Joe Doakes from Como Park emails:
All that hype about the wonderful Obama economy turns out to have been . . . hype. It’s not wonderful at all.
The solution chosen by the Federal Reserve – raising interest rates to throw the brakes on rampant inflation – turns out to have been the wrong solution.
Was the wrong solution chosen because the economic numbers were wrong? Because their analysis was wrong? Or because the President who got elected was the wrong person and Lord knows, we can’t allow That Guy to have a robust economy?
Yes, I am that cynical.
Joe Doakes
No action on that bet.
I’d say too cynical, although not for the reasons you expect. TL;DR: Democratic economic policies killed Democratic electoral prospects despite Democratic government propaganda measures.
Can we agree that if the economy had been good we would probably have Clinton II in office now? So the Demonrats had every incentive to run a good economy in electoral terms.
The problem is that the Fed was running as if someone competent was in control of the White House, rather than a leftist demagogue. If someone like a Reagan had been in the White House, the policies of lower regulation, lower taxes, and cheap money would have caused a burst of economic activity and it would have been necessary to keep inflation in check with higher rates.
But we had no Reagan, we had the Obama polices of heavier regulation, arbitrary political seizure of property (GM bankruptcy anyone?), and general interference with the economy. To hide that fact, Obumbler and his minions couldn’t use the traditional measures and wound up changing things like how GDP was defined, unemployment measures that were always “adjusted” higher after their initial announcements, etc. With that bad data, less transparency, and a Fed board that in general feel under Obumbler’s spell, it’s no wonder the Fed had trouble making good decisions.
But In Real Life folks weren’t living in Obama’s Potemkin village and many turned pretty sour on his policies, especially those not along the coast where the artificial re-inflation of the housing bubble has produced so many paper profits.
The essential problem for Democrats is that their economic policies produce poor results, yet they can’t give them up. In this case, Obama’s personal popularity (which, frankly, I never understood) carried the Democrats through two presidential campaigns, but the unpopularity of the poor performance of their economic policies in tough economic times destroyed them in nearly all other political arenas. The best electoral strategy for them is to let Trump fix the economy so that they can return to power down the road when issues other than the economy might come to the fore.
Good points, Nerdbert, but it strikes me that Yellen is, as an “inflation targeter”, one who is inclined to take liberal promises at face value, and would simultaneously be one who does not figure out that there is a reason that even cheap money is not stimulating borrowing. My company used Yellen’s policies to eliminate high interest debt and get into low interest debt–not a penny more debt, mind you, but eliminate the interest.
Seems to me that they’re fundamental problems are two-fold:
1. They’re publishing inflation numbers that are fundamentally a lie, and
2. They’re believing the numbers.
I follow tons of Austrian – oriented hedge fund guys and they all say the current Boskin Commission CPI is terrible.
Chris Whalen says the real number is more like how people are getting shafted on the price of shelter these days.