Europe To Obama And Romney: Shut Up!

Mitt Romney’s Economic advisor, Glenn Hubbard, wrote an OpEd for one of Germany’s leading newspapers 10 days ago. I don’t think many Germans read it. Those who did, no doubt saw it for what it was, American electioneering. The article did, however, cause a stir in the US.

Hubbard’s message was that the Germans should reject the move away from austerity. He said that German money should not be used to bailout Greece.

The issue here is not the merits of Hubbard’s arguments. It’s Hubbard’s motivations for writing it, and putting it in a German newspaper. If Germany were to follow Glenn’s advice, it would precipitate a big recession in Europe and the inevitable blowback in the USA. The economic adjustment would happen pretty quickly. It would arrive in time to influence the presidential election. 


Photo: Bruce Krasting

One can be sure that Hubbard would be blowing a different whistle if Romney was running the show. Hubbard’s comments were ill timed, manipulative and overtly political. The White House agreed.

David Plouffe was on the Sunday talk show circuit over the weekend and he blasted Hubbard’s attempt to manipulate German opinion for political gain.

Plouffe Op Ed

Photo: Bruce Krasting

Obama thought it was a big enough deal to respond:

Obama op ed

Photo: Bruce Krasting

Obama’s team is playing just as dirty and stupid as the Republicans are. Larry Summers, the beard, unofficial spokesman for Obama, wrote an OpEd for the Washington Post on the eve of the G-20 meeting. He spelled out exactly what he (Obama) would like to see the Europeans do. Not surprisingly. Larry wants a mega bailout and mega-spending plan for Europe. This would be great news for Obama. Getting the European crisis off the front page is key to his getting re-elected.

Summers Post op ed

Photo: Bruce Krasting

Mr. Summers went over the cliff with his suggestions. His words on sovereign subordination and the costs of restructuring sovereign debt:

“Now is the time for radical cuts in the rates official creditors charge European sovereigns; for a willingness to subordinate official debts”

Larry’s proposal on subordination of official creditors is a complete U-Turn on existing policy. It runs counter to long-standing precedent regarding the seniority of official creditors. 

The USA lost its seat at the table on the issue of Europe for two reasons:

I) The US took a pass on the $450Bb increase in the IMF’s lending capacity. While one can debate the merits of the US decision to abstain from contributing its share of the IMF capital raise, one can’t ague that the US, having taking a walk, should still have a say in the outcome.


Photo: Bruce Krasting

II) If the US did have a roll to play, it would be the responsibility of the Treasury Department to orchestrate and facilitate a plan to address the problem. The Treasury Secretary, Timmy Geithner, is a very lame, lame duck. I doubt that any European financial officials even return his calls any longer. Tim is functionally asleep on the job.

It amazes me to see the decline in America’s ability to lead and influence the outcome of global issues. I’m not at all surprised to see the candidates flailing in their attempt to show leadership. I’m also not surprised that beards spokesmen for the candidates are selling a program that suits there own, short-term political agenda.

The Europeans should tell the candidates to shut up. They have no say in the outcome. Their suggestions are self-serving and just plain wrong.

Larry Summers was the Under Secretary for International Affairs for Bill Clinton in 1994 when the US Treasury put together a $50B bailout for Mexico. In that deal the US secured the loans to Mexico with Mexican oil. The deal was so onerous to Mexico that they ended up prepaying the loan to get the US off of their backs.

Summers was actively involved with structuring the Mexican bailout. That he is now advocating subordination of these types of bailout loans is a complete reversal of what he has advocated in the past. I think Larry would say anything if it had a chance of boosting Obama in the polls.

In 1995 Clinton promoted Summers to Deputy Secretary of the Treasury. That was payback for his efforts in the Mexican Bailout. Larry’s OpEd last week was his way of getting a foot in the door to become Obama’s next Treasury Secretary.

The expression, “Professional Blowtard”, comes to mind.

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