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Robert Rubin Wants to Redistribute More Income Upward

Along with Alan Greenspan, Robert Rubin is the person most responsible for the country's economic downturn. He helped steer the country on a path of bubble-driven growth and massive trade deficits. The latter was the result of the IMF engineered bailout from the East Asian financial crisis. The outcome of this bailout was a rush by developing countries to accumulate dollar reserves in order never to have to be in the situation that the East Asian countries faced in dealing with the IMF. This sent the dollar soaring, making U.S. goods and services uncompetitive internationally, causing the trade deficit to explode.

The lost demand from the trade deficit was offset in the 1990s by the stock bubble. The wealth created by the bubble led to a boom in consumption. Also, the ability for hare-brained Internet start-ups to raise billions by issuing stock led to an investment boom in hare-brained Internet start-ups. The bursting of the stock bubble gave us the longest period without job growth since the Great Depression. However the economy did eventually recover on the back of the housing bubble. The collapse of that bubble has given us an even longer stretch without job growth, ruined millions of lives, and will likely cost us tens of trillions of dollars in lost output.

In addition to steering the country to disaster, unlike Alan Greenspan, Robert Rubin managed to directly profit from the calamity. He personally pocketed over $100 million from his stint as a top executive at Citigroup. Citigroup was at the center of the housing bubble and meltdown. It required hundreds of billions in below market loans from the government, along with implicit and explicit guarantees to stay afloat. Naturally we should value the economic opinions of such a person, hence the Washington Post gave him space for a column telling us how China and the United States can have a mutually beneficial relationship. 

Not surprisingly much of what Rubin says is just flat out wrong. He tells readers:

"The United States criticizes Chinese interest-rate, land and other subsidies that support investment and exports, including a managed exchange rate (though that has less effect, for now, because China’s current-account surplus has declined substantially). U.S. officials also fault significant shortfalls in China’s protection of intellectual property rights, including cyber-appropriation.

"China has long expressed strong concern that U.S. fiscal deficits could lead to unduly high interest rates, a U.S. or global financial destabilization or, alternatively, serious inflation."

Dean Baker / November 10, 2013