restructure benefit programmes. Phased in, commitments in these areas would be constructive.

Summers continues to enhance his legacy. He has helped cause a recession (under Clinton), exacerbate another one (under Obama), insulted women’s intelligence and abilities, suggested punishing older people by raising retirement ages, suggested abetting corporate dishonesty and advocated reducing benefits to the poor.

What next for Lawrence Summers? Based on his ability to fail to the top, President of the United States?

Rodger Malcolm Mitchell

No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia. Two key equations in economics:
Federal Deficits – Net Imports = Net Private Savings
Gross Domestic Product = Federal Spending + Private Investment and Consumption + Net exports


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