Santorum Trifecta

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Well, this was unex­pected. While there was lit­tle doubt that for­mer Sen­a­tor Rick San­to­rum (R-​​PA) would win Mis­souri, and all zero of its eli­gi­ble del­e­gates, Min­nesota looked like a tossup just yes­ter­day. And Col­orado? That was a sure win for for­mer Mass­a­chu­setts Gov­er­nor Mitt Rom­ney just a cou­ple of days ago.

And then…

It was South Car­olina all over again. Or Iowa. A lit­tle of both. Only this time, there were three states at one time. And the role of NotRom­ney was played, once again, by Santorum.

And, for the third time since vot­ing started, Romney’s inevitabil­ity has been called into ques­tion. Yes­ter­day, he wasn’t merely defeated in Min­nesota. He was trounced. He didn’t merely lose to San­to­rum; he lost to Rep­re­sen­ta­tive Ron Paul (R-​​Lake Jack­son, TX)! San­to­rum beat Rom­ney by over twenty-​​five points. Paul beat him by double-​​digits as well.

Min­nesota should be in Romney’s wheel­house. This is the Mid­west we’re talk­ing, here. Sure, Min­nesota is a lit­tle bit of that crazy uncle when it comes to vot­ing, but still…yesterday can be viewed as noth­ing less than a huge defeat for Romney.

There were no real sur­prises regard­ing for­mer House Speaker Newt Gin­grich. He’s plan­ning to hang on until Super Tues­day, when he can pick up a few South­ern states, most notably his home state of Georgia.

So now what? No more vot­ing until the end of the month. But there will be one debate, in Mesa, Ari­zona, on Pres­i­dents Day. And then two pri­mary elec­tions. Rom­ney must win both of them: Ari­zona, and Michi­gan. Ari­zona is polit­i­cally sim­i­lar to Nevada, albeit with a slightly smaller Mor­mon pop­u­la­tion. Michi­gan is his child­hood state, where his father was an auto­mo­bile indus­try exec­u­tive. If he can’t win both of these states, Super Tues­day may well be a com­plete grab bag.

It’s def­i­nitely time to bust out the popcorn.

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  1. rgbact,

    Hav­ing bought a house in the last six months, I can say with cer­tainty that fools are not over­pay­ing for them. If they were, then we wouldn’t have a prob­lem, would we? We’d be back in early 2008. 

    Unless said fool has 20% cash to put down on a home, lenders are lim­it­ing their mort­gages to 95% of the value of (very con­ser­v­a­tive) FHA appraisal fig­ures, with 5% down.

  2. rgbact,

    Infla­tion gen­er­ally comes from mon­e­tary pol­icy or gen­eral mar­ket conditions.

    That par­tic­u­lar dis­tinc­tion isn’t mean­ing­ful in terms of the actions that the Fed­eral Reserve takes.

  3. It’s the met­ric most com­monly used for infla­tion. That said, I’m aware that it has numer­ous lim­i­ta­tions.
    One of them being that the cal­cu­la­tion meth­ods have changed in recent years. The site below claims that cur­rent CPI is about 3% lower that pre­vi­ous year’s sim­ply from new calc meth­ods. With­out them, CPI would be run­ning at 6%+
    http://​www​.shad​ow​stats​.com/

  4. rgbact,
    You may want to look into shadowstats’s expla­na­tion for how they came to 6%. It’s not because the gov­ern­ment changed meth­ods; it’s because they are mak­ing a com­plete apples-​​to-​​oranges comparison.

    While it’s true that the mar­ket bas­ket used for CPI changes over time (as well it should), that par­tic­u­lar site’s method is pretty use­less for cal­cu­lat­ing price infla­tion, which is what most peo­ple think of when they think of “inflation”.

  5. rgbact,
     
    Irre­gard­less of the faults of the CPI, once again, it IS the com­monly used bench­mark at most all lev­els. Grip­ing about the pos­si­ble errors in that bench­mark does NOT AFFECT the dis­cus­sion AT HAND.
     
    Save that com­plaint for another thread.
     
    Thanks

  6. GROG said:

    Max,
    I’ll ask you and Michael again:

    Is it the accu­sa­tion that Ryan has only been crit­i­cal of the Fed’s rate pol­icy and how it affects price sta­bil­ity since Obama became President?

    Michael responded:

    Thus far, in my searches, I have yet to find a sin­gle instance of Ryan dis­cussing the Fed’s rate pol­icy before Obama became President.

    At least one of you responded.  Thanks.
    Ryan wrote this in The Wall Street Jour­nal in May, 2008. 

    Price sta­bil­ity is a basic neces­sity of long-​​term pros­per­ity. And, with mon­e­tary pol­icy under its juris­dic­tion, the Fed is the only insti­tu­tion capa­ble of sta­bi­liz­ing prices. But its recent, repeated reduc­tions in the fed­eral funds tar­get rate – down from 5.25% in Sep­tem­ber – were intended to ame­lio­rate the short-​​term slump. This threat­ens to unleash infla­tion­ary prob­lems that could ham­per the econ­omy for a very long time.

    (I thought he was never con­cerned about the Feds rate pol­icy and how it affects infla­tion until Obama became President?)

    The Fed’s actions have pushed real short-​​term inter­est rates into neg­a­tive ter­ri­tory. This has accel­er­ated the decline of the dol­lar, and helped drive up the price on a broad range of com­modi­ties as global investors flee the green­back for hard assets.
    Lower inter­est rates have also reduced the yield on safe invest­ments such as money mar­ket funds and CDs, pro­vid­ing a dou­ble whammy for seniors.

    Sound famil­iar?  The pri­mary pur­pose of the arti­cle was to pro­mote leg­is­la­tion he intro­duced to give the Fed one man­date — price sta­bil­ity.
     
    So when Michael says:

    Where was Ryan’s cryin’ then (2008)?

    Well, he didn’t just cry about it, he wrote freak­ing leg­is­la­tion a few months ear­lier about it that crashed and burned in the Democ­rate con­trolled House.
    Max said:

    And the RANKING MEMBER of the House Bud­get Com­mit­tee said nary a word about fight­ing infla­tion. Who was that Rank­ing Mem­ber? Paul Ryan. Who was Pres­i­dent? George Bush.
     
    The num­bers are against you. The facts are against you. Ryan’s behav­ior is against you in 2008. His behav­ior in 2012 with Bernanke is that of a par­ti­san hack!
    Pick your bat­tles, my friend. This one is a titanic loser and you are going down with the ship.

    Really?  Nary a word about infla­tion until Obama became Pres­i­dent?  Ryan’s behav­ior is “against me in 2008″?   A titanic loser, huh?

     

  8. Max,
    In #91 you referred me back to #82 in which you said:

    Even dur­ing 2008, when through Sep­tem­ber the monthly rate aver­aged well over 4%, even exceed­ing 5% for a num­ber of months, the Fed was DECREASING the dis­count rate! Was Ryan cry­ing “Fire!” then? No, he wasn’t!

    The answer is, Yes, he was!  Do you want more evidence?

  9. GROG,
    Thanks for the link to the arti­cle. I was unable to read it, because I’m not a WSJ sub­scriber (it’s also why I was unable to find that arti­cle in my searches).

    So it does look as if he’s had this con­cern for a while. Good to know.

    Now, this brings up an inter­est­ing point. The Fed low­ered rates through­out this period, and Ryan wor­ried that we would have long-​​term infla­tion. It seems, look­ing in the rear-​​view mir­ror, that Ryan’s fears didn’t come to pass. In fact, quite the con­trary. We had defla­tion. So I guess you’re right that he wasn’t being par­ti­san. He was just being wrong.

    Nice job on the research, BTW. I’d love to see the full text of the arti­cle, but not by vio­lat­ing copy­right law.

  10. GROG,
    Fine.  Ryan is, as we see, a com­pletely unthink­ing pro­po­nent of Ran­dism, a the­ory that no rep­utable econ­o­mist has ever jus­ti­fied.  So if we accept your asser­tion is that it isn’t blind polit­i­cal pan­der­ing which moti­vated him, but rather blind eco­nomic ide­ol­ogy, will that make you happy?
     
    We might point out that the two are not mutu­ally exclu­sive, and that deduc­ing a person’s moti­va­tions from their actions is never a sure thing.

  11. Micheal,
    You can read it here with­out vio­lat­ing copy­right law.
     
    Ryan’s pri­mary con­cern is the dual man­date and that’s what the Price Sta­bil­ity Act of 2008 dealt with.  He wants the Fed to have an  “explicit com­mit­ment to price sta­bil­ity”, and he goes on to explain why. 
     
    The Fed can­not attain and sus­tain more than one pol­icy tar­get, and it has only one pol­icy instru­ment, and the surest tar­get is long run price sta­bil­ity.
     
    Ryan has con­sis­tently talked about the impor­tance of long term price sta­bil­ity and how it affects long term pros­per­ity.  No doubt he’s gen­uinely con­cerned about 6 con­sec­u­tive years of near 0% Fed rates and how that will affect the sound­ness of money and the long term strength of the US econ­omy.  His past rhetoric (even before Obama became Pres­i­dent) con­firms that to be true.  
    I don’t think that’sa  rad­i­cal, par­ti­san posi­tion. It’s what the guy believes.

  12.  
    He wants the Fed to have an  “explicit com­mit­ment to price sta­bil­ity”,
    Grog–
    I think you and MW are talk­ing apples/​oranges, much like Ryan and Bernanke. There was mas­sive price defla­tion due to the pop­ping of the hous­ing bub­ble. In Bernanke/​MW mind­set, that would go against price sta­bil­ity that you seem to want.  So they try to coun­ter­act that with mas­sive mon­e­tary infla­tion, so the net effect is price sta­bil­ity. In their mind, they are suc­cess­ful.
     
     
     
     
     

  13. GROG,
     
    I too, thank you for the research. But I also have to agree with Michael in that the resul­tant con­clu­sion is that Ryan was wrong then so his asser­tions now are sus­pect because of the track record.
     
    If one yells “Fire!” and there is no fire, they are wrong. So now he is yelling “Fire! again. Cur­rent trends show that he again is wrong.
     
    Now, in addi­tion to false alarm, he is becom­ing the boy who cried “Wolf!” as well!
     
    BTW, in #82 I started “For argu­ments sake …” to thus con­cede, NOT stip­u­late” the ques­tion about Ryan and jobs. Noth­ing pro­vided since changes the asser­tion made then of his sim­ply yelling “Fire!” and thus act­ing in the man­ner I described.

  14. short­chain,

    Ryan is, as we see, a com­pletely unthink­ing pro­po­nent of Randism.…

    I have no doubt that you see it that way.
     
    (Btw, what were you say­ing about “unthink­ing” and “blind ideology”?)

  15. GROG,

    Well, he didn’t just cry about it, he wrote freak­ing leg­is­la­tion a few months ear­lier about it that crashed and burned in the Democ­rate con­trolled House.

    I did a lit­tle dig­ging into this leg­is­la­tion, now that I have the full arti­cle (thanks for that). Turns out that, while he did spon­sor it, he didn’t really write it. This is a bill that’s been float­ing around since at least as far back as 1997. It was intro­duced in 1997, when the House and Sen­ate were both Republican-​​controlled. And again in 1999, when the House and Seante were both Republican-​​controlled. Both times it was intro­duced by Repub­li­cans. Nei­ther time did it even make it out of com­mit­tee. Pre­sum­ably, then, it’s not par­ti­san­ship that’s been hold­ing it back. For what it’s worth.

    No doubt he’s gen­uinely con­cerned about 6 con­sec­u­tive years of near 0% Fed rates and how that will affect the sound­ness of money and the long term strength of the US economy.

    Per­haps so. If so, recent evi­dence sug­gests that he’s wrong.

  16. GROG,
    Since Ryan is on record as being a Ran­dite — and has pro­posed leg­is­la­tion which fol­lows that belief — I think we’re enti­tled to draw con­clu­sions, don’t you?
     
    As for “unthink­ing” — that may be a bit exces­sive, but there’s not the slight­est indi­ca­tion of an orig­i­nal thought on Ryan’s part.  How to solve the bud­get prob­lem?  Lower taxes.  How to solve prob­lems with Medicare?  Pri­va­tize it.
     
     

  17. Michael,
    Is the charge now that Ryan was grand­stand­ing not because he has only been crit­i­cal of the Fed since Obama became Pres­i­dent, and not because he’s openly try­ing to pre­vent jobs to make Obama look bad, but because he’s wrong about the Fed’s inter­est rate pol­icy hav­ing pos­si­ble neg­a­tive con­se­quences to price sta­bil­ity and long term eco­nomic growth?  Am I under­stand­ing correctly?

  19. GROG,
     
    Michael may answer for him­self, but my take is that you are NOT under­stand­ing cor­rectly.
     
    In the three sce­nar­ios you men­tion, in order:
     
    He has been crit­i­cal of the Fed, but his crit­i­cisms are par­ti­san and ide­o­log­i­cal, not valid as the facts demon­strate.
     
    Yes, he is try­ing to pre­vent, through omis­sion, jobs so Obama looks bad, an empir­i­cal demon­stra­tion of GOP pol­icy for three years of fight­ing EVERY sug­ges­tion by the Pres­i­dent, even when some of those were orig­i­nally pro­posed BY THE GOP.
     
    He empir­i­cally WAS wrong (no high infla­tion since 2007), he empir­i­cally IS wrong (infla­tion went down in each month since Sep­tem­ber 2011) con­cern­ing “neg­a­tive con­se­quences to price sta­bil­ity and long term eco­nomic growth.”.

    I pur­posely left out the word “pos­si­bly” because there are plenty of unknowns that have NOTHING TO DO with Ryan’s ide­o­log­i­cal rea­sons for price insta­bil­ity. Ie.: Israel could bomb Iran tomor­row, Iran could irra­di­ate the oil fields in the Gulf and the price of oil could exceed $250 bbl in a week, dri­ving up all prices, result­ing in high infla­tion, which would have NOTHING to do with Ryan’s con­tentions.
     
    Best.
     

  20. Max/​Michael,
    Jan 12, 2012 Huff Po -  Indus­trial met­als close higher on infla­tion fears.
    Jan 20, 2012 MSN — Sil­ver Rises from the dead on infla­tion fears.

    It’s all about infla­tion­ary con­cerns and the worry, in more respon­si­ble cor­ners, that Wall Street’s clam­or­ing for a third round of quan­ti­ta­tive eas­ing from the Fed­eral Reserve will be heeded despite the fact crude oil is flirt­ing with $100 a bar­rel and con­sumer price infla­tion is hov­er­ing near 3% while pro­ducer price infla­tion is closer to 5%.

    The­ses peo­ple are prob­a­bly just Obama haters.

  21. GROG,
     
    Let’s be hon­est here.  There are more peo­ple pre­dict­ing the end of the world in 2012 than that there’s going to be run­away infla­tion.  Some bozo says infla­tion, some­body else says “no, defla­tion is the con­cern”.  Who is right?  Answer: both of them.  First one and then the other.  You get the prize if you fig­ure out which one is right first.
     

  22. Sil­ver prices:
     
    9⁄2011 - 42.00
    2/​13/​2012 — 33.71
     
    Cop­per :
     
    9⁄2011 — 4.10
    2/​13/​2012 — 3.83

    I remem­ber Larry Kud­low scream­ing about infla­tion in mid-​​2010 when gold hit 1250/​oz. Hmm 2/​13/​2012 — 1724
     
    FIRE!!!!!!!!!!!!!!!!!!!  WOLF!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
    The WOLF’s on FIRE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
    INFLATION!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  23. GROG, my friend,
     
    In a global econ­omy that is highly depen­dent on oil as a feed­stock, on oil for trans­porta­tion, does the price of oil or the Fed’s dis­count rate pol­icy have more influ­ence on infla­tion?
    Tell us, please, what the pol­icy of hold­ing the dis­count rate at near zero has to do with the price of a bar­rel of light sweet crude? 
     
    Thank you.

  24. Let’s look at cur­ren­cies. If there is infla­tion the value of other cur­ren­cies should be going up against the dol­lar:
     
    Yen: Sept 2011 — 129/​1, Feb 13 2012 — 129⁄1
    Cana­dian $: Sept 2011 — 100.2/1, Feb 13 2012 — 99.8/1
    Brit Pound: Sept 2011 — 1.59/1, Feb 13 2012 — 1.57/1
    Swiss Franc: Sept 2011 — 1.16/1, Feb 13 2012 — 1.09/1 (and rising)

  25. Max,

    In a global econ­omy that is highly depen­dent on oil as a feed­stock, on oil for trans­porta­tion, does the price of oil or the Fed’s dis­count rate pol­icy have more influ­ence on inflation?

    Sup­ply shocks like oil will have more short term influ­ence on infla­tion. I’m not sure what your point is there. Are say­ing we shouldn’t be con­cerned about the impact of the Fed Fund rate because the price of oil has a more sig­nif­i­cant impact on infla­tion?  Are you deny­ing that the Fed Fund rate is a tool the Fed uses to manip­u­late infla­tion?
     
    Ryan has legit­i­mate con­cerns.  He voiced them again late 2008 ( that was before Obama became Pres­i­dent, by the way) when the Fed reduced the rate to zero.  He com­mented that by doing that, the Fed had lost it’s most effec­tive way to resus­ci­tate the econ­omy.  (I can link to it if you wish.)  Here we are 3 years later with the same 0% rate and 3 more years on the hori­zon. 
     
    With­out it’s trump card to juice the econ­omy, the Fed has flooded the mar­ket with cash.  Assets on the Fed bal­ance sheet has gone from $900 bil­lion in early 2008 to almost $3 tril­lion today.  Who knows what it will be in 2014.   Where do they get the cash? They use an uncon­ven­tional method of increas­ing the money sup­ply; Quan­ti­ta­tive Eas­ing.
    This puts us in unchar­tered ter­ri­tory.  Assets on the bal­ance sheet are at an all time high.  The con­cern lies in when the econ­omy does start to rebound and banks decide to start lend­ing again, there will be an enor­mous amount of excess liq­uid­ity in the mar­ket. The Fed will be forced to soak up this excess liq­uid­ity and scram­ble to increase inter­est rates.  It’s these dras­tic bounces that con­cerns Ryan, and right­fully so.
     
    You can deny it all you want and quote cur­ren­cies from the past 120 days all you want.  But this is a legit­i­mate eco­nomic con­cern. 
     
     I’m par­tic­u­larly sur­prised that Michael is just gloss­ing over it, to be hon­est. 
     
     

  26. My good friend GROG,
     
    I know what the Fed has done, and I rec­og­nize the rea­son for it. Even more so than dur­ing Greenspan’s term (rec­og­niz­ing that he actu­ally started it), this cur­rent strat­egy has one MAJOR thing going for it. While we may well be in uncharted ter­ri­tory, IT IS WORKING!!! Hell’s bells, TOMORROW is ALWAYS uncharted ter­ri­tory.
     
    Remem­ber what I said about fore­cast­ing.
     
    The num­bers demon­strate the truth of the asser­tion. Ryan can crab all he likes, but the num­bers for the past decade work against him. And you, my friend.
     
    You can deny all the facts, and cur­ren­cies, I quote, but you may as well deny the sun is over­head at noon.
     
    Does all this mean some­thing unfore­seen WON’T hap­pen tomor­row that will require an over­haul. Absolutely not. Do I expect the deci­sions the Fed makes to be per­fect, or even work close to as well as it has? No!
     
    But the first rule is don’t change horses in the mid­dle of the river.
     
    My friend, I guess we’ll have to agree to dis­agree. If you can ignore all the evi­dence I pre­sented that demon­strates the fal­lacy inher­ent in Ryan’s “con­cern”, we have lost the com­mon ground.
     
    Till the next battle!!!!

  28. DC,

    Wait — Ryan wants the Fed to con­trol prices?

    Isn’t that inter­fer­ence in the sacred Free Market?

    Not in this case. “Price con­trol” in this con­text means man­ag­ing the value of a dol­lar. It’s dif­fer­ent from con­trol­ling the retail value of a prod­uct. In other words, the for­mer is about nom­i­nal val­ues, while the lat­ter is about real values.

  29. Michael/​Max,
    I want to thank you for the dis­cus­sion.  I apol­o­gize for drag­ging these dis­cus­sions out for days, but I don’t always have a lot of time to com­ment and I think this is an inter­est­ing and impor­tant topic.

    My friend, I guess we’ll have to agree to dis­agree. If you can ignore all the evi­dence I pre­sented that demon­strates the fal­lacy inher­ent in Ryan’s “con­cern”, we have lost the com­mon ground.
     
     

    I cer­tainly am not ignor­ing any of the evi­dence you and Michael pre­sented, but there’s a much big­ger pic­ture in play that con­cerns Ryan (and myself).  Bernanke has orders to do what­ever it takes to bring down unem­ploy­ment, as it will ben­e­fit Obama polit­i­cally.  That is cer­tainly under­stand­able.
     
    I’m not buy­ing the fact that the tripling of the asset side of the Fed bal­ance sheet over the past four years, and announc­ing a plan to con­tinue down the same path for 3 addi­tional years, is of zero con­cern to you or Michael.  I’m just not buy­ing it.  You guys are both much smarter than that.
     

  30. GROG,
    I (for one) just want to say that I appre­ci­ate your will­ing­ness to engage here, even–or per­haps, especially–when the con­ver­sa­tion stretches for sev­eral days. Your exchanges with the oth­ers, and most cer­tainly with Michael, are infor­ma­tive and edu­ca­tional. I may find myself agree­ing more often with Michael or Max than with you, but with­out you to raise the ques­tions and counter with thought­fiul points, the insights that we all glean wouldn’t be nearly as com­plete. So, I just want to thank you for that.
      :-)
     

  31. GROG,

    Bernanke has orders to do what­ever it takes to bring down unem­ploy­ment, as it will ben­e­fit Obama politically.

    Bernanke doesn’t answer to Obama. While a Fed­eral Reserve Gov­er­nor gets appointed by the Pres­i­dent in order to get the job, the term is 14 years, and they are not per­mit­ted to be reap­pointed. Bernanke was appointed by Bush, not Obama. His term as Chair­man expires in 2014, and his term as Gov­er­nor in 2020.

    More­over, the “orders to do what­ever it takes to bring down unem­ploy­ment” came from Con­gress, dur­ing the Carter admin­is­tra­tion, not from the President.

    I’m not buy­ing the fact that the tripling of the asset side of the Fed bal­ance sheet over the past four years, and announc­ing a plan to con­tinue down the same path for 3 addi­tional years, is of zero con­cern to you or Michael. I’m just not buy­ing it.

    You don’t have to buy it, but it’s true. At least for me. Now, if we reach a point of a healthy econ­omy again, and those assets aren’t sold back off, then I’m going to be very con­cerned. Just as I’m very con­cerned when we have a healthy econ­omy and no bud­get sur­pluses. But, last time I checked, we don’t have a healthy econ­omy. It’s healthier than it was in early 2009, and I look for­ward to it get­ting healthy so I can start com­plain­ing about deficit spend­ing again, but it’s not there yet.

  32. Actu­ally, the char­ter of the Fed­eral Reserve has, from basi­cally the begin­ning, said their goals are:

    Con­gress estab­lished three key objec­tives for mon­e­tary policy–maximum employ­ment, sta­ble prices, and mod­er­ate long-​​term inter­est rates–

    This appar­ently is not impor­tant to Ryan, but it should be to Bernanke.  It’s his job.
     

  34. Mchael,

    Bernanke doesn’t answer to Obama.….

    Yes, I know.  I was just mak­ing a snarky lit­tle accusation.

    At least for me. Now, if we reach a point of a healthy econ­omy again, and those assets aren’t sold back off, then I’m going to be very concerned.

    You have extra­or­di­nary faith in the Fed to be able to prop­erly exe­cute the tim­ing to do that.  If they they fail, as they have in the recent past, things will get ugly. 

  35. sc,
    Actu­ally, the char­ter of the Fed­eral Reserve has, from basi­cally the begin­ning, said their goals are:
    <blockquote>Con­gress estab­lished three key objec­tives for mon­e­tary policy–maximum employ­ment, sta­ble prices, and mod­er­ate long-​​​​term inter­est rates–</blockquote>
    This appar­ently is not impor­tant to Ryan, but it should be to Bernanke.  It’s his job.

    The fol­low­ing is from the Fed­eral Reserve’s own expla­na­tion of their dual mandate:

    The Con­gress estab­lished two key objec­tives for mon­e­tary policy–maximum employ­ment and sta­ble prices–in the Fed­eral Reserve Act. These objec­tives are some­times referred to as the Fed­eral Reserve’s dual man­date. The dual man­date is the long-​​run goal for mon­e­tary pol­icy,

    “The long-​​run” is key.  Ryan thinks the Fed should be con­cerned about “the long-​​run”.   That’s why quot­ing exchange rates over the past 120 days is mean­ing­less to the Fed in deter­min­ing mon­e­tary policy.

  36. GROG,
    I don’t think you can say that the last 120 days are mean­ing­less to the Fed in deter­min­ing mon­e­tary pol­icy.  Remem­ber, the eas­i­est time to cor­rect a trend is when it has just started.  Let some­thing get momen­tum, and it becomes much more dif­fi­cult to stop.
     

  37. GROG,

    You have extra­or­di­nary faith in the Fed to be able to prop­erly exe­cute the tim­ing to do that.

    Not at all. But it’s their job to do it, and cur­rently they’re doing it the right way. Com­plain­ing about cor­rect actions taken today because those same actions taken later may be incor­rect is a rather point­less exer­cise. Would you com­plain about the guy stand­ing on his brake at the traf­fic light, sim­ply because it’s red now, but it won’t be the right action to take when the light turns green?

    If they they fail, as they have in the recent past, things will get ugly.

    Short of throw­ing the econ­omy into a reces­sion (and caus­ing defla­tion), there were no actions the Fed could have taken that would have pre­vented the hous­ing melt­down. Infla­tion was at his­tor­i­cally low rates. The Fed typ­i­cally raises inter­est rates in order to slow the econ­omy down and bring infla­tion down…but low­er­ing the rates fur­ther cer­tainly would have done noth­ing to cur­tail the hous­ing boom. So what would you have had the Fed do?

  38. GROG,

    Ryan thinks the Fed should be con­cerned about “the long-​​run”. That’s why quot­ing exchange rates over the past 120 days is mean­ing­less to the Fed in deter­min­ing mon­e­tary policy.

    And, look­ing to the long run, there’s a sim­i­lar view to infla­tion. Five-​​year yields on bonds are really low, which is indica­tive that the mar­ket believes infla­tion will remain low for at least the next five years. Just how long would you have the long-​​run be?