Schettino Trifecta

First: In yesterday's blog post, he lays out the causes of the present crisis, focusing on seven points that, in the interest of space, I'll consolidate into four:

1) Low interest rates in the States and the Chinese maintaining an undervalued currency provoked excessive consumption and insufficient savings among Americans.

2) The American government promoted homeownership, including among sub-prime borrowers and no-income, no-job, no-asset (or Ninja) buyers.

3) Credit default swaps and securitization of mortgages exploded, which hid the obligations of the financial institutions while simultaneously spreading it around.

4) Last year, as the housing crisis was unfolding, the Bush administration bailed out Bear Stearns but let Lehman Brothers, a larger institution, collapse. He doesn't say this, but the implication is that Bush (or, more accurately, Paulsen, since Bush was basically in hiding at that point) botched the response, and the crisis, rather than being carefully managed and controlled, exploded.

Second: in today's column he argues that Mexico has almost touched bottom, but that the recovery will be slow. This year, he's expecting a 7 percent drop in industrial production and 3.5 percent contraction in the GDP, which I believe is a bit more pessimistic than most estimates we've been seeing.

Third: I'd been meaning to mention his column from last week about the American rescue package, and I got sidetracked. He writes:

...Paul Krugman, who has concentrated so much on demanding the largest stimulus package possible, has now written two articles dedicated to advocating a decision in regard to the financial rescue. You could yesterday read the first in these pages, and surely today or tomorrow you'll be able to read the second, in which he recognizes that the close to 800 billion dollars of stimulus won't have any utility if a solution to the banking system's problems isn't found first.

The other "leftist" economist [Joseph Stiglitz], also a Nobel prize-winner, wrote just a week ago, in The Nation a long article about the same topic. He even opts for one of the solutions, the nationalization of the banking system. That's why he's "leftist", which I put between quotations so that you won't confuse it with what here we call the left, which is something very different.

One of the fun things about living in a foreign country is that it forces you to reconsider your political leanings in a different context, which often leads to unexpected affinities. For someone who'd always voted for the Democrats, I was a little surprised when I got here to see how unappealing the PRD was, especially (of course) after July 2, 2006. You see a similar dynamic here. His writing is more straightforwardly economic than political, but Schettino is most easily associated with the right, not because he shills for the PAN, but just because he's such a stalwart opponent of AMLO and company. Nonetheless, here he is writing sympathetically about the two most prominent leftie economists in the US.