The Geithner Put: Good for Australia

Lefty Australian economist John Quiggin is, like most left-of-center economists, pretty dubious about the Geithner plan for the banks. But, crucially, he sees it as good for Australia:

There is an even more fundamental assumption underlying the Geithner Plan. Geithner, like Larry Summers, Robert Rubin and Henry Paulson, is deeply committed to Wall Street and its economic model. Their plans are based on the assumption that, when the crisis is over, everything will return to ‘normal’ as this term has been defined for the past thirty years, with a global financial system dominated by financial institutions like Citigroup, Bank of America and Goldman Sachs.

The resort to yet another publicly provided put option reflects this thinking. Just as with the ‘Greenspan put’ and the ‘Bernanke put’ that created the crisis, the assumption is that governments must support the financial sector at all costs.

On the Geithner is view, some new regulations may be needed, but contrary to the rhetoric of the Obama campaign, real change is neither possible nor desirable. By contrast, Kevin Rudd has recognised that the financial crisis signals a ‘seismic’ change in the economic organisation of capitalism, even if not all his government’s policies reflect this.

What does the Geithner plan mean for Australia? On the whole, it is probably a positive. The fact that it is a bad deal for US taxpayers is less important to us than the magnitude of the stimulus involved. And the decline of confidence in the US dollar, while not helpful to exporters competing with US suppliers, will probably make allow the Australian government, and Australian banks, to borrow on more favorable terms.

Maybe the White House economic team is being secretly controlled by an Australian email list? Someone from RedState or the Glenn Beck show ought to look into this; I feel the right needs to update its conspiracy theories.