Friday, April 2, 2010

Freidman as a Rooster

People are not influential in arguing for different courses in the economy…The role of people is to keep ideas alive until a crisis occurs. It wasn’t my talking that caused people to embrace these ides, just as the rooster doesn’t make the sun rise. Collectivism was an impossible way to run an economy. What has brought about the chance is reality, fact—and what Marx called the inevitable forces of history.

--Milton Friedman (quoted in Commanding Heights)

Saturday, February 20, 2010

Looting Vs. Armed Robbery

Why is it more morally acceptable to inflate away someone's savings than it is to hold a gun up to someone's head and take it from them point blank?

Wednesday, February 17, 2010

FT.com / US / Economy & Fed - Lone voice warns of debt threat to Fed

FT.com / US / Economy & Fed - Lone voice warns of debt threat to Fed: "Fed member who dissented at last month’s meeting against language indicating that interest rates should remain near zero for an “extended period”.

On Tuesday he said that the worst option for the US was a scenario where the government “knocks on the central bank’s door” and asks it to print more money. Instead, the administration must find ways to cut spending and generate revenue. He called for a “reallocation of resources” and noted that the process would be painful and politically inconvenient.

The US budget deficit is projected to be $8,000bn (€5,800bn, £5,000bn) in the next decade. Barack Obama, US president, recently lifted the government’s borrowing authority to $14,300bn.

If the Fed succumbed to pressure to increase the money supply, Mr Hoenig said, inflation would lead to a loss of confidence in the dollar and in the economy. Meanwhile, a potential stalemate between the fiscal and monetary authorities that govern the economy could allow growing imbalances to go unchecked, thus raising the costs of borrowing and of capital for the US.

The hawkish Kansas Fed president also warned against “dire” consequences of the central bank prolonging its holdings of mortgage-backed securities, which it purchased in an effort to prop up the US housing market. Mr Hoenig painted a picture of a slippery slope, where a less independent Federal Reserve was asked to find ways to support other ailing sectors, such as agriculture.

The Federal Reserve is purchasing $1,250bn in MBS through March. Mr Hoenig said that it must shrink its balance sheet as quickly as possible while being careful and systematic.

Being pulled into the political framework has complicated the Fed’s job, which Mr Hoenig said should remain focused on the Fed funds rate and price stability.

Holding tightly to the notion of Fed independence, he rejected a suggestion published in a paper by Olivier Blanchard, chief economist at the International Monetary Fund, that central banks should set higher inflation targets. He also said he hoped to avoid political pressure to restore quantitative easing policies.

“That’s when independence will be more important than ever,” he said.

Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web."

Friday, January 29, 2010

Hard to beat

I Love Peggy Noonan

Back from my news diet. Thanks Scott Brown.



JANUARY 29, 2010, 1:31 P.M. ET

When you watch a president give a State of the Union Address on television, you're always watching three people: the president at the podium, and the vice president and House speaker on the rise behind him. As a TV shot it's awkward. The vice president and the speaker have been instructed by media professionals not to let their eyes do what they want to do, which is survey the doings in the chamber. Instead they must stare unwaveringly at the back of the president's head. This is so that they appear to be fascinated by what he's saying, as if he's so interesting that they can't take their eyes off him. It's also so that you, the viewer, don't become distracted by wondering whom they're looking at in the audience.

It's uncomfortable for them, and boring. You, as a member of the TV audience, get to watch the president. The speaker and the vice president get to think, "Huh, he's getting a little gray in the back." The reason Nancy Pelosi often seems a little dart-eyed in these circumstances is that she's always trying to get a look at the chamber when she thinks the camera isn't on her. Joe Biden seems happy to be the fascinated person with crinkly eyes and shining teeth. But for Mrs. Pelosi it's a challenge. This is her chamber, all her people are here, and she wants to be looking at John Boehner's face and Harry Reid's and see who's cheering and who's wearing what.

But the three-shot the other night was also the president's problem. It underscored that he gave the first year of his presidency to the Democrats of Congress, that they wrote the costly and unpopular health-care and spending bills.

James Baker, that shrewd and knowing man, never, as Ronald Reagan's chief of staff, allowed his president to muck about with congressmen, including those of his own party. A president has stature and must be held apart from Congress critters. He can meet with them privately, in the Oval Office. There, once, a Republican senator who'd announced opposition to a bill important to the president tried to claim his overall loyalty: "Mr. President, you know I'd jump out of a plane for you if you asked, but—"

"Jump," said Reagan. The senator, caught, gave in.

That's how you treat them. You don't let them blur your picture and make you more common. You don't let them call the big shots.

***

President Obama's speech was not a pivot, a lunge or a plunge. It was a little of this and a little of that, a groping toward a place where the president might successfully stand. It was well written and performed with élan. The president will get some bounce from it, and the bounce will go away. Speeches are not magic, and this one did not rescue him from his political predicament, but it did allow him to live to fight another day. In that narrow way it was a success. But divisions may already have hardened. In our current media and political environment, it is a terrible thing to make a bad impression in your first year.

There were strong moments. Of what he frankly called the "bank bailout," he observed: "I hated it. You hated it." His unfancy language was always the most interesting: "We don't quit. I don't quit." The president conceded, with striking brevity, having made mistakes, but defensively misstated the criticism that had been leveled his way. He said he was accused of being "too ambitious." In fact he'd been accused of being off point, unresponsive and ideological.

They've chosen a phrase for the president's program. They call it the "New Foundation." They sneaked it in rather tentatively, probably not sure it would take off. It won't. Such labels work when they clearly capture something that is already clear. "The New Deal" captured FDR's historic shift to an increased governmental presence in individual American lives. It was a new deal. "The New Frontier"—we are a young and vibrant nation still, and adventures await us in space and elsewhere. It was a mood, not a program, but a mood well captured.

"The New Foundation" is solid and workmanlike, but it attempts to put form and order to a governing philosophy that is still too herky-jerky to be summed up.

The central fact of the speech was the contradiction at its heart. It repeatedly asserted that Washington is the answer to everything. At the same time it painted a picture of Washington as a sick and broken place. It was a speech that argued against itself: You need us to heal you. Don't trust us, we think of no one but ourselves.

The people are good but need guidance—from Washington. The middle class is anxious, and its fears can be soothed—by Washington. Washington can "make sure consumers . . . have the information they need to make financial decisions." Washington must "make investments," "create" jobs, increase "production" and "efficiency."

At the same time Washington is a place "where every day is Election Day," where all is a "perpetual campaign" and the great sport is to "embarrass your opponents" and lob "schoolyard taunts."

Why would anyone have faith in that thing to help anyone do anything?

The president did not speak of health care until a half hour in. "As temperatures cool, I want everyone to take another look at the plan we've proposed." Then, "If anyone has a better idea, let me know." Those bland little sentences hidden in plain sight heralded an epic fact: The battle over the president's health-care plan is over, and the plan will not be imposed on the country. Waxing boring on the virtues of the bill was a rhetorical way to obscure the fact that it is dead. To say, "I'm licked and it's done" would have been damagingly memorable. Instead he blithely vowed to move forward, and moved on. The bill will now get lost in the mists and disappear. It is a collapsed soufflé in an unused kitchen in the back of an empty house. Now and then the president will speak of it to rouse his base and remind them of his efforts.

All this got hidden in the speech. In unconscious emulation it even got hidden in this column.

***

As the TV cameras panned the chamber, I saw a friendly acquaintance of the president, a Republican who bears him no animus. Why, I asked him later, did the president not move decisively to the political center?

Because he is more "intellectually honest" than that, he said. "I don't think he can do a Bill Clinton pivot, because he's not a pragmatist, he's an ideologue. He's a community organizer. He mixes the discrimination he felt as a young man with the hardship so many feel in this country, and he wants to change it and the way to change that is government programs and not opportunity."

The great issue, this friendly critic added, is debt. The public knows this; Congress and the White House do not. "To me the Republicans are as rotten as the Democrats" in terms of spending. "Almost."

"I hope we have big changes in 2010," the friend said. Only significant loss will force the president to focus on spending. "To heal our country we need to get the arrogance out of the White House and the elitists out of the Congress. We need tough love. We need a real adult in the White House because we don't have adults in the Congress."