...news, moderately offensive commentary, f-bombs...

Tuesday, December 16, 2008

Countercyclicality, and other big words

The Economist has another fun article that NGO hippies should read. I know you all hate the IMF and bitch that it makes poorer countries enact austerity measures in a crisis, whereas rich countries can throw money at the problem til it goes away because why not. This is sort of true. But pretending like this is some sort of horrible injustice ignores the fact that these countries and their circumstances are, uh, TOTALLY DIFFERENT.

Counter-cyclical fiscal and monetary policy in a country suffering capital flight is a sure way to intensify it. Capital controls in an emergency are one option, but they, like your grandparents, are prone to leakage. Rich countries for the most part don't have to worry about any of this because people will keep lending to them, because they're rich assholes, so they can spend and print money like rich assholes because hey, fuck you.

The good news is that many a developing country, having learned this lesson the hard way in the late 90s, have shored up their finances, amassed sizable foreign currency reserves and can now borrow in their own currency thereby reducing the foreign currency debt which proved so destructive last time around. As the article points out, some can now afford to throw money around without provoking the wrath of nervous bond market nellies, just like rich assholes!

Hilariously enough, it looks as if anyone provokes wrath it will be the United States, which is looking to spend approximately one jillion dollars on its super Obama countercyclical whatnots. If I may quote from the renowned epic Hot Shots: Part Duex, "looks like the upper hand is on the other foot."

No comments: