Another two-handed economist
Well, I seem not to have posted since "Kerry will win." I got real busy. Really. It wasn't (just) discouragement or embarassment. More on politics below.
A quick update on economics. Ben Bernanke, the new nominee to replace Greenspan as the head of the Fed (the "second most powerful person on earth", as some have said), shows every sign of matching Greenspan as a "two-handed economist." He is not a knee-jerk anti-inflationist, though he prefers a comfort zone on inflation (1-2 percent) that I find one percentage point too low.
Concerning oil prices, for example, he has flashed indications that they are seen as one-time events rather than part of a wage-price spiral, a point I made in my first blog. Better still would be if they would recognize a supply shock as an occasion for monetary loosening, but Hey - this is basically demand driven, and the U.S. is not likely to kick into recession over the oil price hikes.
He was a bit too conservative in early 2001, when the economy needed the quick interest rate cuts that Greenspan pushed, but at the time I would not have had a big problem with that. We didn't know 9/11 was coming, and even with the heavily inverted yield curve, it was not obvious that the economy needed serious stimulation. The main problem in these cases remains that we rely too much on monetary policy to adjust to business cycles, and this will almost automatically require drastic-looking swings.
Bernanke has shown other signs of being able to recognize a need for stimulation. Reportedly he backed continued low rates even after the Bush recession (bucking such notable experts as the Economist magazine) because it was a jobless recovery. Bush needs more friends and appointments who can pursue realism in the face of ideological roadblocks.
Which brings us to politics. The Republican implosion that I have predicted for the next two elections has apparently begun. Of course, this is partly ordinary second-term blues, brought on by the combination of hubris and anxiety that only a first-termer with a narrow victory can bring to bear. And partly, in the case of Tom DeLay, it is a freak occurence, relying on laws that are not all that compelling. Yet it represents sunshine on his behavior, as the Valerie Plame business represent sunshine on the White House Iraq Group and the paranoid style of Dick Cheney. Added together with economic woes, the stain of Abu Ghraib and the ulcer of Iraq, and the obvious incompetence and cronyism of the FEMA fiasco in New Orleans, these matters may push the public past a tipping point in which they hear the wheezing of the spin machinery when W gets out there to stay on message. My mother has been there for more than a year now, and she voted for Reagan and Nixon.
All is not lost for the Republicans. They have hope in the integrity of John McCain and the gullibility of the Religious Right. But I maintain that they cannot unite behind McCain because he affronts their system and they cannot continue to pretend to integrity while they rely on their system of selling favors for the money to fool an ignorant electoral base.
Until they have a real shock that forces them to revive a true center in their party, an informed core who understand that they have to tell special interests to shove it sometimes, and who are willing to seek common cause with the common voter of the Religious Right rather than just seeking to pull the wool over their eyes once again, they will continue to experience the infighting, intransigence and incompetence that go with being the party in power when your ideology doesn't match with your true program. Like Bill Bennett at the gambling parlor, squandering the earnings from "The Book of Virtues", or perhaps like Kenneth Lay in an Enron that he couldn't recognize as needing to adapt to a changing industry, they will move forward as if on a pre-ordained path of self-destruction.
And I have a feeling the shock is coming. In true pundit pattern, I feel the need to pick the David who will knock down this apparent Goliath. My personal favorite is Elliot Spitzer, but I think he needs a national following first. I am not ready to pick Hilary, though I wouldn't rule her out. The most likely candidate to beat these clowns, frankly, is Edwards. Look for him to hit the campaign trail in swing states in 2006, if his wife's health permits. And look for him to sound the themes that will at least halt the Democrats' slide (they have too many seats up for decision to actually take back the Senate, barring a real national disaster in the next year).
Well, more soon on international economics. Pretending to be a pundit is too much fun to leave alone. Although I am pretty busy.
A quick update on economics. Ben Bernanke, the new nominee to replace Greenspan as the head of the Fed (the "second most powerful person on earth", as some have said), shows every sign of matching Greenspan as a "two-handed economist." He is not a knee-jerk anti-inflationist, though he prefers a comfort zone on inflation (1-2 percent) that I find one percentage point too low.
Concerning oil prices, for example, he has flashed indications that they are seen as one-time events rather than part of a wage-price spiral, a point I made in my first blog. Better still would be if they would recognize a supply shock as an occasion for monetary loosening, but Hey - this is basically demand driven, and the U.S. is not likely to kick into recession over the oil price hikes.
He was a bit too conservative in early 2001, when the economy needed the quick interest rate cuts that Greenspan pushed, but at the time I would not have had a big problem with that. We didn't know 9/11 was coming, and even with the heavily inverted yield curve, it was not obvious that the economy needed serious stimulation. The main problem in these cases remains that we rely too much on monetary policy to adjust to business cycles, and this will almost automatically require drastic-looking swings.
Bernanke has shown other signs of being able to recognize a need for stimulation. Reportedly he backed continued low rates even after the Bush recession (bucking such notable experts as the Economist magazine) because it was a jobless recovery. Bush needs more friends and appointments who can pursue realism in the face of ideological roadblocks.
Which brings us to politics. The Republican implosion that I have predicted for the next two elections has apparently begun. Of course, this is partly ordinary second-term blues, brought on by the combination of hubris and anxiety that only a first-termer with a narrow victory can bring to bear. And partly, in the case of Tom DeLay, it is a freak occurence, relying on laws that are not all that compelling. Yet it represents sunshine on his behavior, as the Valerie Plame business represent sunshine on the White House Iraq Group and the paranoid style of Dick Cheney. Added together with economic woes, the stain of Abu Ghraib and the ulcer of Iraq, and the obvious incompetence and cronyism of the FEMA fiasco in New Orleans, these matters may push the public past a tipping point in which they hear the wheezing of the spin machinery when W gets out there to stay on message. My mother has been there for more than a year now, and she voted for Reagan and Nixon.
All is not lost for the Republicans. They have hope in the integrity of John McCain and the gullibility of the Religious Right. But I maintain that they cannot unite behind McCain because he affronts their system and they cannot continue to pretend to integrity while they rely on their system of selling favors for the money to fool an ignorant electoral base.
Until they have a real shock that forces them to revive a true center in their party, an informed core who understand that they have to tell special interests to shove it sometimes, and who are willing to seek common cause with the common voter of the Religious Right rather than just seeking to pull the wool over their eyes once again, they will continue to experience the infighting, intransigence and incompetence that go with being the party in power when your ideology doesn't match with your true program. Like Bill Bennett at the gambling parlor, squandering the earnings from "The Book of Virtues", or perhaps like Kenneth Lay in an Enron that he couldn't recognize as needing to adapt to a changing industry, they will move forward as if on a pre-ordained path of self-destruction.
And I have a feeling the shock is coming. In true pundit pattern, I feel the need to pick the David who will knock down this apparent Goliath. My personal favorite is Elliot Spitzer, but I think he needs a national following first. I am not ready to pick Hilary, though I wouldn't rule her out. The most likely candidate to beat these clowns, frankly, is Edwards. Look for him to hit the campaign trail in swing states in 2006, if his wife's health permits. And look for him to sound the themes that will at least halt the Democrats' slide (they have too many seats up for decision to actually take back the Senate, barring a real national disaster in the next year).
Well, more soon on international economics. Pretending to be a pundit is too much fun to leave alone. Although I am pretty busy.
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