FT Reveals Orszag Resigns Over Inability To Persuade Summers And Obama Keynesianism Leads To Suffering

Tyler Durden's picture

As we speculated previously, the sudden and unprecedented departure of Peter Orszag, the day prior to the US Budget's formalization (which incidentally never happened as now the US will likely not have a 2010 budget at all, for fear of disclosing to most Americans just how broke the country is ahead of mid-terms) was due to Orszag's disagreement with the administration's, and particularly Larry Summer's, inability to fathom that reckless spending is a recipe for bankruptcy. As the FT reports: "Peter Orszag, Barack Obama’s budget director, resigned this week partly in frustration over his lack of success in persuading the Obama administration to tackle the fiscal deficit more aggressively, according to sources inside and outside the White House." And so, as any remaining voices of reason realize they are dealing with a group of deranged Keynesians, soon there will be nobody left in the administration who dares to oppose the destructive course upon which this country has so resolutely embarked, which ends in one of two ways: debt repudiation, or war. And with the only remaining economic "advisers" being the trio of Summers, Romer and Geithner, you know America will somehow hit both of these mutually exclusive targets.

More from FT:

Mr Orszag, whose publicly stated reasons for leaving were that he was exhausted after years in high pressure jobs and also that he wanted to plan for his wedding in September, is seen as the guardian of fiscal conservatism within the White House.

Other members of Mr Obama’s economic team, notably Lawrence Summers, the head of the National Economic Council, have placed more emphasis on the need for continued short-term spending increases to counteract what increasingly looks like an anaemic economic recovery in the US.

Although Mr Orszag agrees with the need to push short-term spending, particularly in the Senate, which again this week failed to pass a measure extending insurance to the unemployed, the budget director has become increasingly frustrated with the administration’s caution on longer-term fiscal restraint.

Mr Orszag, whom Mr Obama has dubbed a “propeller-head” because of his brilliant facility with projections and spreadsheets, has tried but failed to convince his colleagues to “step up the action”, according to one insider.

In particular, he has collided with the political team, led by Rahm Emanuel, Mr Obama’s chief of staff, over Mr Obama’s 2008 election pledge not to raise taxes on any households earning less than $250,000 a year – a category that covers more than 98 per cent of Americans.

Economists say that would put all the fiscal emphasis on draconian – and highly unrealistic – spending cuts, or else pushing the marginal tax rates on the very rich to confiscatory levels. “Peter feels strongly that this is a pledge that has to be broken if the President is to take a lead on America’s fiscal crisis,” says an administration official not authorised to speak on the matter.

And after Barney Franks's disastrous appearance earlier on, where the market did a shot and an uptick for every lie uttered, we can safely say that this bankrupt country truly deserves all of its elected individuals.

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Anarchist's picture

These guys are not following the priciples of Kenynes. They are in cahoots with the ruling elite to redistribute the countries assets away from the useless eaters, that would include YOU, into their own pockets.

centerline's picture

Too many useless eaters now.  Time for population numbers to drop sharply for awhile.

Kegfreak's picture

I think that is the main principle of Keynes.  He was an English Socialist of the first degree.  He never believed what he was doing would help the masses, just his cronies.

DonnieD's picture

I have a newfound respect for Propeller Head

Xibalba's picture

I'll take one pitchfork, and one torch please. 

StychoKiller's picture

Double-headed axe and flamethrower for me, thanks.

Apostate's picture

Typical math nerd who sees an entire country of people as a giant spreadsheet to be manipulated at will.

That's what he was hired to do, of course. At least Rahmbo, Jabba Summers, and the Emperor understand that obeying the laws of mathematics is futile if you're running the grandest ponzi empire ever conceived.

They're driving the car into the wall as fast as possible in the hopes of breaking through to the other side. I pity the EMTs that will need to clean up the gore. 

hambone's picture

Apo,

"They're driving the car into the wall as fast as possible in the hopes of breaking through to the other side"

Good shat - that's about the only explanation that makes any sense.

Xibalba's picture

It worked for the DeLorean in '85.   The outcome will result in a Wild Wild West in one time or another. 

Rusty_Shackleford's picture

Ha!!

Engage the flux-capacitor!

sgt_doom's picture

In actuality, they all sound completely idiotic.

First, one requires an economy to follow any sort of economic rules....

Alcoholic Native American's picture

That's not a wall my friend, it's a gathering of plebes.  And they got a real big truck.

hangemhigh's picture

 

You know the day destroys the night

the night divides the day

Tried to run

Tried to hide

Break on thru to the other side

 

We chased our pleasures here

We dug our treasures there

Tried to run

Tried to hide

Break on thru to the other side

 

 

 

Magua's picture

great picture - they say you can tell who is the servant and who is the boss, by who is standing or sitting.

Tapeworm's picture

Your observation is something that I have never considered. In that vein I see that Larry is positioning his lard ass to emit a room clearing fart.

-----------------------

What fries me is that the populace has no interest in the biggest scams of all time, and are glued to small time scams as done on TV 'drama" shows. I suppose that there are no big corporate media buyers that would advertise on real crime shows if that threatened their place on the Business Roundtable.

StychoKiller's picture

Bring back Max Headroom (from 15 seconds in the future).

i.knoknot's picture

+++ eagerly waiting for the digital remaster DVDs

way ahead of their time. (way more than 15 seconds... :^)

masterinchancery's picture

Winston Churchill in 1938: "given the choice between dishonor and war, he chose dishonor--he'll get War."

The Disappointed's picture

I've got the solution! http://www.youtube.com/watch?v=8sV-veNm74M Never more relevant than today, especially the money shower at the end

InsanePonziClown's picture

FT, ehhhhhhhhhh, let's get some real reporting going on here

Orzag knew damned well they were keynesians going in, hell, they all are, even orzag, he signed up with them, orzag probably didn't try and disade anyone least likely obama, sumners or rahm babeeeeeeeeeeeeeeeeeeeeee, the fact is they are palying big bens playbook come hell or highwater, what's the difference to them, my gosh they finally got the reigns of the world and orzag had the gall to tell them, uhhhhhhh guys, we are insolvent m'fn broke broke broke, which means we are the next christian in waiting in the wings to be thrown out into the lions pit

hell, orzag handles the books, when ur accountant quits u know hope is hopeless

 

cbaba's picture

yes, for me he is a Rat leaving the sinking ship.

Leo Kolivakis's picture

No worries, he's got Bianna by his side:

Problem Is's picture

Fat Larry and Romer need to lay off the donuts...
Unbutton your coat Larry... It won't be so obvious...

Fat Larry on Stimulus:

"Let the good times roll,
 Let them make you a clown."

Ripped Chunk's picture

Larry was an ugly, fat child that vowed to take revenge on Mankind because of the taunting he endured as a child.

So teach your children not to mock the other ugly children.

tao400's picture

Can someone explain to me why the exploding debt will inevitably lead to war if no debt repudiation. I read that over and over again but don't understand the rational, though I don't doubt its truth since I have read it from so many different sources.

Diogenes's picture

It's a crock. The depression of the 30s, according to contemporary sources, ended in 1934. By 1936 the economy was so overheated the gov't caused the "Roosevelt Recession" of 1937-38 deliberately, to avoid another boom/bust. WW2 for the US did not start until December 1941, long after the RR ended.

 

Besides if wars and repudiation ended depressions the US would be in the clear by now. Has everyone forgotten that the US is waging 4 wars as we speak? And is repudiating normal financial obligations whenever convenient?

LoneStarHog's picture

Sadly, this is such a paradigm example of a public school education(?).

Diogenes's picture

You don't get that kind of information from public schools. You get it from reading original sources. By that I mean books and magazines published in the 20s and 30s.

I was surprised as anybody to find out that the generally held opinions are a load of hooey. The war did not end the depression, and the depression did not cause the war.

I could show you books from as early as 1926, taking for granted that there would be another European war because the political causes of WW1 were not resolved, in fact the so called  solutions made things worse.

Look at any chart of the stock market averages and you will see that the market bottomed in 1931 and 32 then recovered. Not to overheated 1929 levels but to normal levels. Then notice the recession in late 1937 and 1938.

I could even show you a Joseph Mitchell story from the New Yorker in 1934, describing party hats with funny mottos like "wasn't the depression awful" and "it's hell when your wife is a widow". For most Americans the depression was history by 1935.

mikla's picture

Can someone explain to me why the exploding debt will inevitably lead to war if no debt repudiation.

The logic is that if you start a war, then people won't notice that you defaulted.  It's sort of like  arson (set fire to your house because you don't want to make payments on it anymore).

However, your "gut" instinct is correct, if I read you right:  You get debt repudiation either way, and there *might* be war when one side is mad enough about getting screwed.

The "Keynesian" attitude relates to the Broken Window Fallacy ... if you destroy all homes and property, then everybody can get "rich" by selling supplies to build new houses and iPads.  (So, to Keynesians, war literally makes society rich -- that's not a joke -- they actually believe that.)

[EDIT] The reality is that "war" used in this sense is like "bankruptcy" ... after the war, contracts are dismissed, capital is re-assigned, and pre-war debt is often repudiated.  It's still a default, but war provides a significant "distracting event" to get everyone to agree to the new terms (e.g., the post-war agreement).

Anarchist's picture

There are no guarantees of anything. You can't start a war if you don't have the ability to sustain it long enough to achieve your goals.

In the case of the US, we have the means to start and sustain a war. The problem is there are enough countries with veto power so you may never achieve all of your goals. Some of the backers of these two wars have already or are close to achieving their goals. The Chinese and Russians hate the Taliban but were OK with Saddam. The sanctions limited how much investment they could put in Iraq. When the Chinese and Russians find it is not in their interest to support the wars, you will see US losses explode.

Gully Foyle's picture

Anarchist

We have bases in 163 of 195 nations in the world. Something like 750 bases.

It looks like the ones without bases would be the ones targeted.

Then again you never know.

My question is after the collapse will we just abandon all those troops and bases?

sgt_doom's picture

"..though I don't doubt its truth since I have read it from so many different sources."

Trust me, it's total BS.  You've also read about some so-called Recovery, also total BS and mathematically impossible.

They are dreaming of times gone by, and today America doesn't effectively have an actual economy, once, some years back, the Fantasy Finance sector reached over 80% of the GDP.

Ask someone with a functioning brain to name the top 100 exports of America (junk paper, junk paper, junk paper....), get it?

Remember, just because you keep hearing about the Tooth Fairy, there isn't actually one.

Remember that Talking Snake in the Garden of Eden?

Ever met up with a snake who made conversation with ya?

Didn't think so.....

Diogenes's picture

Jesus Christ! Barack (Peace Prize) Obama is WAGING WAR RIGHT NOW!

Last time I counted, he had 4 wars going in Iran Iraq Afghanistan and Pakistan.

So, if WAR will cure your "depression" the IT IS ALREADY CURED!

That plus Keynesianism on steroids, crack and crystal meth and your troubles are over!

So, if your troubles are NOT over, doesn't that indicate there is something wrong with the conventional wisdom?

StychoKiller's picture

Look, if ya don't pay off the loan shark, he sends Guido and Louie the Fish to break some bones...

Rick Blaine's picture

The fact that Orszag's leaving seems like bad news (i.e., because he seems like a genius compared to the other three circus clowns) is a good indication of just how f&(ked we are.

Apostate's picture

Yep. Even though he's part of the court, at least the guy understands that math is important.

As someone else in the thread said... "when the accountant leaves, you know that they're fucked."

tao400's picture

"when the accountant leaves..." That is one of the best and most truthful lines i have heard in a very long time.

Lux Fiat's picture

Yes, exactly like the CFO of a very, very large corporation making a sudden departure.  It's not a good sign.  I thought that Europe was in worse shape than the US, and comparatively, the US would outperform, and that QE would be on hold for a while.  Between the Ambrose Evans-Pritchard story, Orzag's departure, and signs of economic reason from some parts of the EU, the deflation/inflation balance appears to be in flux again, and now tilting towards inflation. 

Apostate's picture

P-Krug wants to nationalize all the banks. He's made that clear. If that happens, then inflation and currency destruction is a near-term certainty.

But now that's moot - issues with the states will force a mega-bailout. Which will lead to more crack-ups... and so on, until a political crisis point. 

Lux Fiat's picture

I am concerned about how this will affect foreign perceptions of market risk in the US.  My experience has been that when I am in the unlucky position to own stock in a company that announces a sudden, unexpected high level departure (particularly the CFO), the best course of action has almost always been to sell pronto.

Agree that the present environment and Administration's apparent policies should result in inflation, and not the good kind.  However, over the next few weeks to months, if enough foreign investors decide that they want to head for the US equity (and bond) exits due to concerns about the mgm't change, instead of a QE-propelled, prenaturally buoyant market, we could see sideways chop or even another meaningful leg down.  I have no clue as to where things will actually head, but that never stops me from speculating.

sgt_doom's picture

Yeah, soooo important this so-called math guy ardently believes everything in America should be privatized.

Can you spell a-r-i-t-h-m-e-t-i-c?