This is my first post in almost a week. I’ve written several pieces that I had intended to post when I started them, but they are just different takes of the same theme: more about Fed Presidents saying stupid stuff and politicians from both parties doing stupid stuff. I think by now my readers get that the Fed is going full steam ahead on doing stupid stuff and most politicians are just plain stupid so I declined to post them. There is only so much one person can say about the political economic calamity that has befallen the Western World and the woeful inability of the political institutions to deal with it until it just isn’t impressive anymore. I haven’t any new or original ideas to share at the moment because I’ve spent a large amount of time on this particular problem and have said what feels like all I have to say about it for the time being. I have been seriously neglecting my history and need to get back to it.
I started this blog to try to make a difference. I don’t know if any of it has been useful to that end, but at least I can hope. The last few years of paying attention to various political and monetary events have been quite an educational experience for me. I know more about the Fed and macroeconomics than I ever thought I would be interested in learning. I’ve also lost a bit of naiveté that I sometimes wish I could get back because some problems are so big, even if they are simple, having the knowledge of them is only the first step and being able to have an impact on them is incredibly difficult. I am not giving up, but I have been temporarily worn thin from trying.
For a time I saw some historical parallels with the current situation; like the last time there was this degree of dysfunction in our political system was back in 1850s across a sectional divide. This time it is across an ideological divide with little discernible middle ground. And while those times were physically violent and these have not yet gotten to that particular boiling point, I feel an appreciation for how citizens of the 1850s might have felt and President Obama reminds me a little of Andrew Johnson.
Andrew Johnson, I believe, lived in an ideological bubble. While I am sure he was well intentioned, he had no real grasp of the political situation he inherited and forgot to put the horse before the cart by trying to impose his own vision of what a rebuilt America would look like instead of starting with the basic first step of healing the wounds of a civil war torn nation. He was right in trying to slow the Republicans down, but in so doing, he went too far toward the Southern point of view, and since the Southerners already loathed him for being a Union man and weren’t about to change their point of view, he ended up angering nearly everyone. Having no friends and very few supporters, he got fed to wolves, was impeached and disgraced while the country was nearly drawn back into armed conflict.
From my point of view, 2009 was not the time for Democrats to implement every social program and regulatory regime they had been dreaming of since the mid-20th century. They took a bad economic situation and turned it into a nasty political fight on top, forgetting that they were governing for everyone, not just the far left; and there were already plenty of people who were scared and upset about the collapse of the financial system and other economic problems of epic proportions.
I am aware that some of the economists I follow believe that the Fed can be effective in that situation, but I have some doubt. Perhaps if the Fed had corrected its mistakes early on, it would have worked well enough to get some recovery, more than we’ve gotten but not great. But I think the political events might now weigh heavily on that outcome because what the markets and thus ordinary people believe matters. If they believe that Obama and his Democrats are trying to destroy capitalism rather than rebuild, they might as well be. None of them have done anything to assuage those fears even after dramatic and historic losses in the 2010 elections. They’ve only doubled down on their policies and beliefs while leaving the economy in a tailspin and the expectations channel isn’t only financial in nature. Markets react to political events as well as financial ones, and the entire Obama Presidency has been like a dark cloud of doubt hanging over nearly everything. I would like to give Obama the benefit of the doubt for being stupid, but with nearly all of the BoG being his appointees, at best, he only cares about being right instead of caring whether he’s wrong and what it means to average people.
I’ve been very harsh on Mr. Bernanke. In some ways he certainly deserves it and he should resign, but with all the water under the bridge, I am somewhat in agreement with him. I’m sure he’s been hearing things I haven’t heard, like the kind of stuff the movers and shakers are saying, or at least it gets back to him. He tries to make the decision-making process look technical, but I don’t believe it ever has been conducted in a bubble. He hasn’t been doing what he wants or even what the Committee as whole wants. They don’t matter. Either way, it is a disgrace that he has been quite disingenuous throughout the entire ordeal.
And so with this last summation of what I think the problems really are, I will start talking about some other things after the holiday. For my readers in the U.S., have a fun and safe Labor Day.