## Wednesday, May 18, 2011

### Reputation

Tim Geithner is upset on the debt ceiling issues
In the linked article, one interesting point made by the Treasury Secretary was about reputation and credibility.
"At the worst moments in the crisis…you saw people basically say they want to be in dollars, in Treasurys, and we need to preserve that. We want to act to earn that confidence over time, and not take advantage of it."
I don't exactly know what he was meaning by that, but one reason to build reputation is to be able to use it when it is worth it. Building "confidence over time" is supposedly costly and there are a couple of reason to incur the cost, like signaling your type, or being able to use it for, say, vote on the debt ceiling on the last day before the deadline. But you build confidence over time to take advantage of it, at some point, otherwise it seems to be useless.

Relatedly(i.e. there is Tim Geithner in it), Geithner offered nice facts reported by Real Time Economics. For instance:

• If you are born today in hard-pressed communities in many American cities, like St. Louis or Baltimore, you are more likely to die before your first birthday than if you were born in Sri Lanka or Belarus.
• We spend $700 billion a year on national security… about two-thirds of what we spent as a share of our economy during the Cold War. • The effective income tax rate for the wealthiest Americans—those earning more than$250,000 a year—is at its lowest level in 50 years. And the effective rate for the very rich—those earning over \$10 million per year— has declined much further and is now around 21%.