When Nouriel Roubini -- a longtime and reasonably loyal Democrat -- says the Republican administration is helping out the rich at the expense of the taxpayer, you just think: Oh, it's a normal Tuesday.
But Ken Rogoff, the highly respected and self-identified Republican economist, tends to be far more circumspect.
In a Guardian column, he is blistering (in an economist-speak sort of way) at how the world is dealing with the crisis, effectively taxing citizens to give rich finance pros a break.
The financial sector has produced extraordinary profits, particularly in the Anglophone countries. And, while calculating the size of the financial sector is extremely difficult due to its opaqueness and complexity, official U.S. statistics indicate that financial firms accounted for roughly one-third of American corporate profits in 2006. Multi-million dollar bonuses on Wall Street and in the City of London have become routine, and financial firms have dominated donor lists for all the major political candidates in the 2008 US presidential election.
Why, then, should ordinary taxpayers foot the bill to bail out the financial industry? Why not the auto and steel industries, or any of the other industries that have suffered downturns in recent years? This argument is all the more forceful if central banks turn to the "inflation tax", which falls disproportionately on the poor, who have less means to protect themselves from price increases that undermine the value of their savings.
Hat tip to the always helpful, truly wonderful but, sadly, anonymous Yves Smith.
categories: Fannie and Freddie, Politics
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