Willem Buiter Picked By Citi In First Round Of Chief Economist Draft, Promptly Adopts "Bianco-esque" Party Line

With Citigroup's latest Chief Economist addition in the face of one Willem Buiter who earlier ironically had said that "Citigroup [was] a conglomeration of worst-practice from across the financial spectrum" now facing much more pro-cyclical scrutiny, it is not surprising that earlier he promptly picked up the party line and stated in a Bloomberg TV interview that Dubai is "not systemically significant." The jury is still out on what the full fallout of the massive CRE collapse in the middle east, which is basically what Dubai was a levered play on, will cost the developed world. Nonetheless, one does get flashbacks to many other short-sighted pundits (some long since gone from the public arena, others who are about to be renominated for Fed Chairman positions) who claimed that subprime was also comparably contained. Time and a few hundred billions in additiona bailouts will determine if Citi's new macro brain is proven right.

Comments

[Hondo]

This is a guy who recently said that auditing the Fed was a bloody good idea.  Has he already lost any credibility......selling out so soon??

[Anton LaVey]

And, at the same time that Buiter pronounces these grave words, there is this:

Dubai government will not guarantee Dubai World's debts, says top finance official

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6691823...

And I quote:

Dubai World, the conglomerate behind the emirate's astonishing rise, triggered a collapse in world stock markets last week when it said it would delay repaying its debts, raising fears about the knock-on effects on the fragile global recovery. It has run up debts of £36bn creating the emirate's "Palm Islands" and buying stakes in firms such as the London Stock Exchange and US department store Barneys. [...]

Investors remained jittery about the possible fallout for banks which have loaned money to the Gulf state. The biggest fallers were state-owned Royal Bank of Scotland and bailed-out Lloyds, down 5.8pc and 4.3pc respectively. Barclays and Standard Chartered also fell, with HSBC slightly up.

Not systematically significant?

Only in the sense that Bernie Madoff was not systematically significant, I suppose. Though a perfect example of the corruption of the world financial system.

[novanglus]

Another Goldman tentacle?

"Currently a professor of political economy at the L.S.E., a well-known economics commentator and blogger and a consultant to Goldman Sachs, Mr. Buiter previously held posts at the European Bank for Reconstruction & Development and the Monetary Policy Committee of the Bank of New England."

[aint no fortuna...]

Wish Margaret was wearing that red dress again ;-(

[duckweed]

The Great Plutonomy, by the group that defined it. Citigroups own document defining itself.

[deadhead]

It's a damn good thing we don't have one of them thar CRE problems here in the United Socialist States of America. Phew.....

Speaking of Bianco-esque, rumor has it that someone on his team upgraded HSBC today, so it seems that the dubai problem is genuinely not a big deal, it is over, and everything is okay in our little world.  hot cocoa and warm fuzzy blankets can come out again.

also speaking of Dave "Mr. Overweight the Financial Sector" Bianco, how come Wells Fargo, certainly one of the largest financial institutions in the USA, is still on extended review?

[Miles Kendig]

DH - Who needs to personally deliver an ace of spades to get that answer out of Bianco?  BTW, ya forgot a key Buiter essential...  The fresh ready whip for that cocoa.

[deadhead]

aaah, the ready whip.

the problem my friend Miles is that there is no ready whip. the economists at the Fed have turned all the cans rightside up and sucked the nitrous out and are running around and giggling that all is well and the subprime crisis is contained.

it's a whippets frenzy.

[Screwball]

You are correct Sir.  HBC upgraded to outperform at FBR Capital, and Buy from Neutral from BAC.  [sarcasm]I guess exposure to Dubai is a good thing. [/sarcasm]

[Miles Kendig]

A transitional move for a transitional operator.  The key with Buiter always has been in the what, when and where he chooses to do what he does. It is worth noting that Buiter is now in this particular position. Perhaps his decision to summer at Martha's Vineyard is paying dividends.

[Anonymous]

Paraphrasing the late, great Burt Blumert:
"Mr. Buiter doesn't like gold, unlike Mr. Chang"

http://blogs.ft.com/maverecon/2009/11/yapping-away-at-gold-lessons-from-...

I think he is exactly where he belongs.

[carbonmutant]

You gotta' wonder how much of Iran's "fuel enrichment plant" funding was tied up in Dubai's CRE scam.

[gatopeich]

I usually remember about Buiter as the guy explaining "the duty of civil disobedience when law is injust". There are some good ideas in his blog.

About Dubai I found this post on his blog, where he does not sound like a CNBC cheerleader:

It is clear that nations whose public debt is mainly denominated in domestic currency and whose central bank is either not very independent or can be make dependent by the government of the day are likely to choose inflation and exchange rate depreciation over default as a way out of fiscal-financial unsustainability.  That category would include the USA and, to a lesser extent, the UK.  Because the ECB faces 16 national governments and national ministries of finance, the power and independence of the ECB are much greater vis-a-vis any Euro Area member state than the power and independence of any central bank facing a single national government and Treasury.  That is regardless of the formal independence criteria laid down in laws, treaties or constitutions.

The practical implication of this is that the ECB will not monetise the government debt and deficits of small European Area member states... For small peripheral European nations, the threat of sovereign insolvency is therefore a real one, unless EU fiscal solidarity can be relied upon to bail them out.

...

Probably the guy is not sellling his ass directly, but he is apparently being used. I would love to know his opinion about the lettersign "Buiter: Dubai no big deal" appearing right over his talk, as a "brief" for the masses.

[AnonymousMonetarist]

Bite the Hand or be the Hand

[Anonymous]

With Buiter how to reconcile Plutonomy and good banks for Citigroup?

http://mgiannini.blogspot.com/2009/11/plutonomy-and-good-bank-for-citigr...

[Anonymous]

An "economist". What more needs to be said?

[Anonymous]

Simple explanation: 24 mo. gteed at $75K/month plus bonus. When the new chair comes in, he can walk. Give him six months and he's gone, got the kid's tuition covered and a new home on the Vineyard. Nice work if you can get it.