Not the Cheeriest Way to Start the Day: Bernanke Part 1 of 2
It’s bad enough to violate Brad DeLong’s first rule (which, I hasten to rationalize, was posted when DeLong himself was disagreeing).
It’s worse when the opposition to Krugman is coming from…the WSJ editorial page. (Or, as Barry Ritholtz correctly describes it, “the comics section.” Just less funny, and more likely to make the two-drink minimum unnecessary.)
This seems to be a direct violation of reality.
But compare the Krugman “endorsement”:
But — and here comes my defense of a Bernanke reappointment — any good alternative for the position would face a bruising fight in the Senate. And choosing a bad alternative would have truly dire consequences for the economy.
Furthermore, policy decisions at the Fed are made by committee vote. And while Mr. Bernanke seems insufficiently concerned about unemployment and too concerned about inflation, many of his colleagues are worse. Replacing him with someone less established, with less ability to sway the internal discussion, could end up strengthening the hands of the inflation hawks and doing even more damage to job creation.
with the WSJ:
No matter how it plays out, Ben Bernanke’s bruising confirmation battle has damaged the U.S. Federal Reserve’s clout and perceived independence.
Mr. Bernanke is more than the Fed’s chief decision maker. Fed officials see him as their brand, a smart, honest and stoic voice best able to defend decisions of the past two years to a skeptical Congress and public. Even if the Senate backs Mr. Bernanke this week, he won’t speak with the same authority, and the Fed will have a harder time casting itself as above partisan politics.
Fortunately for the Fed, the hard call about when to raise interest rates doesn’t need to be made now. Fortunately for Mr. Bernanke, his support inside the Obama administration, and even more so inside the Fed, is solid. But the longer the battle drags on, the more it could interfere with the Fed’s ability to communicate convincingly. And no matter what, the Fed will have less sway as Congress debates whether to rein in its powers.
Oh, wait. That’s a news article. The editorial page throws a few random facts:
Mr. Bernanke continues to deny any Fed monetary culpability for creating the mania. Shortly after the New Year, even with his nomination pending, Mr. Bernanke issued an apologia that was striking for its willingness to play to the Congressional theory of the meltdown by blaming bankers and lax regulators. [note: lax regulators includes the Fed itself.]
with semi-credible analysis:
Others argue that any alternative to Mr. Bernanke could be worse, and that is certainly a risk. Mr. Geithner and White House economic adviser Larry Summers couldn’t be confirmed, even in a Democratic Senate. In the short term if Mr. Bernanke is defeated, Vice Chairman Donald Kohn might run the Open Market Committee, and he shares Mr. Bernanke’s contempt for Fed critics. President Obama could also select San Francisco Fed President Janet Yellen, but she thinks the Fed should be even easier. [Oh, the evil of Ms. Yellen, who immediately replaces Laura D’Andrea Tyson as my pick to run the Fed.]
with sheer insanity:
We agree that the Fed needed to ease money precipitously when the financial markets suffered their heart attack in late 2008, and we praised Mr. Bernanke for that at the time and since. But the issue for the next four years is whether the Fed can extricate itself from its historic interventions before it creates a new round of boom and bust. We already see signs that it has waited too long to move.
Yes, because—along with more obvious indicators—Durable Goods orders have been down two months in a row. Anyone betting January will be up? I fear they have used “real” tea leaves to make their tea.
So the WSJ came to the right conclusion for all the wrong reasons, while Krugman comes to the wrong conclusion for the right reasons.
How did we get here? in the next post.
I really do not like the lesser of two evils argument. I’m sure, in Krugman’s case, in a nation as large as ours, their is someone that could do better. The problem is not the person to choose, the problem is the Obama admin has shown their prefered choice of action to be: take the easy road to self congradulation.
Intrade has Bernake at about 95 percent for getting confirmed.
bY NO MEANS are all the morons in Washington Republicans.
is essentially a criminal. He may not see himself that way. Lot’s of criminals don’t. After all, they need the money so much more than you do.
But anyone who tells Congress “It’s only the law until Congress changes the law” when he is talking about robbing Social Security “because that’s where the money is,” does not need to be managing the banking system of the United States, or advising Congress and the President.
Screw Brad Delong. Why must you always bring that spiteful little mans mendacity to Angry Bear?
“the WSJ editorial page. (Or, as Barry Ritholtz correctly describes it, “the comics section.” Just less funny, and more likely to make the two-drink minimum unnecessary.)”
The irony being anytime I want to read the comics I come here and look for KenHo commenting on financial markets. Something he shows time and time again that he knows nothing about.
I should add, anyone with serious credentials looks at non-defense ex aircraft dubrable goods orders. Why? Try graphing the so called seasonally adjusted series for defense capital goods, defense aircraft, and nondefense aircraft. Revisions to NXA in the table listed were higher. I know that doesn’t fit your ideology.
I keep repeating that you suckers are constantly fooled by randomness. SA factors do next to nothing reducing the month-to-month volatility in the above categories that sane people exclude. Plus I thought you were for driving defense durable goods orders into the ground?
I’ll go on record that non-defense ex aircraft new orders are up 0.4% – 0.8%. The other categories are a crap shoot (I haven’t looked at Boeing orders lately). I’ll also let you know that Friday’s GDP number is going to be below consensus. 3.9% – 4.5%.
Notice how I use ranges to denote error (unlike Climate Scientist and their hockey stick graph where there apparently is no measurement error).
Jay if you would like to submit a guest piece to Dan say “graphing the so called seasonally adjusted series for defense capital goods, defense aircraft, and non-defense aircraft” and then attaching a reasoned argument then I suspect that Dan would seriously consider putting it up, he is always looking for rational data-based conservatives. But frankly this ad-hom “Surely you can’t be serious?! you ideological wankers” style of attack is not convincing anyone of anything but that you are kind of an ass.
So go on record. Put together a piece for publication here or elsewhere that you and others can point to after the fact. But expecting others to remember that you made a substantive point in the midst of a rather nasty drive by comment is a little nutty.
As the kids say: “Say it, don’t spray it”.
And BTW it always amazes me how anonymous commentators implicitly or explicitly claim “serious credentials”. I still remember an incident from the very dawn of blogging when a commenter insisted indignantly “I am the real Anonymous!”, apparently under the illusion that he was the first with to play off the then common habit of taking screen names from classical greek history, philosophy and literature (Josh Trevino/Tacitus and Duncan Black/Atrios only two of hundreds back in the day). Jay if you got anything but your squawk and your habit of swooping down on peoples heads out of the blue show it, cause for now you are just another jay-bird perched on the line.
What a mess of chaotic opinion. Bernanke seems a good choice to a number of very reputable economists. Like Brad DeLong (ignore the silly attack on him above). Krugman’s doubt don’t involve his competence. Rather Krugman is upset that he didn’t see the extent of the coming downturn soon enough and hasn’t really apologize. Neither really impact his ability to fill the post going forward. And the market likes him, and Obama has to pay attention to that.
More interesting, perhaps, is the news that Obama will soon propose concrete measures to help the middle class. Since the crazies shot down health care reform he has probably learned that a good way forward would be clear, simple proposals that the GOP would be very stupid to oppose. Telling people they couldn’t get child care credits enlarged, etc., etc., etc.
Sorry for typos: doubts….that Bernanke didn’t……apologized.
I do think that the reason the GOP could trash the health care reform was because it was a complex package, far too complex for the generality of Americans to understand. This left numerous openings for the opponents to get into it all and distort things, sow doubts and create conflicts, propagate lies, etc., etc. Americans are not on the whole terribly bright. So you have to make things simple for them, as you would for 10 or 11 year olds. “Here is a lollipop; do you want this lollipop? Sure you do.” That’s the way to go.
Re the Wall Street Journal’s saying the Fed has already waited too long to tighten. Well, you see, from the WSJ persepctive, once the superrich bankers were out of the woods and safe, the recession was over. The fact that general unemployment was rising and the poor and middle class still in the sh*t was meaningless. Once the super rich were okay the downturn was over and we need to get back to the status quo ante as fast as possible so the bankers could take up making 40 million dollar bonuses again and buy a few more 30 million dollar homes, etc., etc.
So here’s what I don’t like. The federal reserve has been pumping money into the financial sector for a few decades now, willingly inflating assets, and throughout this time, wages have been stagnant. And wages, we might by now conclude, will remain suppressed for gosh, at least until China per capita income starts coming near a measurable fraction of US incomes, unless we do something like slow trade down, or do what most other nations do – apply VAT taxes, which apply to imports but not to exports.
Yet the fed will undoubtedly raise interest rates as while interest rates remain above 7.5% … perhaps even when they are at or above current levels. And meanwhile, we’ve been throwing $trillions at the financial sector the past year.
Might there not be some way to shift that equation? Perhaps instead of buying truckloads of failed CDOs, do helicopter drops of $100 bills to support aggregate demand while letting failed leveraged investors get swept clean by the invisible hand?
Obama has to be careful of catering “too much” to the poor (blacks, etc.) due to US racism. It is much safer for him to target the “middle class” (whites) for benefits. He has to be realistic and take into account the latent anomosity toward him.
The best way to help low wage earners would be to tax the rich and enlarge programs that confer benefits on low wage earners. You can even consider a negative income tax. People with incomes below a certain threshold will get money FROM the government at tax time instead of having to pay money TO the government. If our glorious capitalists won’t pay a living wage, then tax the hell out of them and let the government pay a wage supplement.
After the Depression the leading industrialists of the time tried to convince Hoover that wages needed to come down. But before the crash wages had fallen to such a low point that 71% of the population was living below poverty. Hoover argued that wages coming down would slow consumption further and with exports falling he was right, but he ultimately became the whipping boy and Bernanke understands what happens to those who stand between what really happened — and how the history books must explain what happened.
The depression was actually caused by too much exploitation that was made possible by the glut of 1921 and the ensuing “yellow dog” campaign. If the Not-so-great-recession is put in as simple of terms, it could be said that it was caused by too little exploitation. But the global complexities have created a dependence on the so-called demograghic dividend and it is not that too little exploitation is occuring, the number of people being exploited has in fact found its proper balance point on the grand scale of supply and demand and it remains in a state of constant oversupply, it is instead though that nations are not sharing these dividends, but it is more than just cheap labor that they are stingy with, they too are restricting their markets to short-term investment flows, and so, Bernanke is in a similar position to that of Hoover’s position. If he explains what really happened he gets the treatment that Hoover did, or he can allow the Fed to be the scapegoat. And what better scapegoat than one that is not quite public, and not quite private.
He will not only keep his job, but historians will give him a respectful place in their little stories, which he deserves, but not for the reasons that will be given by history books.
As someone whose side did not lose in Massachusetts I think that Bernake is doing a good job running the FED. The let’s get Bernake thing seems to be not related to what he’s done but in need of finding a scapegoat. Its a breakdown in discipline.
Election results in Mass – voter turnout in the five largest cities (Boston, Springfield, Lawrence, Fall River, Worcester), from my recall, was in the low 40% range, while statewide it was over 50 and much of the state was over 60.
I don’t have prior election data to compare against, but one might assume that Obama (and Coakley) did little to attract voters enough to get to the polling places in the cities. Exactly what we can conclude from that, I don’t know. Projections might include being baffled why the proposed health reform wouldn’t help cover the low income unemployed. why wall street got $Trillions while few visible jobs were seen on main street.
Bruce: You are going to have to deal with some descriptive statistics as I am waiting for a new computer to have a fully functioning Microsoft Office Suite.
Over the entire series March 93 until present….
The arithmetic mean m/m growth rate for all durable goods is 0.24% compares to 0.28% for durable goods ex defense and aircraft. So I’m not changing long-term trends by excluding these sectors of the economy. Why would you want to exclude these?
The arithemetic mean m/m growth rate for nondefense aircrafts is 20.32% with a standard deviation of 80.40%. The max is 406% (May of this year) and a min of -84% (July 1993).
The arithmetic maen m/m growth rate for defense is 13.12% with a standard dviation of 113.37%. The max is 1,533% (February 2006) and the min is -92.94% (Jan 2006)
Its a breakdown in discipline
Truer words were never spoken…
If you are going to claim intellectual superiority in a debate that involves picking a single monthly economic data series to demontrate the rightness or wrongness of future monetary policy – if you are going to put your intellectual cred on on the line in that sort of silliness – then there is no surprise in seeing you the vere off into claiming the superiority of your one-month forecast range for a narrow set of durable goods to a some group’s long-term plot of environmental temperatures. The two efforts make equal sense. If you want to claim higher intellectual standards, do at least one thing that shows high intellectual standards.
I’m not sure how you being on the not-losing side of anything has a connection to whether Bernanke is the best available choice to run the Fed.
As someone who had coffee today, I think rockers are better than dinner-table chairs. I guess that’s how the game is played, yes?