A.J. (from USA) send me a letter in connection with my publications in this blog. Because of the important issues, raised in this latter, and undoubted competence of it’s author in Bulgarian and American economic and political relations, I decided to post the letter in my blog.
My dear Professor:
Reading your excellent letter to the newly elected Bulgarian premier, I had to ask myself: “Could Bulgaria be an island of prosperity in a sea of troubles?” You may, or may not recall this phrase, but its originator set the stage for the global economic conundrum we find ourselves today. His statement was negative, he was predictably wrong, and he was talking about the United States.
So, the United States remained prosperous in the condition of a worldwide recession contrary to his prediction. Until he acted, using all the powers at his disposal at the time … yet, this is an allusion.
Your letter urging the new Bulgarian government to act urgently implied an availability of a solution – a possibility for the country to remain if not “prosperous”, at least to avoid the brunt of an imminent collapse.
Your enumerated steps to address the situation remained unheeded. So, what must be done now? Has the inaction forfeited all opportunities for Bulgaria at present?
I have an idea or two that may fundamentally help, but I would like to draw on your superior knowledge of Bulgaria, which I do not possess, before I formulate them.
I arrived in the US in 1972, and have been in the investment business since 1976 almost exclusively in the US, mostly on the buy side as a securities analyst and money manager. I am essentially, a financier, not an economist. As for the past 30 years I have worked for myself, my career has been interspersed with side jumps into occasional ventures, one of them for the better part of the 1990s, in Bulgaria.
It is unfortunate that in the past 10+ years I have neglected my contacts there, or what is left of them. I never met the current PM in the past, as he obviously was not a player at that time. I have difficulties following his logic. He is a born populist, however, and that may explain my befuddlement. His "faux pas" could turn very costly for his future political career, however, provided he cares.
The only beneficiary of this havoc, oddly enough, will be Djankov despite his unbecoming behavior and inadequacy as a cabinet minister and Vice PM, as he entered history as such. He'll probably make the most of it - he is not without skills promoting himself, to wit: he somehow acquired as a mentor Sergei Schleifer. Perhaps Djankov’s wife has something to do with it.
Mr. Shleifer, a Russian-American Jew, is a Harvard Professor of Economics, and a protege of no lesser than Lawrence (Larry) Summers. Mr. Summers is currently Director of the Council for National Economics (appointed by Obama), former Secretary of the Treasury under Clinton, former President of Harvard University and a nephew of the Nobel laureate, Paul Samuelson. Larry's father changed his name to Summers, presumably to sound less Jewish at the time.
Whatever other abilities Djankov may have, among them is not macroeconomics management. Mr. Shleifer's skills are clearly far superior and amounted to engineering the transfer of significant Russian wealth into the hands of a few: in mid-1990s Harvard University was hired by US AID as consultants to the Russian Government on the transition to a market economy. At that Mr. Shleifer was an "expert". He became involved in a number of financial shenanigans, and the transition was a disgrace. Eventually, the US Government sued Harvard University, Shleifer, his wife and a number of others. The indictment involved more than $100 million of punitive damages. At some point it was announced that Harvard University and the Shleifers paid about $30 million in an out of court settlement, no one admitting any guilt. Most observers are convinced that if it had not been for Mr. Summers, a man of great contacts in Government and elsewhere, some individuals would have gone to jail for a long time.
As an epilogue, in 2008 it became known that Shleifer's money management firm, all of a sudden, had over $60 billion under management, and that Shleifer was no longer a partner (Sic!). Deripaska somehow comes to mind and the rest of the grateful oligarchs, whose money is most likely being managed, I think. It is a hedge fund and no disclosures are required.
Moving on to the topic of the current financial crisis, the aforementioned Mr. Summers is one of its architects. Some of the others are: Alan Greenspan - the former and longest serving Fed Chairman, Henry "Hank" Paulson, Secretary of the Treasury under G.W. Bush, former head of Goldman Sachs, about whom Time Magazine wrote: "If there is a face to this financial debacle, it is now his …" and a number of others, but these were the notorious chieftains.
The present world financial crisis is complicated yet, it is not that difficult to explain. It is difficult to believe! It has been in the making since the Clinton’s presidency, but its true origin goes back to the New Deal and the creation of two monstrous entities – Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac). In a nutshell: Roosevelt/Clinton’s idea was that in America, anyone, irrespective of income, should own a home. And when money became dirt cheap, 2001 till present (for reasons beyond the scope of this writing, as they would require least a grad school semester to explore), every one was offered an opportunity to buy a home with no down payment and low variable interest rate financing, in many instances over 100% of already over inflated real estate prices. Wall Street’s “talents” took this as an opportunity to “respond” to China’s need for better return of its enormous dollar reserves. You see, China was the “unwitting” accomplice. And why not? – Modern China is our baby. The brain child of an impeached president, Richard Nixon, and his Secretary of State, Henry Kissinger, “conceived” in the year I set foot on American soil.
A.J.
USA
28/03/2010
