Daniel Gross, Still An Idiot.
Can we honestly call this "Part 3 in a series" anymore? (Probably not.) However, our dear friend Daniel Gross over at Slate remains an idiot, evidenced by his most recent piece on Fed Chair nominee Ben Bernanke. Calling into question whether Bernanke is "tough enough on inflation," Gross backs his thesis up only after what appears to be a lame attempt at tongue-in-cheek partisanship, and cites merely the notion that Bernanke was (rightly) afraid of deflation in 2002 and 2003.
When you get right down to it, the "job" of the Federal Reserve is whatever the Federal Reserve says it is -- which, during the Greenspan era, was "ensuring price stability." This involves checking not only pressures on inflation, but pressures on deflation, which can (a) be far more damaging to an economy (see "Japan, 1990") and (b) wreak havoc over a much longer term (see "Japan, 2000"). In '02 and '03, massive federal outlays and tightening credit markets threatened to crowd out consumer spending, which had the potential to tank the U.S. and global economies for a long time. Greenspan and the Fed cut rates, ensuring healthy markets until the threat had more or less passed - and rightly raised them again (now, at their highest level in years, 3.75%) to give future monetary policymakers some breathing room. This, in fact, may be Greenspan's biggest gift to Bernanke as his successor. We'll see.
Finally, criticizing Bernanke for sharing Greenspan's view that the Fed possesses neither the ability nor the repsonsibility to control asset prices, Gross pulls another pied-dans-la bouche. Bernanke is a pragmatist who knows the limits of even the largest central bank. He's no slouch on inflation. Indeed, Bernanke's biggest weakness may be his well-known belief in setting "hard" inflation targets (his current pet number is 2%, FYI), which may compromise some of the breathing room he's been given by Sir Alan.
My prediction: this guy will be good. He'll be villified when the real estate bubble bursts, but (a) it won't be his fault; (b) it won't be Greenspan's fault, either; and (c) Daniel Gross will likely blame both of them anyway.
When you get right down to it, the "job" of the Federal Reserve is whatever the Federal Reserve says it is -- which, during the Greenspan era, was "ensuring price stability." This involves checking not only pressures on inflation, but pressures on deflation, which can (a) be far more damaging to an economy (see "Japan, 1990") and (b) wreak havoc over a much longer term (see "Japan, 2000"). In '02 and '03, massive federal outlays and tightening credit markets threatened to crowd out consumer spending, which had the potential to tank the U.S. and global economies for a long time. Greenspan and the Fed cut rates, ensuring healthy markets until the threat had more or less passed - and rightly raised them again (now, at their highest level in years, 3.75%) to give future monetary policymakers some breathing room. This, in fact, may be Greenspan's biggest gift to Bernanke as his successor. We'll see.
Finally, criticizing Bernanke for sharing Greenspan's view that the Fed possesses neither the ability nor the repsonsibility to control asset prices, Gross pulls another pied-dans-la bouche. Bernanke is a pragmatist who knows the limits of even the largest central bank. He's no slouch on inflation. Indeed, Bernanke's biggest weakness may be his well-known belief in setting "hard" inflation targets (his current pet number is 2%, FYI), which may compromise some of the breathing room he's been given by Sir Alan.
My prediction: this guy will be good. He'll be villified when the real estate bubble bursts, but (a) it won't be his fault; (b) it won't be Greenspan's fault, either; and (c) Daniel Gross will likely blame both of them anyway.
Presented for your delectation by the Hired Hand at 1:05 PM
Comments on "Daniel Gross, Still An Idiot."
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Gentleman Farmer said ... (3:21 PM) :
post a commentMuch as we despise all things French, I feel constrained to observe that "pied-dans-la bouche " is an Anglicism.
While the English and Americans may but their feet in their mouths, the Frenchman has more properly mettre les pieds dans le plat.