January 27, 2008

Is It Still Schadenfreude If You Suffer Too?

Filed under: Economics, Sarcasm — duncan @ 6:31 pm

The loathsome Slate describes the loathsome Larry Summers (via the loathsome Greg Mankiw). Summers has been complaining about sovereign wealth funds at Davos. “It’s the premise of capitalism that people own shares to maximize value. But if you think of an investment made by a state fund, there could be multiple motives… When there’s no assurance that value maximization is being pursued, there is a potential question… [S]uppose that a country ran an active trading operation… Would we be comfortable with the concept that the nation of X had decided that nation of Y’s currency was overvalued and launched an attack? There should be some kind of understanding that that won’t happen. Also, the SWF of country A makes an investment in a major bank in country B. The bank gets in big trouble. Is there any control in the world that can assert, that with billions of dollars on the line, their head of state and foreign minister are not going to get involved in the negotiations?”

Yeah, Larry – God forbid that finance and politics should become intertwined. God forbid that investment should be used to serve narrow political ends. As former U.S. Secretary of the Treasury and ex chief economist of the World Bank, I think you’re in an ideal position to make this complaint.

Kristin Halvorson, Norway’s minister of finance, listened patiently, and was unruffled. “It seems you don’t like us, but you need our money.”

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