More on Fiscal Prudence Post author By Philip Lane Post date May 1, 2009 Bloomberg has a more detailed account of Chile’s relative success in preparing for the downturn: you can read it here. Categories In Economic Performance Tags Andres Velasco, Chilean fiscal policy 6 Comments on More on Fiscal Prudence ← More Swedish Bank Blogging → Negative Equity in Ireland 6 replies on “More on Fiscal Prudence” One of the best economic situations in the world it would seem (comparatively) and it is based on free market economics, Friedman and the Chicago boys. Yet all we hear about today is about the virtue of ideas from Krugman. Sometimes I wonder, what speaks louder? Results or opinion? karl deeter seems to be confusing Andres Velasco with someone else. Andres Velasco is no Friedmanite: The current crisis followed “a massive regulatory failure in many advanced financial markets over the last decade or so,” Velasco said Nor is he a “Chicago boy”. “He helped Bachelet extend social security to 1.3 million people.” “Velasco’s stimulus spending, including 40,000-peso ($68.41) handouts to 1.7 million poor families,” (These quotations are from the Bloomberg article) Hardly ‘free market economics’ Chiago also gave us Strauss and the neo cons who planned this whole mess. Yes, planned it. Dismantling of all the safeguards installed to prevent what happened in 1929 to 1933. Errrr…., what did they call that? A depression? Turkeys are never aware of the approach of Christmas…… we hope. Just Keynes, but applied intelligently, taking away the punch bowl. Required guts, getting bad polls, raising taxes when the economy is booming, and quenching demand. Almost Austrian anyone? He could not restrain the banks directly, but if they were increasing the supply of money, he could take a lot of it out of circulation. @Calan erm… the foundations of the Chliean economy were actually laid in place by Friedman, back in the 70’s the current success wasn’t something that just fell out of the sky over the last five years. The ‘Miracle of Chile’ only happened when they left behind stagnant socialist policy, and that was initiated no by Velasco but by Friedman and the chicago boys. […] NAMA is getting going with its big 10 debtors, transferring 16 billion euros worth of loans in the next few weeks, representing perhaps 20% of the overall loans to be transferred by the end of the year. In particular, Anglo transfers €10bn at 50% discount, AIB transfers €3.29bn (43%), BoI transfers €1.93bn (35%), Nationwide transfers €670m (58%), and EBS transfers €140m (37%). Overall, the haircut is 47%. We need to be careful with that 47% discount number (or ‘haircut’) everyone is talking about. As usual, the bigger haircut, the greater the hole to fill in balance sheets to be filled by taxpayer’s money. While it might be the weighted average of the discounts being applied to each bank as the Minister says, we can’t back out the prices NAMA is going to pay for the loans in, say, AIB or Anglo. Update: Karl Whelan has more on this issue. […] […] taxpayers will pay Comments are closed.