Everyone knows what the problem with the economy is. We have too much debt, and too little savings, and we need to go through a long period of deleveraging. Of course, the goal in Washington is to preserve the status quo, and all stimulus ideas are judged on whether they’ll make consumers spend.
The message that this doesn’t make sense is even coming from our friends across the pond. NYT reports that Tim Geithner got a cool reception at the G-7 summit, days after unveiling (kinda) his banking plan:
Last week Giulio Tremonti, Italy’s finance minister and Mr. Geithner’s host for the weekend, gave a tart review of the Obama administration’s stimulus in a local newspaper here.
“If the problem is an excess of debt, the cure is not adding more debt, whether that debt is public or private,” he wrote in the Corriere della Sera. Italy is one of the most indebted countries in Europe. Its debt surpasses itsannual gross domestic product.
So obvious, yet seemingly unthinkable in the halls of Washington.