NationStates Jolt Archive

http://www.economist.com/opinion/displaystory.cfm?story_id=11496881
Playing politics with the Fed

By refusing to confirm new governors, Congress is putting the world's most important central bank at risk

SMALL, weak and vulnerable: hardly an accurate description of America's central bank. But soon it could be. The Federal Reserve is the world's most important financial institution. Just this week Ben Bernanke, its chairman, demonstrated its influence when a rare comment on the dollar's weakness sent the currency soaring (see article). Yet the Fed's standing is in a potentially parlous state, thanks to political brinkmanship by the Democrat-controlled Senate.

For more than a year, two seats on the Fed's seven-member board of governors have been empty, because the Senate has been unwilling to confirm George Bush's nominees to the job. It has also refused a new term for the Bush-appointed Randall Kroszner, who is hanging on in limbo. On May 28th Rick Mishkin, another governor, said he would depart in August. If the Senate continues to delay, the Fed's board will have only four members—fewer than at any time since at least the 1930s.

No one doubts Mr Bush's candidates are qualified. The hold-up is ideological. Democrats want to wait until after November's election so that a new president can, as one senator put it, “remake the Fed” by appointing a clutch of new people at once. That is reckless on several counts.

In the short term, the central bank will be starved of talent and leadership at an extremely tricky time. Power in monetary policy will also shift. Like much of the American government, the central bank is an artful balance of federal and local. The Fed's key policy rate is set by the Federal Open Market Committee. Its voting members consist of the Fed's seven governors and five presidents from the 12 regional Federal Reserve banks. If the Fed's board has only four governors, the regional presidents will be in the majority—contrary to what the Fed's founders intended. Ironically, several of the regional presidents are decidedly hawkish, so the result might be a greater focus on inflation than growth—the opposite of what many Democratic senators are likely to fret about.

The real danger, however, lies further ahead. Mr Bernanke's term as Fed chairman expires in 2010. With lots of governors to appoint at once, and the prospect of a new chairman within two years, the next president will have unprecedented power to reshape the Fed. Governors are appointed for overlapping 14-year terms precisely to avoid this concentration of power.

Independence, schmindependence

That alone is dangerous. It is doubly worrying given the Democrats' seeming insouciance about politicising the Fed. So far the senators' focus has been on consumer protection. They want governors who would have done more to stop predatory subprime lending. But, in the aftermath of the Bear Stearns rescue, the overhaul of financial regulation is likely to be far broader. Wall Street's attempts to wriggle out of that regulation have already begun (see article). The Fed will be central to ensuring that institutions implicitly backed by the state are appropriately regulated: impartiality is crucial.

But the biggest risk lies with monetary policy. Though every American politician pays lip service to the central bank's independence in interest-rate decisions, that independence is more fragile than in other rich countries. The Fed has a dual mandate—to promote full employment and price stability—and no explicit inflation target. With its fuzzier goals, America's central bank is more vulnerable than some others. A set of doveish appointments could soon dissipate the Fed's inflation-fighting credibility. Economic growth is weak and prices are rising uncomfortably fast. Central bankers face difficult decisions. It is no time for politicians to make matters worse.

Meanwhile...
http://www.economist.com/finance/displaystory.cfm?story_id=11506822
http://www.economist.com/opinion/displaystory.cfm?story_id=11496844
http://www.economist.com/finance/displaystory.cfm?story_id=11502308
http://www.economist.com/finance/displaystory.cfm?story_id=11294547

Somehow it doesn't seem to make sense to me to do this sort of thing now, of all times. I realise that politicians will be politicians, but is this really just further confirmation that they can't care about the technical intricacies of jobs that, quite frankly, they couldn't even begin to understand?

What do you think? Are the Dems being irresponsible? Or do you think Central Bank Independence is stupid to start with?

An economically conservative news source is opposed to the Democrats' economic policies in an opinion piece? Who could have expected that...

http://www.economist.com/opinion/displaystory.cfm?story_id=11496881


Meanwhile...
http://www.economist.com/finance/displaystory.cfm?story_id=11506822
http://www.economist.com/opinion/displaystory.cfm?story_id=11496844
http://www.economist.com/finance/displaystory.cfm?story_id=11502308
http://www.economist.com/finance/displaystory.cfm?story_id=11294547

Somehow it doesn't seem to make sense to me to do this sort of thing now, of all times. I realise that politicians will be politicians, but is this really just further confirmation that they can't care about the technical intricacies of jobs that, quite frankly, they couldn't even begin to understand?

Of course they can't care. And this from the party that claims to be in favor of a strong economy.

What do you think? Are the Dems being irresponsible? Or do you think Central Bank Independence is stupid to start with?

In answer:

1) I think the Republicans need to force the issue.

2) Yes

3) No

Thought this was going to be about Kevin Federline...

An economically conservative news source is opposed to the Democrats' policies in an opinion piece? Who could have expected that...

Thats economically liberal actually. And it backed John Kerry in '04.

Nevertheless, I believe the point of this thread is to discuss the politicising of central bank control not the editorial stance of a newsmagazine.

Thats economically liberal actually. And it backed John Kerry in '04.

Nevertheless, I believe the point of this thread is to discuss the politicising of central bank control not the editorial stance of a newsmagazine.

In the US economically "liberal" is on the left wing, while economically "conservative" is right-wing. The Economist is not left wing economically...

And yes, it's socially liberal, which is why it backed Kerry.

[/anyway]

I don't see how giving appointments to Bush would help the economy recover...

I don't see why you're surprised-the Democratic Party has stonewalled everything it can on no other grounds than ideology for as long as I can remember, and at least since the Roosevelt Administration as I can research. Not that it matters-anyone leveling the charge is obviously a conservative with an ax to grind, since the Party ran out of ideas in the sixties and merely resorts to mudslinging and name-calling since.

from the article:
The real danger, however, lies further ahead. Mr Bernanke's term as Fed chairman expires in 2010. With lots of governors to appoint at once, and the prospect of a new chairman within two years, the next president will have unprecedented power to reshape the Fed. Governors are appointed for overlapping 14-year terms precisely to avoid this concentration of power.
Wouldn't this exact same "danger" apply to letting Bush appoint all those governors before his term is up, since there will be up to four seats to fill by August, if I read the article right?

If the goal is a balanced and impartial Fed, and if the Fed is as susceptible to political influence as the magazine says, then clearly, the impartiality of the Fed is dependent on the ethics of the politicians making the appointments. If so, then the Fed is pretty much screwed, unless the appointees have the balls to buck their masters once they get the job. Considering his other appointees, I would not expect such independence from Bush Fed appointees.

If the ethics of the appointers is key to a strong Fed, then I don't really think it's a good idea to let a clearly unethical person do the appointing. Even though the Senate is playing a risky gambit by refusing to fill the seats, I would have a hard time letting Bush make all those appointments. I think that fox has killed enough chickens already, while he's been in charge of the henhouse.

It is funny how the OP is accusing the Democrats of "playing politics". Here's a suggestion. Bush might be, too.

While I'm sure Bush's appointees are qualified, I imagine they have a strong republican lean to their politics. All Bush needs to do is put up an appointee who isn't a psycho right wing nut job, but a centrist, and the democrats would approve the nomination.

There are 2 people playing this game. Democrats and Republicans. Don't forget this. To be honest I think you know this, and are just regurgitating propaganda and putting out some Democrat hate. I hate both the Dems and Republicans, so I'm not biased one way or the other.

While I'm sure Bush's appointees are qualified

i would tend to assume otherwise, even in the face of otherwise persuasive evidence.

An economically conservative news source is opposed to the Democrats' economic policies in an opinion piece? Who could have expected that...
I've been reading the paper for some time, and there are a few things to be said:
1) It's reporters really know what they're writing about, which is not something you get out of other papers (short of the really specialised finance and business ones).
2) They make no secret of their editorial stance, and since it's roughly the same over time you can correct for it if you want. More importantly, it doesn't make them fanboys of a politician, because they care about the issues rather than the people. Here's a case in point: a preview from The Economist's perspective of the presidential race: http://www.economist.com/opinion/displayStory.cfm?Story_ID=11496904
3) If there is something wrong with what the article says, concentrate on that instead.

I don't see how giving appointments to Bush would help the economy recover...
Considering his other appointees, I would not expect such independence from Bush Fed appointees.
While I'm sure Bush's appointees are qualified, I imagine they have a strong republican lean to their politics. All Bush needs to do is put up an appointee who isn't a psycho right wing nut job, but a centrist, and the democrats would approve the nomination.
i would tend to assume otherwise, even in the face of otherwise persuasive evidence.
Well, the most important appointment Bush has made so far was Ben Bernanke. And choosing him was by some margin the best thing Bush did in his second term. Here's what wiki (http://en.wikipedia.org/wiki/Ben_S._Bernanke) says:
He is believed to be less ideologically rigid than Alan Greenspan and has been reluctant to weigh in on political issues. For example, while Greenspan publicly supported President Clinton's deficit reduction plan and the Bush tax cuts, Bernanke, when questioned about taxation policy, said that it was none of his business, his exclusive remit being monetary policy, and said that fiscal policy and wider society related issues were what politicians were for and got elected for. Indeed, in his undergraduate economics textbooks he somewhat distances himself from the overt economic liberalism of Greenspan.

Anyways, this is the board right now:
http://alephblog.com/wp-content/uploads/2008/03/The_Federal_Open_Markets_Committee.pdf

These are the three guys under contention:

http://en.wikipedia.org/wiki/Randall_S._Kroszner

Larry Klane:
http://www.campaignmoney.com/political/contributions/larry-klane.asp
http://www.americaspromise.org/APAPage.aspx?id=6476

Elizabeth Duke:
http://investing.businessweek.com/businessweek/research/stocks/people/person.asp?personId=1164356&capId=2111301&previousCapId=271135&previousTitle=Fannie%20Mae
http://www.campaignmoney.com/political/contributions/elizabeth-duke.asp

If you can find something you think really makes them questionable as far as doing the job is concerned, go ahead. Personally, I think Bush doesn't just pick these people, some of his more qualified staff does. He just picks them from a list of suitable candidates.

Somehow it doesn't seem to make sense to me to do this sort of thing now, of all times. I realise that politicians will be politicians, but is this really just further confirmation that they can't care about the technical intricacies of jobs that, quite frankly, they couldn't even begin to understand?

What do you think? Are the Dems being irresponsible? Or do you think Central Bank Independence is stupid to start with?

I admit I haven't really studied the issue, but I like the independence of the Fed because it makes it easier for the Fed to be protected from politicians (and financiers) who refuse to think past the next quarter. The Fed, like the Judicial branch, should take the long-term view of things.

I agree that the Democrats are being a bit irresponsible in not holding hearings, but it's unfair to hold the Banking Committee solely responsible either for the general stalemate in appointments or for politicizing the Fed. The latest round of the government messing with the Fed started at the end of Bush 41's term, and was helped along by both Clinton and Greenspan. Bush 43 has continued Clinton's theory of government-by-endless-campaign, and part of that is having his political operatives, not his policy wonks, pick nominees, and refuse to negotiate with the Senate on who those nominees should be. Both sides seem happy with turning the appointments system into a massive game of Chicken.

With only a few months left in Bush's term, my hope is that the Democrats see that it's to their advantage to consent to at least some of Bush's nominees so they can start to lessen the paralyzing polarization of the past 7 years. Which doesn't necessarily mean that they should appoint these particular nominees, as there are almost certainly areas of government in more dire need of filled appointments than the Fed, which at least has a sensible head.

EDIT: Not to pick on you, NL, but would everyone please get the usage of the center-left US party correct? Noun: Democrat. Adjective: Democratic. Therefore, Democrats (people) but Democratic politicians, Democratic party, Democratic nomination battle. The "Democrat Party" usage was coined by right-wing talk-show hosts who realized that the final "t" made for better spitting.

An economically conservative news source is opposed to the Democrats' economic policies in an opinion piece? Who could have expected that...

You obviously know nothing about The Economist or the difference between conservative and liberal economics. I suggest you refrain from further comment until you do.

Do I think the Democrats (who are in the Democratic Party) are going against the mission of the Federal Reserve? Yes. Do I think that's a bad thing? Ehh, probably. I don't think the Fed is really as independent as it likes to think it is anyway, and I prefer using fiscal over monetary policy to shape the economy. But, if we're going to have a Central Bank, it should be as non-political as possible, and I think the Democrats stopping this are not playing according to Hoyle.

Good.

I don't want another Bush appointee confirmed.

This is exactly what the GOP would and has done. Nothing new.

If you can find something you think really makes them questionable as far as doing the job is concerned, go ahead. Personally, I think Bush doesn't just pick these people, some of his more qualified staff does. He just picks them from a list of suitable candidates.

What would a "Republican" governor of the Reserve do, anyway? I can think of a myriad of ways Republicans are different from Democrats on fiscal matters, and a myriad of ways a Republican president or Congress could work with a conservative Fed chairman in conjunction (if that's the word I'm looking for) with how they dish out money. But I can't think of a way two Republican governors could dramatically affect the Fed in anyway.

That wasn't a rhetorical question, by the way. I really am curious.

Good.

I don't want another Bush appointee confirmed.

This is exactly what the GOP would and has done. Nothing new.

Some people would say that judging a candidate for a position based on who nominated them rather than who they are is somewhat idiotic.

Some people would say that judging a candidate for a position based on who nominated them rather than who they are is somewhat idiotic.

Agreed though based on past nominations...

Some people would say that judging a candidate for a position based on who nominated them rather than who they are is somewhat idiotic.

Yes, some might. But, not anyone who sat through the second term of the Clinton presidency who watched the GOP hold up nearly all of Clinton's judicial nominees. Nor anyone who has witnessed the obstructionist tactics of the Republican minority in Congress who use every stalling tactic, including 71 separate filibusters, to ensure that no Democratic legislation comes to a vote.

I'm tired of the Republicans playing by one set of rules and expecting the Democrats to play by another.

The winds of change are blowing, my friend.

Yes, some might. But, not anyone who sat through the second term of the Clinton presidency who watched the GOP hold up nearly all of Clinton's judicial nominees.

As opposed to the Democratic Party holding up Bush's nominees. Do you support what the dems did with Bush's judicial nominees?

Nor anyone who has witnessed the obstructionist tactics of the Republican minority in Congress who use every stalling tactic, including 71 separate filibusters, to ensure that no Democratic legislation comes to a vote.

That's politics and that's the Senate for ya.

I'm tired of the Republicans playing by one set of rules and expecting the Democrats to play by another.

And I'm tired of the Democrats playing by on set of rules and expecting the Republicans to play by another.

The winds of change are blowing, my friend.

But in which direction remains to be seen.

Why oh why won't the democratic senators stop exercising their constitutionally granted powers and do what Bush wants them to?

Yes, some might. But, not anyone who sat through the second term of the Clinton presidency who watched the GOP hold up nearly all of Clinton's judicial nominees. Nor anyone who has witnessed the obstructionist tactics of the Republican minority in Congress who use every stalling tactic, including 71 separate filibusters, to ensure that no Democratic legislation comes to a vote.

I'm tired of the Republicans playing by one set of rules and expecting the Democrats to play by another.

The winds of change are blowing, my friend.

Really? All I can see is the same shit from a different party. If there really was any change we might see both parties making decisions on things like nominations to government posts based on qualification rather than nominator.

Why oh why won't the democratic senators stop exercising their constitutionally granted powers and do what Bush wants them to?

I believe the issue is why they are doing it, not what they are doing.

I believe the issue is why they are doing it, not what they are doing.

maybe after 8 years of failure, incompetance, and general inability to keep a competant staff, the senate distrusts anybody nominated by Bush.

I sure as hell would. This was, after all, a man who nominated Harriet Miers to the Supreme Court

I sure as hell would. This was, after all, a man who nominated Harriet Miers to the Supreme Court

Which was stupid and we all know that but tell me why the Fed Bank Appointments should be blocked!

Which was stupid and we all know that but tell me why the Fed Bank Appointments should be blocked!

Because the senate majority does not want them there. I may agree or disagree with that decision, but that is entirely unrelated to the question of "why". Appointments must be confirmed by the senate. The senate declined to confirm.

Do I think the Democrats (who are in the Democratic Party) are going against the mission of the Federal Reserve? Yes. Do I think that's a bad thing? Ehh, probably.
Alesina, A. and Summers, L.H. 1993. Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence. Journal of Money, Credit and Banking, 25(2): 151-62. (http://ideas.repec.org/a/mcb/jmoncb/v25y1993i2p151-62.html)

I don't think the Fed is really as independent as it likes to think it is anyway, and I prefer using fiscal over monetary policy to shape the economy.
Well, there is a tool for each job. The central bank's job is primarily about money and inflation. In the long run money, as they say, is neutral, meaning you can't affect things like output and employment with monetary policy forever anyways. On the other hand, you can't control inflation with fiscal policy.

So both have a role to play, and since the elected officials have a separate goal to the Fed, it's best to keep the two separate and not give either of them too much control about the other.

What would a "Republican" governor of the Reserve do, anyway?
Well, I suppose Bernanke is a Republican (though really apolitical) governor. I guess the fear is that Republican nominees will be tough inflation hawks who would be happy to slow the economy down a lot to stop inflation expectations from setting in, thereby costing quite a few people their jobs.

That wasn't a rhetorical question, by the way. I really am curious.
I guess the fear is that since Democrats supposedly care more for the little man and employment, they'd be willing to expand monetary policy so as to make sure there is no contraction and people don't lose their jobs, thereby neglecting inflation. It's the sort of thing that eventually led to stagflation before.

I really don't think that the actual nominees would do that though. It may well be that some of their more hardcore Democratic backers would like them to, but the only people who will make it onto the FOMC are economists and financial gurus, who are quite aware of what might work and what definitely won't.

And ultimately, Greenspan was also being over-expansionary with his monetary policy...though that wasn't clear until now since inflation wasn't really getting out of hand (maybe you can thank China for that). The moral of the story is that monetary policy is far more important, complex and powerful than most people realise, and it's really not the sort of thing people should be playing politics with. But the temptation is there, in the US as well as in Europe (where Sarkozy occasionally tries to score points by bitching about the fact that the ECB isn't "doing something" about the high euro).

Because the senate majority does not want them there.

Why?

maybe after 8 years of failure, incompetance, and general inability to keep a competant staff, the senate distrusts anybody nominated by Bush.

I sure as hell would. This was, after all, a man who nominated Harriet Miers to the Supreme Court

And she was judged based on her qualification for the role, thanks in part to the fact that her nomination and opposition was bipartisan.

Why can't the senators do the same for the current nominees? Is it really such a difficult exercise to take some time to judge the qualifications and character of the nominees and make a decision based on that?

Why?


Why can't the senators do the same for the current nominees? Is it really such a difficult exercise to take some time to judge the qualifications and character of the nominees and make a decision based on that?

Because they're hoping for a democratic president in january who will appoint individuals more in line with their political philosophy, so they can get what they want, not settle for the least offensive of what they don't. They know enough to know that while the individuals may be qualified for the job, they may not be who the senators want most for the job, so they decline to appoint those who are merely qualified, but those who are qualified, and aligned with their political ideology.

Which is their perogative.

Because they're hoping for a democratic president in january who will appoint individuals more in line with their political philosophy, so they can get what they want, not settle for the least offensive of what they don't. They know enough to know that while the individuals may be qualified for the job, they may not be who the senators want most for the job, so they decline to appoint those who are merely qualified, but those who are qualified, and aligned with their political ideology.

Which is their perogative.

In other words, the independence of the Federal Reserve has just become meaningless. Even though I'm skeptical at just how independent they actually were to begin with.

In other words, the independence of the Federal Reserve has just become meaningless.

Not at all. The fed reserve does not answer ot congress, it does not require congressional approval for much that it does.

Which is exactly the point, after all. Why would the senate want to appoint people to an agency it has very little control over, when those senators disagree with how those appointees would do things? That's just foolish. The reserve operates independantly, which is why I understand senators who would not wish to grant such independance to people they disagree with.

Limiting the effectiveness of the central bank at a time of eonomic instability in order to reduce central bank independence next year sounds like a rather reckless thing to do.

depends on your perspective I suppose, if you think that an unchecked central bank authority lead by an economic philosophy you oppose would do more damage than the alternative, it's a perfectly rational thing to do.

Because they're hoping for a democratic president in january who will appoint individuals more in line with their political philosophy, so they can get what they want, not settle for the least offensive of what they don't. They know enough to know that while the individuals may be qualified for the job, they may not be who the senators want most for the job, so they decline to appoint those who are merely qualified, but those who are qualified, and aligned with their political ideology.

Which is their perogative.

Limiting the effectiveness of the central bank at a time of eonomic instability in order to reduce central bank independence next year sounds like a rather reckless thing to do.

As opposed to the Democratic Party holding up Bush's nominees. Do you support what the dems did with Bush's judicial nominees?

In 2002 when the Senate was also controlled by the Democrats they confirmed 72% of Bush's nominees. If the Democrats are less generous this time around it is because Bush has proven himself to be an untrustworthy president. In any event the Democrats haven't come close to giving the Republicans tit-for-tat.

During the Clinton years circuit court vacancies rose from 12 to 26 to 32 because of Republican obstructionism.

There are currently just 12 circuit court vacancies.

The Democratic Senate has surpassed the total number of circuit court nominees confirmed by the Senate in the 1996 session, a presidential election year during which the Republican-led Senate refused to confirm a single circuit court nominee of President Clinton. With six nominations hearings already concluded this year the Committee is well ahead of the pace Republicans set in the 1999 session of Congress, when the Judiciary Committee failed to hold a hearing on a single judicial nomination before June. With the Senate having confirmed five judges in early April, the Senate is also well ahead of the pace Republicans set in the 1996 session when no judicial nominee was confirmed before July.

In this Congress, the Committee has reported 45 judicial nominations, and 31 nominations for high-ranking positions in the Department of Justice, including the Department’s top three positions – Attorney General, the Deputy Attorney General and the Associate Attorney General.

I have no sympathy for the GOP, which has chosen to operate under scorched earth tactics the last eight years. This party once controlled the House, the Senate, the Supreme Court and the Oval Office. They have had a chance to lead and what have we gotten? An unpopular war, an economic recession, $4.00 a gallon gas, rising unemployment, and a loss of respect the world-around among both our friends and enemies.

depends on your perspective I suppose, if you think that an unchecked central bank authority lead by an economic philosophy you oppose would do more damage than the alternative, it's a perfectly rational thing to do.

How about a central bank lead not by economic philosophy but committed to seeking a balance between economic growth and inflation, as the Federal Reserve, Bank of England and ECB currently are? Such as appointing people like Ben Bernanke or Mervyn King who make decisions based on what is best for monetary policy rather than based on their political views.

How about a central bank lead not by economic philosophy but committed to seeking a balance between economic growth and inflation, as the Federal Reserve, Bank of England and ECB currently are? Such as appointing people like Ben Bernanke or Mervyn King who make decisions based on what is best for monetary policy rather than based on their political views.

I suppose that's a question of whether the senate believes the recommended appointments would try to seek an honest balance or would lead through a particular philosophy.

*snip*

Are you actually going to answer it?

Also, linkie to your facts.

I suppose that's a question of whether the senate believes the recommended appointments would try to seek an honest balance or would lead through a particular philosophy.

That's the very issue, isn't it? There appears to have been no criticism directly of the candidates picked. If the senators said that they opposed the candidates for their political views - or rather, the belief that their political views would would jeopardise their role of following an impartial monetary policy - then I wouldn't take issue with them. But they haven't so I am taking issue here.

How about a central bank lead not by economic philosophy but committed to seeking a balance between economic growth and inflation, as the Federal Reserve, Bank of England and ECB currently are? Such as appointing people like Ben Bernanke or Mervyn King who make decisions based on what is best for monetary policy rather than based on their political views.
You are assuming that these monetary policies aren't political to begin with.

The FED makes decisions that best serve the market, but does that mean they best serve people? For instance, the market often responds positively when a company lays off large numbers of workers, often sending that company's stock higher. However, is that move what is best for the people who were fired, or for the towns decimated by the surge in unemployment? Isn't that fundamentally a political decision upon which different people could argue?

When the FED lowers interest rates in order to drive money into stocks it also lowers the interest people earn in their savings accounts. Isn't the choice to favor one group of people - Wall Street investors - over another group of people - main street savers - a fundamental political decision?

The FED favors investment over work. That is political.

That's the very issue, isn't it? There appears to have been no criticism directly of the candidates picked. If the senators said that they opposed the candidates for their political views - or rather, the belief that their political views would would jeopardise their role of following an impartial monetary policy - then I wouldn't take issue with them. But they haven't so I am taking issue here.

again, while I think it might be a little "slackerish" of them, I can't particularly fault them for rejecting out of hand as a political hack anyone that Bush recommends.

The man, after all, does have a history. In fact, just looking at the history of his nominations, it's hard to find one that doesn't qualify as a political hack, and the only one I can think of is Roberts who I am only willing to give a very lukewarm "eh"

You are assuming that these monetary policies aren't political to begin with.

The FED makes decisions that best serve the market, but does that mean they best serve people? For instance, the market often responds positively when a company lays off large numbers of workers, often sending that company's stock higher. However, is that move what is best for the people who were fired, or for the towns decimated by the surge in unemployment? Isn't that fundamentally a political decision upon which different people could argue?

When the FED lowers interest rates in order to drive money into stocks it also lowers the interest people earn in their savings accounts. Isn't the choice to favor one group of people - Wall Street investors - over another group of people - main street savers - a fundamental political decision?

The FED favors investment over work. That is political.

Actually, cuts in the saving rate are often done to spur economic growth in the face of rising unemployment and the threat of recession. As Neu Leonstein correctly pointed out, a Democratically inclined Federal Reserve may cut interest rates to raise employment regardless of inflation in a perceived attempt to favour the 'average worker'.

However, it is not hard to avoid politicising monetary policy - set an inflation and growth target and stick to it.

again, while I think it might be a little "slackerish" of them, I can't particularly fault them for rejecting out of hand as a political hack anyone that Bush recommends.

The man, after all, does have a history. In fact, just looking at the history of his nominations, it's hard to find one that doesn't qualify as a political hack, and the only one I can think of is Roberts who I am only willing to give a very lukewarm "eh"

What about his current appointees to the Fed, including Bernake? He seems to have got them right so far.

You cannot make decisions, Cosmopoles, which affect people's wealth, investments, savings, and employment, without it being political. The fact that you set an inflation and growth target doesn't mean the choices aren't political.

Nor is the fact that the FED is political necessarily a bad thing. Politics is the decision making process of a community of people. It is the art of the possible. The FED is not a computer and its decisions aren't logarithmic functions. Its decisions are made by people and affect people.

That makes it political.

You cannot make decisions, Cosmopoles, which affect people's wealth, investments, savings, and employment, without it being political. The fact that you set an inflation and growth target doesn't mean the choices aren't political.

Nor is the fact that the FED is political necessarily a bad thing. Politics is the decision making process of a community of people. It is the art of the possible. The FED is not a computer and its decisions aren't logarithmic functions. Its decisions are made by people and affect people.

That makes it political.

I should clarify - by 'politicising' I mean making decisions based off of party support or some political ideology. Obviously the process by which the decisions are made could be described as 'political' but that's not what I have a problem with. When political parties try to influence the policies made by the central bank such as appointing people with common political beliefs and who will allow those beliefs to affect their decisions it is worse for the economy as the research shows (http://ideas.repec.org/a/mcb/jmoncb/v25y1993i2p151-62.html) (credit to NL for that), than allowing to bank to operate without interference.

Of course they can't care. And this from the party that claims to be in favor of a strong economy.
You mean your new party? :D

Hard to give up your Republican thinking?

http://www.economist.com/opinion/displaystory.cfm?story_id=11496881


Meanwhile...
http://www.economist.com/finance/displaystory.cfm?story_id=11506822
http://www.economist.com/opinion/displaystory.cfm?story_id=11496844
http://www.economist.com/finance/displaystory.cfm?story_id=11502308
http://www.economist.com/finance/displaystory.cfm?story_id=11294547

Somehow it doesn't seem to make sense to me to do this sort of thing now, of all times. I realise that politicians will be politicians, but is this really just further confirmation that they can't care about the technical intricacies of jobs that, quite frankly, they couldn't even begin to understand?

What do you think? Are the Dems being irresponsible? Or do you think Central Bank Independence is stupid to start with?

Both?

You mean your new party? :D

Hard to give up your Republican thinking?

:headbang:

CH. I'll tell you this one more fucking time. I only registered for a political party to vote in the fucking primaries. I do not have any real loyalities to any one party for I vote based on who will do a better job in office.

Is that simple enough for you brain to comprehend now?

I've been reading the paper for some time, and there are a few things to be said:
1) It's reporters really know what they're writing about, which is not something you get out of other papers (short of the really specialised finance and business ones).
2) They make no secret of their editorial stance, and since it's roughly the same over time you can correct for it if you want. More importantly, it doesn't make them fanboys of a politician, because they care about the issues rather than the people. Here's a case in point: a preview from The Economist's perspective of the presidential race: http://www.economist.com/opinion/displayStory.cfm?Story_ID=11496904
3) If there is something wrong with what the article says, concentrate on that instead.


I've been reading it for a few months, too.

1. I agree - it's much better than Time or Newsweek or any of those other ones. However, they tend to accuse some center-left or even economically center policies as "populist" (see their articles on N/CAFTA) regardless of the motives or the actual stated policy positions of the politicians making them.

2. I know - they're strongly free trade, right-wing economically, but socially liberal.

3. Well, apart from unfairly fully blaming the Democrats for the stonewall that is at least partly Bush's fault...

the issue I see is there is not really a party consensus on the Fed reserve.

Democrat Clinton lowered interest rates. Republican bush also lowered them.

Republican Reagan Raised interest rates, and I think FDR raised them too.


To be honest it looks like we have run the course on low interest rates it is time to raise interest rates and stabilize the value of the dollar.

CH. I'll tell you this one more fucking time. I only registered for a political party to vote in the fucking primaries. I do not have any real loyalities to any one party for I vote based on who will do a better job in office.

Setting aside the ill-mannered response of this post for a moment, there is a philosophy here that I encounter quite frequently by people who disdain the party system. These folks proudly, if somewhat naively, proclaim they “vote for the individual, not the party.” Usually they see this as a virtue and feel a sense of superiority over those they see as party hacks.

Although these people are well meaning they demonstrate a profound ignorance of American politics and are casting their votes based upon an assumption about politics in this country that does not exist, nor has ever existed.

In short, they are clueless about American government.

Those who see themselves as rising above "dirty party politics" think our country is governed by individual citizen-politicians, each independent of the other, operating only according to the dictates of his or her individual conscience.

The reality is that we are a two party system in which the only governing that occurs happens within the framework of the party philosophy. The party in power gets to set the legislative agenda, appointee committee chairpeople, dominate committee meetings, select federal judges, and in short, impose its political philosophy on the country. The party out of power can attempt to block that agenda and peel off some like minded individuals of the other party in order to pass modest legislation, but is mostly in the role of the loyal opposition until they are once again in the majority.

What about the individual citizen-politician who operates outside the party system?

That person almost never gets elected and if he does is almost completely impotent to get anything done. The only way such individuals obtain any power and influence at all is if they align themselves with a party.

The only governing that happens in this country happens through the political parties. People who tell themselves they only vote for the individual cast their vote based upon a fantasy that has no grounding in reality. Ironically, these are the people who moan and groan the most about partisan politics, but it is these very individuals who have created this hyper-partisanship. They are the ones who give us government divided between Democrats and Republicans, because they are voting for "the best person to govern," regardless of party affiliation. They are then shocked and disappointed when nothing gets done in Washington because of all of the partisan in-fighting that quite naturally occurs when both parties are so evenly balanced.

All the while they remain ignorant of the fact that they themselves have brought about the partisan nastiness they claim to be trying to avoid by voting for the person, not the party.

Setting aside the ill-mannered response of this post for a moment, there is a philosophy here that I encounter quite frequently by people who disdain the party system. These folks proudly, if somewhat naively, proclaim they “vote for the individual, not the party.” Usually they see this as a virtue and feel a sense of superiority over those they see as party hacks.

A party hack is those who support the party line hook, line, and seeker and oppose anything that the other party comes up with. My dad is a party hack and I get on him every time for this. My mother is an independent and since she basically raised me since my dad was always off to some far off land because of orders, she taught me to do research and not to believe what is being said in the media without actually looking into it.

A proper voter does this. A proper voter researches the candidate to make the best possible decision.

Although these people are well meaning they demonstrate a profound ignorance of American politics and are casting their votes based upon an assumption about politics in this country that does not exist, nor has ever existed.

Sorry but I do not base my decisions on what party fucktards say. Unlike some people, I actually do the research on candidates and make my decision. That is why I am supporting Barack Obama over John McCain and why I do not support Hillary Clinton.

In short, they are clueless about American government.

Any fool who votes straight ticket as an idiot.

Those who see themselves as rising above "dirty party politics" think our country is governed by individual citizen-politicians, each independent of the other, operating only according to the dictates of his or her individual conscience.

Oh please. :rolleyes:

The reality is that we are a two party system in which the only governing that occurs happens within the framework of the party philosophy.

Which is stupid. George Washington was a prophet in this regard when he said be weary of political parties.

The party in power gets to set the legislative agenda, appointee committee chairpeople, dominate committee meetings, select federal judges, and in short, impose its political philosophy on the country. The party out of power can attempt to block that agenda and peel off some like minded individuals of the other party in order to pass modest legislation, but is mostly in the role of the loyal opposition until they are once again in the majority.

Government 111 in a netshell!

What about the individual citizen-politician who operates outside the party system?

They are free to make their own choices.

That person almost never gets elected and if he does is almost completely impotent to get anything done.

That's not true.

The only way such individuals obtain any power and influence at all is if they align themselves with a party.

Which needs to change.

The only governing that happens in this country happens through the political parties. People who tell themselves they only vote for the individual cast their vote based upon a fantasy that has no grounding in reality.

:rolleyes:

Ironically, these are the people who moan and groan the most about partisan politics, but it is these very individuals who have created this hyper-partisanship.

Oh my God. No what created the hyper-partisanship is Congress themselves which have made it all but impossible for third party candidates to actually get a say or a seat.

They are the ones who give us government divided between Democrats and Republicans, because they are voting for "the best person to govern," regardless of party affiliation.

I'd rather vote my conscience than vote for someone that is dictated to me. See previous statement before this one on why our system is the way it is today.

They are then shocked and disappointed when nothing gets done in Washington because of all of the partisan in-fighting that quite naturally occurs when both parties are so evenly balanced.

And Congress wonders why their approval ratings are always so low. They have no one to blame but themselves but they are to stupid to take responsibility for it. Couple that with the fact that they do not care what each other says does not help that fact.

All the while they remain ignorant of the fact that they themselves have brought about the partisan nastiness they claim to be trying to avoid by voting for the person, not the party.

:rolleyes:

When the FED lowers interest rates in order to drive money into stocks it also lowers the interest people earn in their savings accounts. Isn't the choice to favor one group of people - Wall Street investors - over another group of people - main street savers - a fundamental political decision?
That's not how it works.

Firstly, Fed isn't an acronym, hence we don't spell it with capitals.

Secondly, the Fed lowers interest rates because it has a dual mandate by law, both to watch inflation and to secure stable economic growth over the longer term. Financial breakdowns affect the real economy, hence doing something about them is part of the job.

Furthermore, when the Fed lowers the funds rate, it doesn't target savings accounts, it targets lending by banks. It wants to get people to spend rather than save. If it cuts rates, it wants to pump extra money into the economy, which in the short run will increase spending and shore up employment. So the poor guy, who is likely to be the marginal worker who is expendable in a recession, would actually prefer a rate cut. Hence why the risk is that the Dems want rate cuts even when they're not necessarily appropriate. The problem with that then is that the trade off between inflation and unemployment only works in the short run. With more time, people simply adjust their expectations and unemployment is what it otherwise would have been, except now with more inflation.

And finally, if you can find an American who puts money into a savings account, I'd like you to find him or her. ;)

And finally, if you can find an American who puts money into a savings account, I'd like you to find him or her. ;)

Hi :)

:rolleyes:

How did you manage such a long post in which you actually said nothing. Very impressive.

How did you manage such a long post in which you actually said nothing. Very impressive.

I see that you do not care about actual debate but GOP bashing. Now I get you.

Furthermore, when the Fed lowers the funds rate, it doesn't target savings accounts, it targets lending by banks. It wants to get people to spend rather than save. If it cuts rates, it wants to pump extra money into the economy, which in the short run will increase spending and shore up employment. So the poor guy, who is likely to be the marginal worker who is expendable in a recession, would actually prefer a rate cut. Hence why the risk is that the Dems want rate cuts even when they're not necessarily appropriate. The problem with that then is that the trade off between inflation and unemployment only works in the short run. With more time, people simply adjust their expectations and unemployment is what it otherwise would have been, except now with more inflation.

And finally, if you can find an American who puts money into a savings account, I'd like you to find him or her. ;)
You make my point, which is that the FED makes a choice to prefer investment over saving, speculation over work. The FED makes choices which benefit Wall Street and which may or may not benefit main street.

BTW, I don't have to look any further than my mirror to find an American who puts money into savings. It is how I bought two homes and sent my son to college.

I see that you do not care about actual debate but GOP bashing. Now I get you.

No you don't. Nowhere in my entire post did I say anything disparaging of the GOP whereas your entire post consisted of rolled eyes, "oh, please," "you're an idiot," and "you're wrong."

Illuminating.

Why should I waste my time with someone who either has no ability or no interest to engage in thoughtful discourse?

No you don't. Nowhere in my entire post did I say anything disparaging of the GOP whereas your entire post consisted of rolled eyes, "oh, please," "you're an idiot," and "you're wrong."

Please point to the post in question where I called you an Idiot. Unless of course you are one of those straight party ticket voters.

Illuminating.

Why should I waste my time with someone who obviously has no interest in thoughtful discourse?

You are not making any points here. No substance. At least I had substance. Please make a point or leave.

Please point to the post in question where I called you an Idiot. Unless of course you are one of those straight party ticket voters.

You are not making any points here. No substance. At least I had substance. Please make a point or leave.
I am a straight party voter, which if you had understood my original post you would understand why people who "vote the person, not the party" are the one's who are ignorant of the system and have created such partisan infighting.

Your post indicates you do not understand the basics of the American political system. The fact that you cannot understand my point is neither my problem nor my concern.

I am a straight party voter, which if you had understood my original post you would understand why people who "vote the person, not the party" are the one's who are ignorant of the system and have created such partisan infighting.

Its the straight ticket voter Ogiek that is ignorant. And yes, that includes my own father who votes straight republican ticket. Luckily for me I take after my mom when it comes to politics and actually conduct my own research into candidates. Its the straight ticket voters that are the problem in this country. Now I know why California has a high independent voter registration.

Your post indicated you do not understand the basics of the American political system. The fact that you cannot understand my point is neither my problem nor my concern.

Oh for the love of Christ. :headbang:

Its the straight ticket voter Ogiek that is ignorant. And yes, that includes my own father who votes straight republican ticket. Luckily for me I take after my mom when it comes to politics and actually conduct my own research into candidates. Its the straight ticket voters that are the problem in this country. Now I know why California has a high independent voter registration.
:headbang:

Ok, Corn, you have stated your opinion, now how about supporting it. I gave you a well thought out defense of voting the party line. You have yet to offer a counter argument or even a supporting argument for why "voting the person" is such a noble thing to do. Give me something more than name calling and simple statements that you are right because, well, you are right.

Just to recap, since I don't think you really understood my argument:

Each party has a set of core ideals which it attempts to implement through public policy. It is only possible to implement those policies if they control Congress and the White House through elections. If you agree with the core ideals of a party (as your father does) then you vote for the members of that party so they will have the majority and therefore the power to put into affect the policies that reflect the ideals in which you believe.

If you "vote the person" without regard to the party you end up with a divided government in which each party is trying to implement different policies, which only intensifies the political partisanship and infighting.

Voting the party is neither blind nor is it without thought. In fact it reflects a self awareness that people like your father truly are in touch with their core beliefs. People who "vote the person" either have no core beliefs or don't know what they are.

Ok, Corn, you have stated your opinion, now how about supporting it. I gave you a well thought out defense of voting the party line.

Which is what? Continue with the status quo? You realize its voters like you that keep things the way they are? Not bothering to look into other party platforms? I've split my ticket in every election I have voted in. Why? Because I voted for the person I felt was suited for the job. Unlike straight ticket voters who only want their party to maintain power. Maybe you should take a government class.

You have yet to offer a counter argument or even a supporting argument for why "voting the person" is such a noble thing to do.

That's because you are not seeing it. That's fine. Its what I expect from straight party voters. My dad's the sameway. He does not understand why I do not vote straight ticket and even after I explained it to him, he still doesn't get it.

Give me something more than name calling and simple statements that you are right because, well, you are right.

Because if we voted for who is best suited for the job, regardless of what political party, this country would be better off. George Washington even stated that we should be weary of political parties for it will divide us. He's right. You are a prime example of it.

Voting the party is neither blind nor is it without thought. In fact it reflects a self awareness that people like your father truly are in touch with their core beliefs.

No my dad is just an idiot when it comes to politics. He's smart but he never researches and believes what the the right has to say be it right or wrong.

People who "vote the person" either have no core beliefs or don't know what they are.

I know exactly what they are. That is why I vote the person over ticket.

Ok, Corn. Obviously we have different ideas on what it means to make a cogent argument in support of a position.

Congratulations on your upcoming marriage and may you have many long years of bipartisan bliss.

Ok, Corn. Obviously we have different ideas on what it means to make a cogent argument in support of a position.

Congratulations on your upcoming marriage and may you have many long years of bipartisan bliss.

She's just as independent as I am. Thanks. :)

Maybe you should take a government class.


By the way, I teach government class.

By the way, I teach government class.

High school or college?

but for the legislature, regardless of the individual's viewpoints or talents, a vote for any Republican is a vote to give more power to that party leadership, and I cannot abide that.

As opposed to a vote for any democrat is a vote to give more power to that party leadership?

Maybe I shouldn't vote anymore. Both parties are runned by fucktards.

Because I voted for the person I felt was suited for the job.
It depends a lot on whether you are talking about an individual office (Governor, etc.) or a member of a legislative body. I could, and have, voted for Republicans for some individual positions (Michigan's Secretary of State was competent, and I voted to retain her), but for the legislature, regardless of the individual's viewpoints or talents, a vote for any Republican is a vote to give more power to that party leadership, and I cannot abide that.

It depends a lot on whether you are talking about an individual office (Governor, etc.) or a member of a legislative body. I could, and have, voted for Republicans for some individual positions (Michigan's Secretary of State was competent, and I voted to retain her), but for the legislature, regardless of the individual's viewpoints or talents, a vote for any Republican is a vote to give more power to that party leadership, and I cannot abide that.

Well, the parties don't have a "whip" like some parliamentary parties do. I'd vote for a liberal Republican over a conservative Democrat (those aren't oxymorons, you see a lot of the former in the northeast and the latter in the south.)

You make my point, which is that the FED makes a choice to prefer investment over saving, speculation over work.
1. It's "Fed", not "FED". It's short for Federal Reserve. Sorta important in government class.
2. Have you done any economics at all? Where do you think saving creates its interest? Why do you think it serves any purpose? Only because someone invests it, and targeting that is the more direct way of doing it. I mean, by the way, investment in productive capacity, of which share markets and hedge funds are just a preliminary stage.

The Fed cuts the funds rate, banks can lend out for less, Wall Street jumps and makes more capital available for more worthwhile investment opportunities by businesses, there is more money available for buying houses, driving up the wealth for house owners etc etc. In the end there are more jobs and more people spending because they've gained wealth. There is basically no scenario in which the Fed could do what is actually in Wall Street's interest and doing something wrong by the general economy. The two are interlinked and must move together over time, otherwise you get something like the tech bubble.

The FED makes choices which benefit Wall Street and which may or may not benefit main street.
Can you list any example of this ever happening? The Fed is required, by law, to care about inflation and the real economy. Wall Street is a tool for that end, nothing more.

BTW, I don't have to look any further than my mirror to find an American who puts money into savings. It is how I bought two homes and sent my son to college.
You're an exception. And not just that, it wasn't the interest that made it worthwhile for you as it was foregoing consumption. Interest rates in the US have been quite low in real terms for more than a decade.

Anything that keeps Bush a lame duck. I wouldn't trust him appointing a street sweeper, I'd expect it to be one that would charge 3000$ for a broom but in reality only put $30 towards the actual broom.

:headbang:

CH. I'll tell you this one more fucking time. I only registered for a political party to vote in the fucking primaries. I do not have any real loyalities to any one party for I vote based on who will do a better job in office.

Is that simple enough for you brain to comprehend now?
Nice flame. :p

Sooooo, does that mean that you are not going to vote for Obama in the general election?

Nice flame. :p

Sooooo, does that mean that you are not going to vote for Obama in the general election?

He said he'd vote for the person who'd do a better job.

He said he'd vote for the person who'd do a better job.
You perhaps don't realize the history that is going on here?

Corny declares himself an "independent", yet he was a registered Republican (http://forums.jolt.co.uk/showpost.php?p=13678258&postcount=384), but switched so he could vote for Obama in the primaries.

And to be honest, I wouldn't care if McCain was President or not! If you bothered to read my posts thoroughly, you would have seen that I was a registered republican but switched so that I can vote for Barack Obama.
Then he makes this comment in this thread:

I'll tell you this one more fucking time. I only registered for a political party to vote in the fucking primaries.
He is defending Republicans in this thread and the election thread, and hence my question.

The main reason that he has Obama 08 in his siggy is due to my urging. I am waiting for it to quietly disappear....it is a long story......won't bore you with the details.

BTW, his vote is also conspicuously absent in the election thread.

1. It's "Fed", not "FED". It's short for Federal Reserve. Sorta important in government class.
2. Have you done any economics at all? Where do you think saving creates its interest? Why do you think it serves any purpose? Only because someone invests it, and targeting that is the more direct way of doing it. I mean, by the way, investment in productive capacity, of which share markets and hedge funds are just a preliminary stage.

The Fed cuts the funds rate, banks can lend out for less, Wall Street jumps and makes more capital available for more worthwhile investment opportunities by businesses, there is more money available for buying houses, driving up the wealth for house owners etc etc. In the end there are more jobs and more people spending because they've gained wealth. There is basically no scenario in which the Fed could do what is actually in Wall Street's interest and doing something wrong by the general economy. The two are interlinked and must move together over time, otherwise you get something like the tech bubble.


Can you list any example of this ever happening? The Fed is required, by law, to care about inflation and the real economy. Wall Street is a tool for that end, nothing more.


You're an exception. And not just that, it wasn't the interest that made it worthwhile for you as it was foregoing consumption. Interest rates in the US have been quite low in real terms for more than a decade.

Good points, Neu Leon. I have to fix my hot water heater right now (part of the way I increase my savings) and can't address them right now, but let me make a couple of points.

I am aware what the FED is. I use the capitals for emphasis. My larger point is that the decisions made by the FED are not without political considerations. There are winners and losers every time the FED makes a decision to raise or lower interest rates.

The Federal Reserve has many purposes. It was originally created to address the problem of bank panics and to serve as a central bank for the United States. The idea that the U.S. need a central bank is not without controversy and is an issue that goes back to the early 19th century.

Throughout its history there have been politically motivate expansions and tightening of the monetary supply, especially in the 1970s and 1980s. Rather than curbing inflation some critics, including recent presidential candidate Ron Paul, have claimed the FED has actually created excessive inflation.

It is interesting that the greatest advocates of free enterprise capitalism are often the greatest supporters of this secretive body, the FED, which artificially manipulates interest rates and money supply.

I am not advocate of abolishing the FED, although there are valid arguments that it is unconstitutional. However, I do maintain that its decisions are political and all too secretive for my taste.

Those who maintain the FED is above politics, in my opinion, are those who agree with the FED's political philosophy.

Each party has a set of core ideals which it attempts to implement through public policy. It is only possible to implement those policies if they control Congress and the White House through elections. If you agree with the core ideals of a party (as your father does) then you vote for the members of that party so they will have the majority and therefore the power to put into affect the policies that reflect the ideals in which you believe.

If you "vote the person" without regard to the party you end up with a divided government in which each party is trying to implement different policies, which only intensifies the political partisanship and infighting.

Voting the party is neither blind nor is it without thought. In fact it reflects a self awareness that people like your father truly are in touch with their core beliefs. People who "vote the person" either have no core beliefs or don't know what they are.

A recent column in the Washington Post by E.J. Dionne supports my argument that a partisan election victory actually leads to more bipartisan cooperation in Congress.

"The paradox is that sharp shifts in partisan identification often presage periods of bipartisanship. If Obama were to win because of the country's Democratic tilt, moderate Republicans in Congress could move toward him to protect themselves against a Democratic tide. A comparable shift of worried Democrats helped Ronald Reagan build bipartisan majorities for his tax and budget programs in 1981."

http://www.washingtonpost.com/wp-dyn/content/article/2008/06/12/AR2008061203471.html?nav=rss_opinion/columns

Nice flame. :p

Sooooo, does that mean that you are not going to vote for Obama in the general election?

If Hillary is his VP, fuck no!

You perhaps don't realize the history that is going on here?

Corny declares himself an "independent", yet he was a registered Republican (http://forums.jolt.co.uk/showpost.php?p=13678258&postcount=384), but switched so he could vote for Obama in the primaries.

In case you do not know this, PA has a closed primary. Which means that one has to belong to a political party in order to vote in the primaries. I switched so that I can vote for the person that I wanted to be President of the United States.

Then he makes this comment in this thread:


He is defending Republicans in this thread and the election thread, and hence my question.

And there's a law against defending Republicans now? Can I see a source for said law?

The main reason that he has Obama 08 in his siggy is due to my urging. I am waiting for it to quietly disappear....it is a long story......won't bore you with the details.

The only way it goes if if he puts that bitch Hillary on the ticket.

BTW, his vote is also conspicuously absent in the election thread.

Oh cry me a river. This is a non-point and you know it.

By the way, I teach government class.

High school or college?

I'm waiting on an answer Ogiek!

I'm waiting on an answer Ogiek!

How the hell is that relevant to the discussion in any way?

As far as the actual discussion is concerned, the Fed has always been political. Economic philosophy has always been one of the major differences between the two parties, and having people who agree with your economic philosophy in charge of the economic policy of the entire nation strengthens your party's political power. I prefer to think of it as the financial Supreme Court. Where, on the Supreme Court, the parties like to have like-minded judges on the bench to further their social philosophy, on the Fed board they like to have like-minded governors at the table to further their economic philosophy.

As far as whether what the Democrats are doing is damaging, I think it's incredibly naive to believe that they are looking any further than the next election cycle. They are looking for an opportunity to get their guys in the Fed, and with the real possibility of a Democratic Congress and White House, delaying is their best bet for doing that.

Frankly, I think that Bush has destroyed any sort of goodwill he could expect from the Democrats over the past eight years. He's also destroyed any sort of confidence in the ability of those he nominates. To expect the Democrats to not play political hardball now after it's all the Republicans have done for 8 years is stupid. I fully support the Democrats doing anything and everything in their power to obstruct the Republicans at every pass. Whether it's what's best or not, turnabout is fair play.

How the hell is that relevant to the discussion in any way?

Its called curiosity? Maybe you have heard that term before?

I'm waiting on an answer Ogiek!

Sorry, I didn't see the original question.

I teach in an International Baccalaureate high school. The main courses I teach are Advanced Placement European history and the Theory of Knowledge, which is an epistemological course that examines how we know what we know. I've also taught AP U.S. history, A.P. world history, philosophy, and government.

As to the previous discussion concerning Hillary Clinton as Obama's VP, I don't think either of them want that. I started out at the beginning of the primary a little dismayed Hillary was running. I don't like the oligarch implications of passing the presidency between two families and was concerned about the distractions the Big Dog would bring to the White House. However, I have become very impressed with Clinton as a campaigner. She is tough as nails and as unrelenting as a bulldog - two qualities I want in a president. Plus, I have no doubt she is the most intelligent of all the primary challengers, from both parties. I ended up voting for Obama (even though I only get half a vote - thanks Democrats), but would have been perfectly happy with Clinton.

I hope Obama appoints her to the Supreme Court. She has the talent and temperament for the job.

Sorry, I didn't see the original question.

I teach in an International Baccalaureate high school. The main courses I teach are Advanced Placement European history and the Theory of Knowledge, which is a epistemological course that examines how we know what we know. I've also taught AP U.S. history, A.P. world history, philosophy, and government.

Very nice! I love history myself. Its going to be interesting on how History reviews this election season.

As to the previous discussion concerning Hillary Clinton as Obama's VP, I don't think either of them want that. I started out at the beginning of the primary a little dismayed Hillary was running. I don't like the oligarch implications of passing the presidency between two families and was concern about the distractions the Big Dog would bring to the White House.

You are not the only one my friend.

However, I have become very impressed with Clinton as a campaigner. She is tough as nails and as unrelenting as a bulldog - two qualities I want in a president. Plus, I have no doubt she is the most intelligent of all the primary challengers, from both parties. I ended up voting for Obama (even though I only get half a vote - thanks Democrats), but would have been perfectly happy with Clinton.

Most dems are.

I hope Obama appoints her to the Supreme Court. She has the talent and temperament for the job.

Maybe but if it does occur, it'll be in Obama's second term provided he wins this term first. The last thing he wants to do is appoint her to the Supreme Court in an election year. That will not bode well.

Its called curiosity? Maybe you have heard that term before?

Spare me your condescending bullshit Corny.

If there were a way to separate the Fed from appointments, that would be a good idea.

Both parties have, over time, fucked with the Fed in ways that aren't good.

There are winners and losers every time the FED makes a decision to raise or lower interest rates.
Monetary policy is complicated, but not really up for interpretation. If the Fed does the right thing, the people who lose people only do so in the short run. That's why the Fed can't make analyses on the particular impact of its policies on particular groups within society - it has to make decisions based on the long-term health of the economy.

The idea that the U.S. need a central bank is not without controversy and is an issue that goes back to the early 19th century.
Yeah, but when political science tries to talk about questions of economics, it generally falls flat on its face. The controversy may exist as far as constitutional law is concerned, but other than that things are clear: The Fed is a superior solution to there not being a Fed. Its existence does not allow governments to print money in a way that wasn't possible under gold- or silver currencies. The 60s and 70s were a learning experience and the ultimate problems were caused moreso by the politicisation of the Fed and putting it to work alongside fiscal policy than its existence as such. And the fact that prices tend to edge higher over time today while they didn't so much in the 18th and 19th centuries is really a measurement error: it is difficult to make precise distinctions between the goods bought in a particular basket in 1970 and today. But technological advances have meant that a car today can provide a much greater benefit than a car back then: some steady low rate of inflation simply reflects this improvement in the goods and services we buy.

Throughout its history there have been politically motivate expansions and tightening of the monetary supply, especially in the 1970s and 1980s.
I'm not disagreeing with you, but I'd like to know whether you can think of any details.

It is interesting that the greatest advocates of free enterprise capitalism are often the greatest supporters of this secretive body, the FED, which artificially manipulates interest rates and money supply.
Some of them do, some of them don't. The difference is in why they support free enterprise capitalism.

And the Fed is not secretive. They take a great deal of care and effort in explaining their decisions these days, because researchers have figured out that this sort of thing matters. Other central banks, such as the RBA here in Australia, go even further in explaining their decisions.

However, I do maintain that its decisions are political and all too secretive for my taste.
http://www.federalreserve.gov/boarddocs/hh/2008/february/fullreport.htm

What is secretive about this?

Those who maintain the FED is above politics, in my opinion, are those who agree with the FED's political philosophy.
What is the Fed's political philosophy?

As far as the actual discussion is concerned, the Fed has always been political. Economic philosophy has always been one of the major differences between the two parties, and having people who agree with your economic philosophy in charge of the economic policy of the entire nation strengthens your party's political power.
Is there any particular impact you can illustrate of the party who chose the head of the FOMC on the way the Fed acts?

I prefer to think of it as the financial Supreme Court. Where, on the Supreme Court, the parties like to have like-minded judges on the bench to further their social philosophy, on the Fed board they like to have like-minded governors at the table to further their economic philosophy.
How would they do that? It's obvious that the Supreme Court directly implements certain philosophical ideas in its decisions.

But the Fed is a mechanical body (unlike fiscal policy and the ability to draft economic legislation). It has a few tools it can manipulate to create outcomes that are ultimately set by legislation and the adherence to is checked by the regular hearings in Congress. Its role was expanded during the current crisis and it will now integrate more regulatory functions to come with these lender-of-last-resort powers. It's all done quite transparently, but done strictly with academic research to support it and by an entire panel of people who are first and foremost experts in a field they care about.

So can you give me an example of what it would look like if the Fed were to further its governor's economic philosophy?

As far as whether what the Democrats are doing is damaging, I think it's incredibly naive to believe that they are looking any further than the next election cycle. They are looking for an opportunity to get their guys in the Fed, and with the real possibility of a Democratic Congress and White House, delaying is their best bet for doing that.
That doesn't mean it isn't damaging. As I said, the Fed is a mechanical body. What it does and how it does it isn't up for debate or interpretation. It doesn't matter whether you're an anarcho-communist or a Chicago-school economist: within the band set by federal legislation, it does what our current knowledge suggests is the best way to achieve the targets set by that legislation.

He's also destroyed any sort of confidence in the ability of those he nominates.
Like Ben Bernanke?

I fully support the Democrats doing anything and everything in their power to obstruct the Republicans at every pass. Whether it's what's best or not, turnabout is fair play.
But you do realise that we're entering one of the most difficult phases of economic management worldwide since WWII, right? I understand the political reasons the Senate has, but ultimately if they push it too far what we'll get is something that this whole subprime bust and oil price shock looks positively benign. And that doesn't help poor people any more than rich people (in fact, it'll probably hit them a lot harder).

But you do realise that we're entering one of the most difficult phases of economic management worldwide since WWII, right? I understand the political reasons the Senate has, but ultimately if they push it too far what we'll get is something that this whole subprime bust and oil price shock looks positively benign. And that doesn't help poor people any more than rich people (in fact, it'll probably hit them a lot harder).

This is what worries me most.

How the hell is that relevant to the discussion in any way?

As far as the actual discussion is concerned, the Fed has always been political. Economic philosophy has always been one of the major differences between the two parties, and having people who agree with your economic philosophy in charge of the economic policy of the entire nation strengthens your party's political power. I prefer to think of it as the financial Supreme Court. Where, on the Supreme Court, the parties like to have like-minded judges on the bench to further their social philosophy, on the Fed board they like to have like-minded governors at the table to further their economic philosophy.

As far as whether what the Democrats are doing is damaging, I think it's incredibly naive to believe that they are looking any further than the next election cycle. They are looking for an opportunity to get their guys in the Fed, and with the real possibility of a Democratic Congress and White House, delaying is their best bet for doing that.

Frankly, I think that Bush has destroyed any sort of goodwill he could expect from the Democrats over the past eight years. He's also destroyed any sort of confidence in the ability of those he nominates. To expect the Democrats to not play political hardball now after it's all the Republicans have done for 8 years is stupid. I fully support the Democrats doing anything and everything in their power to obstruct the Republicans at every pass. Whether it's what's best or not, turnabout is fair play.

Yah, but the fed is actually tied to it's duel mandate, so it can't actually promote any particular economic philosophy. Of course, control of monetary policy may be used to influence elections. But that is a matter of pure partisanship, and not really one of ideology. And in any event, monetary policy won't keep you in government forever, just ask the conservative party in the UK.

More interesting to this whole debate is that should monetary policy be independent anyway. (Which I think is what NL was actually looking for in the OP). Ken Clarke raised a few good arguments against independence back in 97. I'm undecided myself. But only to the extent that I don't think the central bank has that much control anyway.

Its role was expanded during the current crisis and it will now integrate more regulatory functions to come with these lender-of-last-resort powers. It's all done quite transparently, but done strictly with academic research to support it and by an entire panel of people who are first and foremost experts in a field they care about.


Ah, well the expanded role wasn't really that transparent. More rubber-stamped. There hasn't really been any debate about it has there?

Also, I'm surprised that you hold Bendover in such esteem. He's clearly just a useful idiot.

The days of the GOP running the never-ending election and using every dirty trick in the book, while expecting the Democrats to play by a separate set of rules, are over.

We've seen what happens when the Democratic nominee tries to take the high road. Swiftboating. The Republican philosophy of democratic government is based upon the business model. You own 50% of the stock plus one and you have absolute control of the company. They have made no attempt to reach across the isle and have taken every opportunity to paint their opposition as disloyal and anti-American.

Does John McCain really believe a veto proof Democratic House and Senate will allow him to implement any of his ideas?

Turnabout is fair play.

The days of the GOP running the never-ending election and using every dirty trick in the book, while expecting the Democrats to play by a separate set of rules, are over.

We've seen what happens when the Democratic nominee tries to take the high road. Swiftboating. The Republican philosophy of democratic government is based upon the business model. You own 50% of the stock plus one and you have absolute control of the company. They have made no attempt to reach across the isle and have taken every opportunity to paint their opposition as disloyal and anti-American.

Does John McCain really believe a veto proof Democratic House and Senate will allow him to implement any of his ideas?

Turnabout is fair play.

That's some good stuff. Full of moral fiber, almost chewy in fact, but not really anything to do with the central bank.

That's some good stuff. Full of moral fiber, almost chewy in fact, but not really anything to do with the central bank.
Neither did the side debate about whether it is better to vote the person or the party, however...

The OP was critical of the Democrats refusing to nominate Bush appointees to the central bank for political reasons. This is only the Democrats acting as the Republicans have for years, starting with the Clinton administration and continuing to the current obstructionist Republican senators.

Turn about is fair play.

More interesting to this whole debate is that should monetary policy be independent anyway. (Which I think is what NL was actually looking for in the OP). Ken Clarke raised a few good arguments against independence back in 97. I'm undecided myself. But only to the extent that I don't think the central bank has that much control anyway.
What were his arguments? All I could find is "I am awesome at setting interest rates and letting someone else do it is stupid (http://conservativehome.blogs.com/toryleadership/2005/09/ken_clarkes_utu.html)".

Ah, well the expanded role wasn't really that transparent. More rubber-stamped. There hasn't really been any debate about it has there?
I'm sure there was a lot of debate within the FOMC, obviously. And, after the fact it must be said, there was a lot of explaining before various committees too.

Anyways, I think that had to do with the fact that there was no time - something had to be done really quickly. And ultimately, there are few who can really come up with a better idea even now. Selling off Bear Stearns kept the lid on the credit default swap market, which is a place so huge and badly understood that we'd probably be better off not finding out what can go wrong in it.

Also, I'm surprised that you hold Bendover in such esteem. He's clearly just a useful idiot.
For whom?

Anyways, I've known about him from before he was at the Fed, when he was still an academic. He wrote one of my textbooks, for example. He was precisely what they teach you at university about monetary policy: straightforward, hands-off and target-orientated. He wanted to run the Fed according to economic fundamentals.

And then all this stuff started happening and he had to remember another part of his academic past: all his research into the Great Depression. And he pulled out all the stops, initiated all sorts of new programs and innovative actions and has managed to hold the financial industry together so far. It was that really fast learning and the switch from pure theory to ugly practice that I think is admirable.

He'll be a much better academic for it too, and I can't wait until he produces some more papers and maybe some memoirs.

Turnabout is fair play.
But there has to be some sort of reason for it. I don't mind the idea of the Senate blocking a nominee in principle. Obviously, doing so is part of the political process in the American system.

But this is a particularly pointless issue on which to prove that they still have some balls left. It's a dangerous thing to do, and they're meddling in something they don't even begin to understand.

And for what? I still haven't had a single response on what is wrong with the actual nominees in question or any evidence that there is a difference between the behaviours of Republican and Democratic nominees.

Neither did the side debate about whether it is better to vote the person or the party, however...

The OP was critical of the Democrats refusing to nominate Bush appointees to the central bank for political reasons. This is only the Democrats acting as the Republicans have for years, starting with the Clinton administration and continuing to the current obstructionist Republican senators.

Turn about is fair play.

Yah, but if you read what NL is actually saying - and I am not trying to put words in his mouth - it's not really an issue of political ideology.


1. The "Developed" economies are facing an unprecedented financial crisis.

2. The best way to ameliorate said crisis is through quick and decisive central bank action.

3. To act quickly and decisively, the central bank needs the full support of government.

4. Central banking is largely mechanistic anyway (in theory!), so there really is no room for much political maneuvering in any case. So politics should be irrelevant.

5. But undermining the central bank to 'score' a few points, which are irrelevant anyway (see 4.) is a potentially disastrous way to go. (See 1.)

I don't actually agree with him, 'cos I think we are fucked anyway. But he does have a point.

What were his arguments? All I could find is "I am awesome at setting interest rates and letting someone else do it is stupid (http://conservativehome.blogs.com/toryleadership/2005/09/ken_clarkes_utu.html)".

Well, as I remember his point was that monetary policy shouldn't be divorced from the popular vote. In other words, it's undemocratic. Probably more nuanced than that, but there is the nitty gritty. I mean, let's face it, inflation targets aside, central banks are always going to be pressured to promote short term growth, so you might as well put the blame on the populace where it is deserved.


I'm sure there was a lot of debate within the FOMC, obviously. And, after the fact it must be said, there was a lot of explaining before various committees too.

Anyways, I think that had to do with the fact that there was no time - something had to be done really quickly. And ultimately, there are few who can really come up with a better idea even now. Selling off Bear Stearns kept the lid on the credit default swap market, which is a place so huge and badly understood that we'd probably be better off not finding out what can go wrong in it.

Yah, but that basically means that Bear got away with writing bad contracts. And people got away with taking them. It would be fine if it was all speculative money, but it effected everyone owing to bogus ratings. And really, it's not capitalism if people aren't allowed to fail. Moreover, everyone understands the CDS market. Most of the counter parties can't pay. All Bendover did was place an implicit guarantee that he would 'sort it'. Which is fair enough, but given the magnitude of the problem, you'd think it should at least have a full debate in congress.



For whom?



Jamie Dimon. And I'll be fair, he is an excellent technician. Nevertheless, he was part of the run up to the 'the problem' (and the problem is not going away!) so forgive me if I am skeptical of his ability.




Anyways, I've known about him from before he was at the Fed, when he was still an academic. He wrote one of my textbooks, for example. He was precisely what they teach you at university about monetary policy: straightforward, hands-off and target-orientated. He wanted to run the Fed according to economic fundamentals.

And then all this stuff started happening and he had to remember another part of his academic past: all his research into the Great Depression. And he pulled out all the stops, initiated all sorts of new programs and innovative actions and has managed to hold the financial industry together so far. It was that really fast learning and the switch from pure theory to ugly practice that I think is admirable.

He'll be a much better academic for it too, and I can't wait until he produces some more papers and maybe some memoirs.

Well, look he's been on the board since 2002, so he owns it. And the new programs are just awful. Frankly the alphabet soup he created to solve 'the problem' has forced gambling money into commodities. Hence the fact that he has lost control of the bond market.

Trust me on this. Ten years from now he'll be a pariah.

I mean, let's face it, inflation targets aside, central banks are always going to be pressured to promote short term growth, so you might as well put the blame on the populace where it is deserved.
You could make a similar argument for courts. But letting the electorate decide who gets what punishment for what crime for each case is likely to lead to bad outcomes. There's not a whole lot of good in a decision being democratic if it just causes a lot of damage.

Yah, but that basically means that Bear got away with writing bad contracts. And people got away with taking them. It would be fine if it was all speculative money, but it effected everyone owing to bogus ratings. And really, it's not capitalism if people aren't allowed to fail.
Yeah, that's what they said in the Great Depression. And that's what Mervin King said up until there were lines several blocks long outside Northern Rock branches.

Ultimately Bear didn't get away with anything. Its owners and its employees paid a significant price for their mistakes, and the premium that was in the end covered by the taxpayer was to avoid a wider collapse. You can argue that it wasn't worth it, but I don't think it would be a very strong point to make.

Moreover, everyone understands the CDS market. Most of the counter parties can't pay. All Bendover did was place an implicit guarantee that he would 'sort it'. Which is fair enough, but given the magnitude of the problem, you'd think it should at least have a full debate in congress.
The basic principle behind CDS trades are pretty clear, but who made them with whom, how much everyone is exposed etc etc is quite unknown. Risk managers are having a hell of a time trying to sort through it, and considering that it's worth in the dozens or even hundreds of trillions based on a system no more stable than LTCM was, I don't think we understand it in the sense that we can estimate the consequences a hick-up there would have.

So the hick-up was prevented, sort of. The question is now whether the regulatory reform can move on and try and sort out what's going on behind the scenes there. A congressional debate, and you know this as well as I do, would have produced nothing. By the time they had decided anything (probably in combination with an equal-value stressed mortgage borrower bail-out plan) Wall Street would have been in ruins.

Jamie Dimon. And I'll be fair, he is an excellent technician. Nevertheless, he was part of the run up to the 'the problem' (and the problem is not going away!) so forgive me if I am skeptical of his ability.
Jamie Dimon played the cards he was given as well as I would expect the boss of an investment bank to. Nobody was able and willing to buy Bear but him, and everybody knew it. That is also capitalism, and nobody would have been served by the Fed not pushing through this deal it had initiated. JPMorgan didn't have to buy Bear that day, and even today it's not clear whether it was a good decision.

As for the problem...there is evidence (http://www.economist.com/finance/PrinterFriendly.cfm?story_id=11554700) that it's developing into other things, but ultimately there still is value in these securities. It's not gonna be ignored indefinitely, and once US housing markets look like they're getting better these securities will come back too. It's not a quick process, but no one really expected it to be.

Well, look he's been on the board since 2002, so he owns it.
Granted, he wasn't a big dissenter (http://www.fmcenter.org/atf/cf/%7BDFBB2772-F5C5-4DFE-B310-D82A61944339%7D/BoardVotes_043008.PDF). But then, nobody was. I don't think he's trying to run away from the fact that the policy he thought at the time to be correct, just like everyone else, had unintended consequences.

And the new programs are just awful. Frankly the alphabet soup he created to solve 'the problem' has forced gambling money into commodities.
And one thing leads to another. But what else is he supposed to do? What would you have done instead? The goal was a given: stabilise Wall Street and prevent these big trading houses from collapsing.

The way he did it was innovative in a way you wouldn't expect an academic economist to be, which to me indicates that he was and is learning.

Hence the fact that he has lost control of the bond market.
How do you figure? He can't magically force people to do this or that, and in a crisis situation it's not a given that they'll listen to anything he says. Nor will the Chinese, for that matter.

But that's a problem for monetary policy in general and the Fed in particular. Bernanke just happens to be the guy who is trying to deal with it now, and he could be doing a lot worse than he is.

The days of the GOP running the never-ending election and using every dirty trick in the book, while expecting the Democrats to play by a separate set of rules, are over.

Ooookkkkk!!!!!

We've seen what happens when the Democratic nominee tries to take the high road. Swiftboating. The Republican philosophy of democratic government is based upon the business model. You own 50% of the stock plus one and you have absolute control of the company. They have made no attempt to reach across the isle and have taken every opportunity to paint their opposition as disloyal and anti-American.

Neither have democrats. Both parties bad mouth eachother and smear eachother regardless of who has the high road or not. Moveon.org is a prime example of this.

Does John McCain really believe a veto proof Democratic House and Senate will allow him to implement any of his ideas?

Turnabout is fair play.

I would like to see the Congress controlled by one and the White House controled by the other. And just because something is veto proof does not necessarily mean they'll override the veto.

I would like to see the Congress controlled by one and the White House controled by the other. And just because something is veto proof does not necessarily mean they'll override the veto.
That is not what you said in 2006, when you confidently predicted that the repubs would win the House and Senate.

Just found these: sorta relevant.

http://www.businessspectator.com.au/bs.nsf/Article/Banking-FB2T2?OpenDocument
http://www.businessspectator.com.au/bs.nsf/Article/Banking-FB2ZW?OpenDocument

The question is: given this sort of environment, do you really want the Fed to be understaffed because "turnabout is fair play"?

That is not what you said in 2006, when you confidently predicted that the repubs would win the House and Senate.

And that came months before the election.

I know you weren't specifically Democrat-bashing, but just as a clarification: the Republicans did the same in 2000 when both shoes were on the other feet, so this is probably going to happen whoever the majority party is.

I do agree they're playing politics, and it's dicey territory. This comment (http://blogs.ft.com/maverecon/2008/03/the-case-of-the-missing-federal-reserve-board-members/#comment-929) makes a good point as to why Dodd is unlikely to go ahead with hearings: it will only show up his previous inaction, at a time when he (so it seems to me from across the pond) is one of the most prominent Senate Democrats.

That said, Duke and Klane are both bankers; they're also not trained economists. Are they really the best appointees for the job at a time when the banking industry seems to be in need of serious scrutiny? (I'm just guessing here: I don't actually know Dodd's reasons for not holding hearings and I haven't found any public statements beyond 'allowing a new President to decide' which smacks of bullshit.)

That said, Duke and Klane are both bankers; they're also not trained economists. Are they really the best appointees for the job at a time when the banking industry seems to be in need of serious scrutiny?
Well, some say that the FOMC is a bit economics-heavy right now. The thing with that is that they're likely to look at underlying economic fundamentals when making decisions. Which is fine in theory, but in this case you want someone with enough inside knowledge to make sure the Fed knows what's going on and what makes people tick.

Plus, the recently announced regulatory overhaul gives the Fed a lot more power to make sure Wall Street firms are doing the right thing, so again they'd want as much finance-specific expertise right now as they can get.