There have been few if any academic economists who have both become prominent and correct regarding our current financial crisis than Nouriel Roubini, Ph.D., of NYU's Stern Business School. His diagnoses have been brilliant and prescient. Recently, he has segued to arguing for his policies. He has been vocal that the insolvent large complex financial institutions should be nationalized and rationalized.
Sadly, this brilliant economist, who is well connected within top Obama administration officials, has moved to advocating a command and control economy, as per a current Time magazine interview:
Q (Time). Why hasn't the banking mess been cleaned up?
A. (Roubini) You have to do triage between banks that are illiquid and undercapitalized but solvent and those that are insolvent. The insolvent ones you have to shut down. You need more aggressive credit creation by the government, or you have to force the banks to lend. We're in a war economy. You need command-economy allocation of credit to the real economy. Otherwise, the incentive individually for every institution is to pull out, not extend credit. Not enough is being done.
Q. What do you think of President Barack Obama's progress so far?
A. I have to give [the members of Obama Administration] credit. In about six weeks, they have done three major things: the $800 billion stimulus package, a mortgage program that is much more than the previous Administration did and a bank plan that, however flawed, at least has the benefit of not having another bailout of the banks.
So in Dr. Roubini's first response, he wants government to force us to borrow. In the second response, he ignores the plain facts that the Obama administration has bailed out Citigroup and AIG already, and has a "placeholder" $750 B in the proposed budget for financial bailouts.
So far as I am now concerned, Nouriel Roubini is now such an advocate both for extreme positions and has become such an apologist for the Obama administration that his predictions need to be discounted. If matters become better faster than he predicts, his policy prescriptions for a massive expansion of the state into the economy will be unnecessary.
A wiser philosophy would be to let a free people, with companies that can act in their self-interest, choose for themselves how vigorous they would like their economic activity to be. If they and we prefer to move toward a quieter life and channel Henry Thoreau enjoying Walden Pond rather than resume being voracious consumers, what difference is it to our government? Perhaps the gross product would decline but individual and collective happiness and healthiness would improve.
There is no way for me to even guess as to whether Dr. Roubini has been a closet command-and-control freak all along, or whether the stress of this crisis has driven him to become one.
No matter how brilliant he is, he's now just another Keynesian economist gone wild.
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