Bad Economics, Bad Politics

The Conning Tower ^ | July 8, 2003 | Trentino

[Davis]

How the Republicans Can Snatch Defeat from the Jaws of Victory in 2004

The economy sucks.

There, I've summed up the feeling of the overwhelming majority of Americans. Dr. Howard Dean's prescription for the economy's sour stomach, restore the tax cuts, is clearly preposterous, but the discontent it epitomizes is significant, and it has pushed him to the front.

The Federal Reserve, above the fray and obviously above mere politics, has responded with 13, count 'em, 13 interest rates cuts. Mr. Greenspan & Pals need to be reminded that doing the same thing over and over while expecting a different result is madness.

Don't those great double-domes at the Fed with all those advanced degrees and those nifty computers and their vast intellectual resources see that the core problem isn't too-high interest rates and thus that their solution is no solution whatever? Is their next step, a negative interest rate?

It would be clear even to a tourist from Mars that the Fed is making things worse not better, rewarding thrifty people by depressing interest rates on their savings--and distorting the economy in the process, misdirecting work, investment, and production. Alas, the Federal Reserve's stupidity isn't personally painful to its Board of Governors. Those guys are all set with nearly permanent positions and fat pensions. And after all, they can lay the blame elsewhere because they aren't in charge of the political arena.

The Bush administration cannot ignore the prosperity problem nor hide it from the scrutiny of the electorate. It cannot hope to succeed at the voting booths by pretending that present popularity polls make its reelection a certainty....MORE

[JohnnyZ]

Yes, let's raise interest rates. ???

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[LS]

First, the fundamental factors for economic growth are good. The question is at what point EMPLOYMENT rises, because Greenspan thinks new employment won't even occur until you get a 3.5% growth rate, which is substantial.

Second, this author, like many others, simply misses the national security GORILLA which is that Americans EQUATE the economy with national security. A full 1/3 of all jobs lost in 2002 were related to AIRLINES, TRAVEL, and RECREATION all tied to the fear of traveling. Thus, national security continues to trump all issues, even the economy.

I think Bush will win with anything under where we are now, 6.4%. I think Bush will win convincingly if it drops to 5.5%, and if the direct in Sept. 2004 is trending down, he will win in a landslide.

[Gunslingr3]

Yes, let's raise interest rates. ???

Let the market determine interest rates and quit pretending Alan Greenspan & Co. know what interest rates 'should be' better than the multitude of particpants who compose the market. If you think they know what the interest rate 'should be' you're probably also fond of "Five Year Plans", "New Economic Policy" and "New Deals".

[JohnnyZ]

Let the market determine interest rates and quit pretending Alan Greenspan & Co. know what interest rates 'should be' better than the multitude of particpants who compose the market.

The market can do what it wants as it is. The Fed just loans money to banks at a low rate.

[Gunslingr3]

The market can do what it wants as it is. The Fed just loans money to banks at a low rate.

The Fed prints the money it loans, that's the problem. By printing money, and then setting a ridiculously low interest rate to borrow that money, they are manipulating the market. As Greenspan himself noted, "The law of supply and demand is not to be conned." link

[hrhdave]

The Fed prints the money it loans, that's the problem.

You hit it right on the button, pal. It's crooked, thats what it is. Dishonest. Nothing good can come from dishonesty.