The End of Monetary Policy

I apologize in advance since this post isn't as tight as I'd like it but I've been dwelling on three things this evening, the President-elect's news conference on Monday in Chicago, the expected fed funds rate cut on Tuesday and some comments by Paul Krugman in Germany's Der Spiegel. So with this introduction . . .

Another reduction to the Federal Reserve's funds rate, the interest banks charge each other on overnight loans, is all but certain to be announced tomorrow. The Fed's funds rate is already near historical lows at 1.0% but most economists expect the Federal Reserve to cut the rate in half to 0.5%. Some economists are even pushing for a more aggressive three-quarters of a point reduction. Their argument is that such a cut might cushion some of the economic fallout and prevent a tailspin. Well, I think that's already too late. I think I am sanguine when I say we'll be lucky to lose only 750,000 jobs next year.

My sense is that a fed rate cut is spit in the ocean. Not that I am against the rate cut, it should be cut, but rather that the cut in and of itself isn't likely to spur the American economy much less the global economy. The bitter truth is that we have reached the end of monetary policy as an instrument. To spur the economy, we really waiting on President Obama's fiscal stimulus. Only a Keynesian style investment program is likely to soften the edges of the economic downturn.

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Rejecting Equivalence

We've seen it for years, the false equivalence struck by the media Villagers when discussing something negative done by Republicans or even a criticism of Republicans, it always has to have a corrollary on the left, otherwise they risk being called out as "liberal media" or showing "bias." It's an absurd notion, one that inherently implies that there actually is no objective truth, but rather that there are always two valid sides to everything. "Republican strategists say the sky is green..."

This year we've seen it reach new heights, as media figures and right-wing pundits confronted with criticisms of the McCain campaign, have tried, comically, to insist that "both sides are doing it," whatever "it" is. For instance, at the height of Sarah Palin's media blackout, it was a pathetic sight to see Lou Dobbs bully Candy Crowley into saying that both campaigns are equally inaccessible. Right. And then just this past Sunday on This Week, classic Villager Cokie Roberts, in response to an undeniable charge about the right-wing's batshit crazy reaction to the Clintons in the 90s, insisted that both sides are the same in their disdain for the president of the other party:

Krugman: This is not just about McCain and what he did. The fact of the matter is, for a long time we have had a substantial fraction of the Republican base that just does not regard the idea of Democrats governing as legitimate. Remember the Clinton years. It was craziness, right? They were murderers, they were drug smugglers, and the imminent prospect of what looks like a big Democratic victory would drive a lot of these people crazy even if Sarah Palin wasn't saying these inflammatory things. It's going to be very ugly after the election.

Roberts: On both sides that's true. I think that you've also had a huge number of Democrats who think that the Republicans are illegitimate, and that was particularly true after the 2000 election, and to some degree after 2004. And so you really do have at the core of each party people who are not ready to accept the verdict of the election.

Krugman: I reject the equivalence.

Krugman could have been more forceful with his pushback, of course, although the format and the quick hit forward movement of the This Week panel actually makes it difficult, but even that little coda Krugman added to Roberts's absurd statement was really important.  These people NEVER get challenged in their little protective bubbles and it was nice to see Krugman take Cokie on, even though she completely ignored it, as the Villagers do. You see, the inanity of many of these professional pundits requires that there's no follow up or challenge -- they can just say stupid shit and it hangs out there, even becoming conventional wisdom. It's a lot more difficult for them to do that with the ascendancy of the blogosphere and the progressive media infrastructure, of which Paul Krugman is an essential component.

As is Rachel Maddow who had a "rejecting equivalence" moment of her own on her show yesterday when David Frum accused her of essentially poisoning the political discourse to the same degree that the pitchfork mobs at the McCain and Palin rallies have. Umm, really? Watch Rachel put Frum in his place and watch how clearly unaccustomed Frum is to getting challenged by anyone in the media:

MADDOW:...We decry them on all sides, people left right and center complain about the tone in politics but I sense also that there's a devotion to coming up with a false equivalence, that bringing up John McCain's experience in the Keating 5 for example is somehow equivalent to calling Barack Obama somebody who "pals around with terrorists," you saying that my tone on this show, sarcasm, being playful, the way I approach issues, is somehow equivalent to the McCain campaign saying they don't want to talk about the economy. I don't see those things as equivalent. [...]

FRUM: You guys have a symbiotic relationship of negativity.

MADDOW: I just don't think that what we do on this show is at all equivalent to people yelling "Kill him" from the audience of political rallies but I appreciate that rhetorically you're trying to make the point of equivalence, I just couldn't disagree with you more strongly...

There's something admirable about the fact that Frum would even go on the show and something fairly audacious about a former Bush speech writer calling for a more adult intelligent discourse (cognitive dissonance, anyone?) But this exchange couldn't point out more starkly just how important the evolution of the media landscape over the past few years has been. Progressive voices, once relegated to a lone chair on a panel drowned out by media enabled conservative voices, are no longer shouting from the wilderness.

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Shrill Wins!

Paul Krugman, Princeton econ professor and NYT columnist, wins a nobel:

Mr. Krugman received the award for his work on international trade and economic geography. In particular, the prize committee lauded his work for "having shown the effects of economies of scale on trade patterns and on the location of economic activity." He has developed models that explain observed patterns of trade between countries, as well as what goods are produced where and why. Traditional trade theory assumes that countries are different and will exchange different kinds of goods with each other; Mr. Krugman's theories have explained why worldwide trade is dominated by a few countries that are similar to each other, and why some countries might import the same kinds of goods that it exports.
...
"For economists, this is a validation but not news. We know what each other have been up to," Mr. Krugman said. "For readers of the column, maybe they will read a little more carefully when I'm being economistic, or maybe have a little more tolerance when I'm being boring."

Besides his academic work, Krugman also deserves praise and thanks for his analysis of more immediate economic debates. From the fight to save Social Security to his analysis of candidates' health care plans to his foresight into our current crisis, trusting Krugman's perspective has always proved a good bet.

Congratulations to Professor Krugman.

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Paul Krugman wins Nobel Prize

I think this is a well deserved prize for someone who has been giving us the warning signals for many years. As a columnist in NYTimes, Krugman has been a fearless and very balanced commentator taking on both the right and sometimes the left. He has been attacked from both sides but in most cases his analysis has been spot on.

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McCain: Do Unto Health Care As We Have Done Unto Banks

This is a really important story, not just because it shows how out of touch John McCain is and how irresponsible a McCain presidency really would be, but also because it highlights the importance of the blogosphere in the Obama campaign rapid response machinery.

Remember back in the olden days -- back in 2004 -- when we would hear from one of our most reliably progressive voices, Paul Krugman, just twice a week, only when his New York Times column was published on Mondays and Fridays? That was before Krugman launched his brilliant blog, The Conscience of a Liberal, which he debuted in September 2005 with these prescient words:

What can you do on the Web that you can't do in print? A lot. There's still no substitute for traditional newspapers, but adding online material can really enhance the overall product.

One thing that you get from the web that you don't get in print is, of course, immediacy. Before his blog, the last word Krugman would have had this week would have been yesterday's column on the government bailout; but thanks to his blog, last night at 7:24pm, Krugman posted this doozy about something John McCain had written in the latest issue of Contingencies Magazine (pdf of the full article HERE):

Here's what McCain has to say about the wonders of market-based health reform:

Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation.

So McCain, who now poses as the scourge of Wall Street, was praising financial deregulation like 10 seconds ago -- and promising that if we marketize health care, it will perform as well as the financial industry!

Why does this matter? Because this afternoon, the Obama campaign held an impromptu conference call for press with Senators Bob Casey (D-PA) and Sherrod Brown (D-OH) to highlight McCain's highly irresponsible health care prescription, which they acknowledged was broken by Krugman on his blog. The purpose of the call was to put McCain's words in a larger context, connecting them to McCain's statement that the fundamentals of the economy are strong and his continued desire to privatize Social Security, all proof that McCain is out of touch and that, as Sherrod Brown put it.

The American people don't trust John McCain with their pensions and they don't trust him with their healthcare.

This wasn't the last word the Obama campaign had on the subject. At an appearance in Florida, Barack worked what McCain wrote in Contingencies into his stump speech:

There's only one candidate in this race who called himself, and I quote, "fundamentally a de-regulator" when it was reckless de-regulation and lack of oversight that's a big part of the problem on Wall St. right now. And here's the really scary part. Now, the great de-regulator wants to turn his attention to healthcare. He wrote in the current issue of a magazine, and I quote: "Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation." That's right, he said he wants to do for healthcare what Washington did for banking. Folks, let me tell you, we don't want to go there. That's a risk America can't afford.

All thanks to a Friday night post on Krugman's blog. The vast left-wing conspiracy at work, ladies and gentlemen. We're not in 2004 anymore.

Update [2008-9-20 19:49:12 by Todd Beeton]:Thanks to TomP for video of one of Barack's speeches today, in which Barack rips McCain for his Contingencies article.

No doubt it will continue to be standard in every one of his stump speeches moving forward.

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