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Politics : Liberalism: Do You Agree We've Had Enough of It? -- Ignore unavailable to you. Want to Upgrade?

To: FJB who wrote (71190)	8/27/2009 7:23:29 AM
From: lorne	Read Replies (1) \| Respond to of 224724

...."Bernanke spelled out the policy bluntly in his 2002 speech. "The US Government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost," he said."... The troubling side of Ben Bernanke He has saved the world but he helped cause the crisis in the first place, writes Ambrose Evans-Pritchard. By Ambrose Evans-Pritchard 25 Aug 2009 telegraph.co.uk Ben Bernanke has proved himself a heroic fire-fighter, saving world from a calamitous spiral into debt deflation by showering markets with liquidity. A good thing too. He helped cause the raging fire of 2007-2009 in the first place. As a Princeton professor and then a junior Federal Reserve governor, Mr Bernanke was the intellectual architect of his predecessor Alan Greenspan's policies that so distorted global finance and pushed debt to historic extremes. Related Articles 'Bold' Bernanke checks into Fed for four more years Ex-Fed chair Paul Volcker attacks money market funds Indeed, he was picked to join the Fed because he provided academic cover for Greenspan's view that asset bubbles do not matter. He blamed credit excesses on Asia's "saving glut", arguing that reserve accumulation by export nations suppressed global bond yields. That let the Fed off the hook for its own role in driving the US savings rate to zero – and consumption through the roof – by holding interest rates below "Wicksell's Natural Rate". It is this twin-sided nature of Bernanke that raises nagging questions about his reappointment as chairman of the Fed. He has admitted errors: it was wrong to think the sub-prime crisis could be contained. But he has yet to acknowledge that his economic ideology is deeply flawed. Bill White, former chief economist at the Bank for International Settlements, said the error of the central banking fraternity over past 20 years has been to cut real interest rates ever lower to keep the game going. This has lured the world into a debt trap. The effect is to keep drawing prosperity from the future – until the future arrives. "It does the job for a while but moves in interest rates have to be ever more violent to achieve the same effect. My worry is that we may have reached the point where the policy ceases to work altogether. "These imbalances come back to haunt you, and that is where the world now is. People have been induced to bring forward purchases by taking on debt and there has been a massive expansion in corporate investment," he said. Economists call this critique "intertemporal misallocation". It is a favourite of the Austrian School. It plays almost no role in the "New Keynesian" thinking of Bernanke. His reflex is to see any fall in demand as an outside shock to be corrected by extra stimulus. What he does not accept is that the adrenal glands of the economic system have been depleted by perpetual credit stimulus, giving the world a form of Addison's Disease. Bernanke made his name studying the "credit channel" causes of depressions, chiefly drawing on the 1930s. He was quick to see the danger when the financial system had its heart attack on August 20, 2007, the day yields on three-month Treasuries collapsed on flight to safety. He dusted off his manual for fighting slumps – his 2002 speech, Deflation: Making Sure It Doesn't Happen Here – and coolly embarked on monetary revolution. Rates were slashed to zero. The Fed stepped into to prop up the banks, commercial paper, mortgage securities, and finally Treasuries. Nothing like this had been tried before. He did so against fierce resistance from Fed hawks. Only a man so convinced of his mission could have pulled it off. Given his calmness under fire, and his grasp of credit mechanics, it makes sense for President Barack Obama to give him a second term. We are not out of danger. The markets might have taken fright at a political appointee. Yet Bernanke's certainty is troubling. The thrust of his academic writings is that the Depression was a "financial event" that could have been avoided if the Fed had flooded the economy with money (by bond purchases) to prevent a banking crash. This theory – half-Friedmanite – has merits. The Fed made horrible mistakes. But it neglects other causes of the slump: industrial over-capacity created by the 1920s bubble, so like today. It also led to the Greenspan doctrine that central banks can let stock market and housing booms run their course, stepping in to "clean up afterwards". Bernanke spelled out the policy bluntly in his 2002 speech. "The US Government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost," he said. The "no cost" flippancy grates now. Washington says the damage will lift the US federal debt by $9 trillion (£5.5 trillion) over the next decade, pushing the total towards 100pc of GDP. In any case, the Fed cannot use this machinery so easily after all. Foreigners own 40pc of US Treasury debt and have a partial veto on the policy. Overt attempts to "monetise" US debt will cause the policy to short-circuit. Investors will dump US bonds. Bernanke's theoretical model is clearly wrong – since he was blind-sided two years ago – and must lead him into fresh error. The risk is that he will mismanage the Fed's "exit strategy" by tightening policy too soon on the false assumption that recovery is secure. He knows this was the Fed blunder of 1936-1937, but also seems to think he has basically licked our Great Recession of 2008-2009. Has he really? As Mark Twain put it: "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."

To: FJB who wrote (71190)	9/1/2009 10:48:05 PM
From: Hope Praytochange	2 Recommendations Read Replies (4) \| Respond to of 224724

The Obama Slide DAVID BROOKS Published: August 31, 2009 Two tides swept over American politics last winter. The first was the Obama tide. Barack Obama came into office with an impressive 70 percent approval rating. The second was the independent tide. Over the first months of this year, the number of people who called themselves either Democrats or Republicans declined, while the number who called themselves independents surged ahead. Obama’s challenge was to push his agenda through a Democratic-controlled government while retaining the affection of the 39 percent of Americans in the middle. The administration hasn’t been able to pull it off. From the stimulus to health care, it has joined itself at the hip to the liberal leadership in Congress. The White House has failed to veto measures, like the pork-laden omnibus spending bill, that would have demonstrated independence and fiscal restraint. By force of circumstances and by design, the president has promoted one policy after another that increases spending and centralizes power in Washington. The result is the Obama slide, the most important feature of the current moment. The number of Americans who trust President Obama to make the right decisions has fallen by roughly 17 percentage points. Obama’s job approval is down to about 50 percent. All presidents fall from their honeymoon highs, but in the history of polling, no newly elected American president has fallen this far this fast. Anxiety is now pervasive. Trust in government rose when Obama took office. It has fallen back to historic lows. Fifty-nine percent of Americans now think the country is headed in the wrong direction. The public’s view of Congress, which ticked upward for a time, has plummeted. Charlie Cook, who knows as much about Congressional elections as anyone in the country, wrote recently that Democratic fortunes have “slipped completely out of control.” He and the experts he surveyed believe there is just as much chance that the Democrats could lose more than 20 House seats in the next elections as less than 20. There are also warning signs in the Senate. A recent poll shows Harry Reid, the majority leader, trailing the Republican Danny Tarkanian, a possible 2010 opponent, by 49 percent to 38 percent. When your majority leader is down to a 38 percent base in his home state, that’s not good. The public has soured on Obama’s policy proposals. Voters often have only a fuzzy sense of what each individual proposal actually does, but more and more have a growing conviction that if the president is proposing it, it must involve big spending, big government and a fundamental departure from the traditional American approach. Driven by this general anxiety, and by specific concerns, public opposition to health care reform is now steady and stable. Independents once solidly supported reform. Now they have swung against it. As the veteran pollster Bill McInturff has pointed out, public attitudes toward Obamacare exactly match public attitudes toward Clintoncare when that reform effort collapsed in 1994. Amazingly, some liberals are now lashing out at Obama because the entire country doesn’t agree with The Huffington Post. Some now argue that the administration should just ignore the ignorant masses and ram health care through using reconciliation, the legislative maneuver that would reduce the need for moderate votes. This would be suicidal. You can’t pass the most important domestic reform in a generation when the majority of voters think you are on the wrong path. To do so would be a sign of unmitigated arrogance. If Obama agrees to use reconciliation, he will permanently affix himself to the liberal wing of his party and permanently alienate independents. He will be president of 35 percent of the country — and good luck getting anything done after that. The second liberal response has been to attack the budget director, Peter Orszag. It was a mistake to put cost control at the center of the health reform sales job, many now argue. The president shouldn’t worry about the deficit. Just pass the spending parts. But fiscal restraint is now the animating issue for moderate Americans. To take the looming $9 trillion in debt and balloon it further would be to enrage a giant part of the electorate. This is a country that has always been suspicious of centralized government. This is a country that has just lived through an economic trauma caused by excessive spending and debt. Most Americans still admire Obama and want him to succeed. But if he doesn’t proceed in a manner consistent with the spirit of the nation and the times, voters will find a way to stop him. The president’s challenge now is to halt the slide. That doesn’t mean giving up his goals. It means he has to align his proposals to the values of the political center: fiscal responsibility, individual choice and decentralized authority. Events have pushed Barack Obama off to the left. Time to rebalance.