Debt, Ugly Dogs and a New Dr. Doom

Late last month, a bespectacled economist who enjoys fantasy novels and science fiction wrote a report about the trillions and trillions of dollars of debt weighing the world down. It is long, difficult, sporadically hilarious, thoroughly terrifying and, over the past few weeks, has become an essential read.

“The public finances in the majority of advanced industrial countries are in a worse state today than at any time since the industrial revolution,” writes 60-year-old Willem H. Buiter, who became Citigroup’s chief economist in January, “except for wartime episodes and their immediate aftermaths.”

Just after the bank published the report, the Financial Times called it “some serious, serious thinking.” The Sunday Times quoted from it a few days later; reports from South Africa and Australia followed; and MarketWatch wrote about it last Friday. This week, after the euro sunk to a four-year low and the president of the European Central Bank gave a interview about terrifying tension and contagion, The New York Times ended its story on European woes with not one but two of its quotes.

There was a time, quaintly, when the globe’s financial calamity was limited to horribly troubled banks and doomed financial giants. Now the problem is entire nations, including this one, whose fiscal shapes have deteriorated spectacularly. Mr. Buiter, mixing algebra with asides about soccer and marriage, and with a hint of distaste for the kind of giant that now employs him, gives a sense of how it got that way, and what happens next.

 

BESIDES SCIENCE FICTION, Mr. Buiter enjoys poetry, tennis, and thinking about the conundrum of gargantuan sovereign debts. He’s been doing it since he was a Yale student, writing his Ph.D. thesis under the Nobel Prize-winning economist James Tobin. Since then, he’s bounced between Cambridge, Princeton, Yale and the London School of Economics, where he taught most recently. On the side, when not writing his own FT blog, he has been a member of the Bank of England’s rate-setting Monetary Policy Committee.

Insofar as widespread appeal can be enjoyed by any macroeconomist who wears spectacles on the bridge of his nose while holding forth on permanent effective real interest rates on public debt, Mr. Buiter’s ideas are influential and often neon-colored. He can get dazzlingly irritable, especially when complaining about what he calls hogwash bailouts, Europe’s fumble and bumble or the heart-stopping ignorance of limp-minded lawyers and woolly social scientists. “Imagine one small spoonful of tea leaves in a teapot the size of an adult beer barrel,” he wrote about a British government white paper.

Not only did he mock his future employer last year, but he described it as an iconically blind behemoth. “Financial supermarkets lose focus and ultimately become Citigroup,” he wrote last April, “a conglomeration of worst-practice from across the financial spectrum.” When former Citi chairman Win Bischoff was hired to help lead a report on British financial institutions, he called it “the most ridiculous appointment since Caligula appointed his favourite horse a consul.”

Debt, Ugly Dogs and a New Dr. Doom