One of the most insightful interviews with Nomura's Richard Koo. Controversial, with a penchant for government spending, reception to Koo's ideas will be polarized with statements such as this:
You’re walking into a political hornets’ nest in this country. The GOP would love nothing better than to paint the Obama team as profligate spenders destroying our children’s future with deficit spending.
"Yes, that is going to be an enormous political challenge and I don’t underestimate the danger or the difficulties involved because I went through the same process in Japan for a full 15 years; trying to explain to people that if you don’t do it, the situation will be far worse. And the more successful you are in preventing the crisis, the less appreciative the people will be of your efforts. As a general in Japan’s selfdefense force taught me, if you continually prevent crises, you will never become a hero. Look what just happened to the LDP. I think that’s true in the U.S. as well. Obama’s $787 billion rescue package seems to be working; the economy seems to be recovering. The temptation for the blue dog Democrats and for the Republicans to cut the budget deficit, now that the stimulus seems to be doing its job, will be tremendous. It will be very difficult for a Larry Summers or a Tim Geithner to come out and say, “No, we cannot cut the budget deficit now because the private sector is paying down debt.”
Yet regardless whether one agrees or disagrees with Koo's work, his ideas, unlike those of that other Nobel prize winning profilgate spending advocate, merit consideration. Koo realizes the only fundamental necessity of a flawed Keynesian system: if it is broken, there is no way to fix it without reseting the system. The best one can hope for is to throttle it to where yet another episode of proximity between the broken economy and reality is pushed further back into the future.