Huh.*
From Bloomberg via MSN, March 4:
Former Treasury Secretary Robert Rubin said President Donald Trump’s economic policies have stoked the “greatest uncertainty” in his six-decade career, warning that they will undermine confidence, worsen the US fiscal trajectory and endanger US credibility on the global stage.
“A lot of what is going on is adversely affecting confidence — it is now, and I think even more so in the future,” Rubin said in an interview from the Bloomberg Invest conference in New York Tuesday, referring to confidence in the rule-of-law. He said the Trump administration appears to be targeting its opponents in its application of law, and is outright violating commitments made in treaties with trading partners.
Rubin singled out the efforts by Elon Musk’s DOGE to shrink federal spending as “doing tremendous damage to government and to the recipients of government services.” Rather than creating efficiencies, “what DOGE is going to do is tear apart our government.”
Rubin, who oversaw a shift to budget surpluses as Treasury chief under Democrat Bill Clinton in the 1990s after serving as co-chairman of Goldman Sachs Group Inc., said that while some federal spending can be cut, “as a practical matter” there’s insufficient scope for that to rein in deficits.
More broadly, Rubin hammered Trump’s tariff hikes for wrecking the foundation of the postwar global economic framework, which was based on reducing trade barriers in order to boost productivity and people’s livelihoods.
Postwar Framework
“We have spent all these years since World War II developing alliances and allies, supported by all sorts of commitments,” he said. This was “all in our economic self-interest and our geopolitical self-interest — and I think we’re putting all that at risk.”Trump as of Tuesday has added 25% tariffs on all Mexican and most Canadian goods, and a 20% surtax on Chinese goods, with further levies planned in the coming weeks.
The increases in levies amount to violations of treaty obligations, “which can affect our credibility around the world,” Rubin said. “They create a very serious risk of inflation,” he also said.
“If the new normal is a world of tariff walls, then we’ll all just be less productive, less efficient,” he said. “And our people will, as a result, do less well than they would otherwise have done.”
Rubin, 86, said that he’s now seeing the “greatest uncertainty” in his about-60 years of being involved in “decision making of one sort or another with respect to markets and economies.”....
In 2008 the Fed had to bail out Mr. Rubin's employer, Citigroup, to the tune of billions of dollars.
If Interested here's a nice introduction to what the three amigos did in:
"The Economists' Hour, A Powerful New Economic History"
The Essential Larry Summers: How He and Alan Greenspan Laid the Groundwork for the Financial Crisis and Larry Lost $1.8 Billion for Harvard
Today In Irony: Robert Rubin Reviews A History Of the Fed (yes the same fed that rescued citi)
And our application of an older econ paper to understanding the meta-narrative of why Rubin's co-conspirator at Citi, Chuck Prince, was able to say with a straight face:
“When the music stops, in terms of liquidity, things will be complicated. But as
long as the music is playing, you’ve got to get up and dance. We’re still dancing.”
—Citigroup CEO Chuck Prince, July 9, 2007
Speaking of Robert Rubin: "The Optimal Design of Ponzi Schemes in Finite Economies"
This is a paper from 2002 that accurately predicted the events of the Great Financial Crisis, 2007 - 2009.
TL;dr: You don't play in the late stages of a pyramid or Ponzi scheme unless you know there will be a bailout.
From the Social Science Research Network:
This version is not available for download but the 1998 version is:Posted: 1 Oct 2002There are 2 versions of this paper
Abstract As no rational agent would be willing to take part in the last round in a finite economy, it is difficult to design Ponzi schemes that are certain to explode. This paper argues that if agents correctly believe in the possibility of a partial bailout when a gigantic Ponzi scheme collapses, and they recognize that a bailout is tantamount to a redistribution of wealth from non-participants to participants, it may be rational for agents to participate, even if they know that it is the last round. We model a political economy where an unscrupulous profit-maximizing promoter can design gigantic Ponzi schemes to cynically exploit this "too big to fail" doctrine. We point to the fact that some of the spectacular Ponzi schemes in history occurred at times where and when such political economies existed - France (1719), Britain (1720), Russia (1994) and Albania (1997).Keywords: Ponzi schemes, bubbles, bailouts, moral hazard
SSRN download page (33 page PDF)
Previously on Robert Rubin and his role in the financial disaster, the bank bailouts and the $126 million he pocketed from Citi when big C got bailed:
"The Economists' Hour, A Powerful New Economic History"
