The Fed doves and the Fed’s Obama appointees

David Beckworth has a new post showing that Fed doves like Charles Evans of Chicago, Eric Rosengren of Boston, and John Williams of San Francisco are almost pleading for monetary stimulus.  But what I don’t see many people discussing is the curious position of the Obama appointees to the Fed.  Not one member of the Board of Governors voted for monetary stimulus at the August meeting.  And Obama appointed 6 of the 7 board members.  Perhaps one could make excuses for the two Republicans that Obama picked.  But the Dems?  Not a single vote?  This is a real puzzle that needs to be explained.  I suppose some will argue that they’ve been absorbed into the “FedBorg.”  But that explanation won’t wash, as it doesn’t explain all the regional presidents loudly calling for more aggressive monetary stimulus.  There was one dissent (for tighter money) and last year there were often 3 or 4 dissents, in both directions.

I don’t have an answer, but I’ll say this:  Obama will probably be re-elected.  But if he loses there will be precisely 6 reasons for his loss.  No more, no less.


Tags:

 
 
 

39 Responses to “The Fed doves and the Fed’s Obama appointees”

  1. Gravatar of Adam Adam
    9. August 2012 at 07:41

    I don’t have any insight into the internal politics at the Fed, but it could be that voting against the majority or dissenting isn’t persuasive internally.

    But I’m probably just being naively optimistic.

  2. Gravatar of dwb dwb
    9. August 2012 at 08:25

    its a confusing time to be an economist, unless you are a Market Monetarist. if its going viral, i hope that virus infects the FOMC soon.

  3. Gravatar of Morgan Warstler Morgan Warstler
    9. August 2012 at 08:35

    “Obama will probably be re-elected. But if he loses there will be precisely 6 reasons for his loss.”

    Ah yes, we are left to wonder how it is the hegemony gets its way?!?

    The question isn’t why has Ben changed his tune since Japan.

    The question is, since he has changed his tune, WHY aren’t you screaming the Congress should cut fiscal, to force more Monetary?

    You are committed like the chicken, not like the pig.

  4. Gravatar of anw anw
    9. August 2012 at 08:55

    Think about demographics and voter turnout. All the old people hate inflation more than anything.

  5. Gravatar of Neal Neal
    9. August 2012 at 08:59

    All the regional banks except Dallas are calling for more aggressive stimulus.

  6. Gravatar of Major_Freedom Major_Freedom
    9. August 2012 at 09:16

    Why is it that those who favor coercive progressive taxation and welfare for the poor, often recoil at the real gains that can be peacefully made by poor people through cash holding in a world of hard money and falling prices?

  7. Gravatar of Morgan Warstler Morgan Warstler
    9. August 2012 at 09:20

    “Why is it that those who favor coercive progressive taxation and welfare for the poor, often recoil at the real gains that can be peacefully made by poor people through cash holding in a world of hard money and falling prices?”

    A: Because they are dumb.

    Neal, where Texas goes, so goes the Nation.

  8. Gravatar of jduptonma jduptonma
    9. August 2012 at 09:42

    I may be misunderstanding, but I think if prices were falling, and that was caused by a burst of productivity growth and real output growth, that would be great for poor people. But if we have high unemployment and low income growth, or negative income growth, I don’t think there’s any benefit for poor people as a group.

  9. Gravatar of J Mann J Mann
    9. August 2012 at 09:47

    Assuming the Suskind was accurate about Obama telling Romer that monetary policy was exhausted, I wonder if Obama was ever convinced that monetary policy could be helpful.

    On a reductive public choice level, it sure looks like a lot of the special interests on that side wanted additional spending and employment for public sector unions, so there is a powerful incentive to convince oneself that only fiscal stimulus can do any good.

    Under those circumstances, I suppose your goals on the fed appointments is to appoint smart people and/or reward supporters, then hope for the best. (Or horse trade the fed appointments for something else that you want more).

  10. Gravatar of Major_Freedom Major_Freedom
    9. August 2012 at 09:59

    Morgan:

    A: Because they are dumb.

    That may be true for some of them, but certainly not everyone. Even otherwise intelligent people hold both these views at the same time.

    There has to be some ideas or convictions or assumptions that are leading them to believe it.

  11. Gravatar of Neal Neal
    9. August 2012 at 10:19

    Morgan: Except in 1860.

  12. Gravatar of Mike Sax Mike Sax
    9. August 2012 at 10:37

    “Why is it that those who favor coercive progressive taxation and welfare for the poor, often recoil at the real gains that can be peacefully made by poor people through cash holding in a world of hard money and falling prices?”

    I think the answer is that the poor don’t have much cash to hold. What money they do have they consume right away. Then a large part of the poor are also indebted borrowers.

    Delfation only increases the real amount of debt they owe.

  13. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    9. August 2012 at 10:41

    Obama just doesn’t have the background to understand the problem. This is the guy who worked for a while after college at a newsletter where, according to one of his co-workers, he had to have explained to him what a bond was.

    Obama describes it in his book as if he was, ‘behind enemy lines’. Now he’s CinC!

    Maybe the Market Monetarists should work out a compensation scheme for Fed BoG members where there are incentives for them to hit their target for NGDP growth. Something like paying them $1 million per year, but with a clawback for every tenth of a point deviation from the target (5%, say).

  14. Gravatar of Jim Glass Jim Glass
    9. August 2012 at 11:33

    The Median Voter Theorem affects experts too.

    Especially when appointed to their jobs by a politician who is no expert.

    The Fed may have a double “mandate” but it has no mandated objective to achieve, which makes the mandate meaningless, so why not?

    Patrick is right, the BoG needs to be given a specific objective to achieve to meet the mandate, enforced by pay-for-performance or some other method of being held accountable in they don’t.

  15. Gravatar of Major_Freedom Major_Freedom
    9. August 2012 at 11:48

    Mike Sax:

    I think the answer is that the poor don’t have much cash to hold.

    That makes no sense. Investments and returns are about RATES, not absolute sum of investment.

    The real RATE of return on money would be the same for those who have little cash and those who have a lot of cash, the same way those who invest in $100 million 5 year bonds are earning the same RATE as those who invest only $1000 in 5 year bonds.

    Does that mean that you advocate for less than 4% interest for those who invest lots in bonds, and advocate for more than 4% for those who invest little in bonds?

    Poor people have little cash, yes, but they have little of most things. How can you maximize, or introduce, a RATE of return for them? Well, most poor people delay their consumption to the future not so much by way of investing in stocks and bonds, but by way of holding onto their cash earnings over time. If you’re so concerned about the poor, then why not advocate for a monetary order that will enable the poor to earn a RATE of return on their delayed consumption?

    It is quite frankly rather ignorant to prevent this real rate of return for poor people, on the basis that others have more money than they do. Others have more of everything that the poor do. That’s what being poor means.

    Why not instead of coercive cash transfer payments from those who earned it to those who did not, we have instead a peaceful real return from them holding their cash earnings? If they delay their consumption in this way, then all the better, because it will have the long term effect of making the economy more capital intensive, and their labor productivity will increase. This is because when they consume less, then all else equal it will make capital goods production relatively more profitable than consumer goods production, and when scarce resources are devoted to capital goods production, it makes the economy more physically productive, hence it will lower prices all the more, and thus poor people can have an even higher standard of living!

    Delfation only increases the real amount of debt they owe.

    Not every poor person owes debt. It is no justification to point to history which is a product of inflation, and then hold that over the heads of everyone going forward. For those who owe debt, the increased real value of the money interest they still owe is exactly offset by the real return gain they make holding cash.

    Additionally, going forward, if holding cash earns a real return, then the incentive to taking out more debt is reduced, so you can’t presume that the total level of debt owed by the poor will remain unchanged forever. The debt they owe is a function of all the various factors that occurred in history, including inflation. With price deflation, you can’t say the same debt trend will take place.

    Poor people have an incentive to take out more debt when money is easy, and when prices rise faster than their incomes, leading them to wanting to maintain a certain standard of living. But with hard money, loans are diminished down to the level of real savings, and prices tend to fall, so there is an almost complete reversal in the incentive of debt. Poor people wouldn’t need to take out as much debt to maintain/grow their standard of living. With falling prices, they can grow their standard of living by holding cash, and then, when they become wealthy enough, they can start to make equity and bond investments and earn a higher return.

    Why should poor people remain indebted?

  16. Gravatar of Macro_Man Macro_Man
    9. August 2012 at 11:56

    Major Freedom,

    If the deflation comes from productivity gains then yes, they would be better off. But if deflation comes from an unplanned fall in aggregate spending they are worse off. Right now it seems we are closer to the latter.

  17. Gravatar of Mike Sax Mike Sax
    9. August 2012 at 11:57

    “If you’re so concerned about the poor, then why not advocate for a monetary order that will enable the poor to earn a RATE of return on their delayed consumption?”

    They don’t delay their consumption. They live hand to mouth.

  18. Gravatar of Mike Sax Mike Sax
    9. August 2012 at 11:59

    “It is quite frankly rather ignorant to prevent this real rate of return for poor people, on the basis that others have more money than they do. Others have more of everything that the poor do. That’s what being poor means. ”

    The poor aren’t getting any rate of return. Their cash goes into immeidate consumption. There is no benefit for tight money for them.

    It benefits certain people of more considerable means as far as giving them a better rate of return in their depostis. This does not benfit the poor as they don’t have delayed consumption.

  19. Gravatar of Mike Sax Mike Sax
    9. August 2012 at 12:04

    “Why not instead of coercive cash transfer payments from those who earned it to those who did not, we have instead a peaceful real return from them holding their cash earnings? If they delay their consumption in this way, then all the better, because it will have the long term effect of making the economy more capital intensive, and their labor productivity will increase. This is because when they consume less, then all else equal it will make capital goods production relatively more profitable than consumer goods production, and when scarce resources are devoted to capital goods production, it makes the economy more physically productive, hence it will lower prices all the more, and thus poor people can have an even higher standard of living!”

    You speak as someone who has never been poor. If so lucky you. Fact is that being poor means you can’t save. There are certain kinds of consumptino you can’t delay for a higher return. Rent, food, utlities, gas. There are many who either don’t make enough to even adequately pay for this or can afford to pay it with nothing left in advance.

    Your premise benfits only those who have large cash holdings already. They find things very “peaceful” not so much those who are struggling in a terrible labor market.

  20. Gravatar of Major_Freedom Major_Freedom
    9. August 2012 at 12:30

    Mike Sax:

    You speak as someone who has never been poor.

    You tacitly speak as if polylogism is true, that I cannot “understand” if I am not of a particular class.

    To clue you in, I grew up poor. I was poor for most of my life.

    Fact is that being poor means you can’t save.

    Poor people can defer consumption MORE in the way of holding cash than they can investing in stocks and bonds. Being poor doesn’t mean you can’t save. If that were true, then the human race could never have escaped the caves and build modern material civilization.

    The fact is that wealth must be produced, and when the original state of affairs for humanity was poverty, it shows that humans who are poor CAN indeed save.

    You are just denying reality because you don’t WANT the poor to get out of poverty ON THEIR OWN. You want the state to be presented as the only mechanism by which the poor can escape poverty. Well, the state doesn’t produce, so sorry to say, it is not the state that abolishes poverty. Producers abolish poverty. Producers started out poor way back when. If they can do it, then poor people today can do it. They just need more independence and less mommy and daddy government keeping them in a state of dependency.

    You’d be surprised what poor people with economic freedom can do. Many immigrants into the US started out with empty pockets, and became multi-millionaires.

    There are certain kinds of consumptino you can’t delay for a higher return.

    There are certain kinds of consumption you CAN delay for a higher return. Beer, cigarettes, extra car trips, expensive junk food, designer clothes, movies, etc. Many who are poor can easily afford to hold somewhat higher cash balances. Barely any are so poor than one dollar less in spending will result in their starvation.

    Your premise benfits only those who have large cash holdings already.

    False. It benefits ANYONE who earns money whatsoever. ANY amount of cash holding can earn a return.

    Poor people can and do hold cash.

    Why do you want to keep poor people dependent on the state, and not find ways to encourage them and help them become financially independent?

    They find things very “peaceful” not so much those who are struggling in a terrible labor market.

    You’re too myopic. You’re only looking at the symptoms and not the cause. The cause is, in part, loose money.

    The labor market is struggling precisely because of years of malinvestment brought about by years of inflation fundamentally altering the economy into an unsustainable configuration. The US economy in the context of the world market, has become far too consumer oriented and too little industry oriented. Problems on this scale take years to undue. And wouldn’t you know it? The Fed is not letting those corrections take place. This can’t go on forever. You can either be blind to it, or learn it.

  21. Gravatar of Major_Freedom Major_Freedom
    9. August 2012 at 12:34

    Mike Sax:

    The poor aren’t getting any rate of return.

    They have cash balances that would get a real rate of return with hard money and falling prices.

    Their cash goes into immeidate consumption.

    Precisely because prices are rising faster than their incomes.

    There is no benefit for tight money for them.

    Yes, there is. You’re not taking into account the changes that would be had with a different monetary order.

    It benefits certain people of more considerable means as far as giving them a better rate of return in their depostis.

    False. The real rate of return on cash would be the same for everyone.

    This does not benfit the poor as they don’t have delayed consumption.

    Yes, they do. If the poor did not have delayed consumption, then humans could never have built modern material civilization, which requires saving.

    Are you so ignorant that you believe wealth is created out of thin air so long as there is consumers and consumption spending?

    How do you explain the rise of industry from initial poverty, without saving? You can’t if you continue to believe the false claim that humans cannot produce from an initial state of poverty.

    Poverty was after all the initial starting point for the human race. Empirically, you’re making no sense, and you consider yourself an empiricist!

    What does that say if, as an a priorist, I am more sensitive to empirical facts than you are?

  22. Gravatar of Major_Freedom Major_Freedom
    9. August 2012 at 12:36

    Macro_Man:

    If the deflation comes from productivity gains then yes, they would be better off. But if deflation comes from an unplanned fall in aggregate spending they are worse off.

    OK, but why would people suddenly reduce their spending?

    Right now it seems we are closer to the latter.

    How is that? NGDP has been growing 4-5% since 2010.

  23. Gravatar of Mike Sax Mike Sax
    9. August 2012 at 12:44

    “You are just denying reality because you don’t WANT the poor to get out of poverty ON THEIR OWN. You want the state to be presented as the only mechanism by which the poor can escape poverty. Well, the state doesn’t produce, so sorry to say, it is not the state that abolishes poverty. Producers abolish poverty. Producers started out poor way back when. If they can do it, then poor people today can do it. They just need more independence and less mommy and daddy government keeping them in a state of dependency.”

    You are as usual attackign a straw man with your “do you still beat your granmother?” framing of the issue. I understand people often do get out of poverty on their own. Still in recent years we’ve seen social mobility decline. So it’s becoming harder rather easire.

    Even if people can sometimes rise above very difficult circumstances that’s no reason to insist on making it as tough as possible. We still should give a little boost to those trying to rise out of it where we can.

    I never have claimed that the state is the whole solutiona I’m must saying it has a role.

    For many people today, they aren’t able to do much deferred consumption. You want to preach to them to do wihtout, but many already do witout. People who can afford savings aren’t really poor.

  24. Gravatar of Richard A. Richard A.
    9. August 2012 at 12:47

    Who are selecting these Fed appointments for Obama? They appear to have little training in macroeconomics.

    Example
    Jerome H. Powell took office on May 25, 2012.

    Mr. Powell was born in February 1953 in Washington, D.C. He received an A.B. in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. While at Georgetown, he was editor-in-chief of the Georgetown Law Journal.

  25. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    9. August 2012 at 12:53

    ‘You speak as someone who has never been poor. If so lucky you. Fact is that being poor means you can’t save. There are certain kinds of consumptino you can’t delay for a higher return. Rent, food, utlities, gas.’

    None of which is true. When I was poor, I saved on rent by living with other people, on food by shopping carefully and not eating in restaurants, on utilities by conserving on the use of electricity, and on gas by having a high mpg car and not using it for unneeded trips.

    I have an uncle who is a millionaire, but he wasn’t when he got out of the navy after WWII. His wife (my mother’s sister) still teases him about his frugality back then. They lived on Capital Hill in Seattle, and if they were going to downtown Seattle (where everything worth doing was located then), he would turn off the engine in his Pontiac and coast all the way.

    Habits that helped him get rich. Scott has told us similar stories of how he got through grad school; cutting his own hair, eating carrots and hot dogs….

    I’ve lived around a lot of Mexicans who walked across the border and started their own landscaping, drywall, taco cart businesses. Somehow they learned to husband their resources and improve their lot in life.

  26. Gravatar of Mark A. Sadowski Mark A. Sadowski
    9. August 2012 at 12:55

    What I find interesting is if you count Pianalto (Cleveland) and Dudley (New York) that makes five out of the 12 FRB Presidents who have made clear dove-like statements. In contrast, of the seven Board of Governors members, I would only consider Yellen and Tarullo to be doves with any certainty. (I’m not sure about Powell or Stein, and Powell is a Republican, so probably not.)

    This means that ratio of doves among the FRB Presidents is apparently higher than on the BOG, and this goes against common wisdom as well as past history.

    Also, Scott, to be technical the entire BOG is Obama’s responsibility. That’s because Duke’s term expired in January and she may serve until he picks a replacement or renominates her. (That also makes the Republican count three, not two.)

  27. Gravatar of Major_Freedom Major_Freedom
    9. August 2012 at 13:35

    Mike Sax:

    You are as usual attackign a straw man with your “do you still beat your granmother?” framing of the issue.

    You haven’t shown me to be attacking straw men the first time, how can you say “as usual” as if you have shown it?

    At any rate, what else follows from your refusal to accept that poor people can escape poverty on their own, and your advocacy that the state must take from those who earn more to give to those who earn less? That is WANTING the poor to remain poor and dependent. That is WANTING the poor to never become more financially independent.

    I understand people often do get out of poverty on their own.

    Was that before or after I made the argument regarding the human race rising out of an initial state of poverty to build modern material civilization?

    Still in recent years we’ve seen social mobility decline. So it’s becoming harder rather easire.

    That’s because economic freedom has declined. Social mobility is reduced the more economic freedom is reduced.

    Even if people can sometimes rise above very difficult circumstances that’s no reason to insist on making it as tough as possible.

    What I am proposing makes it EASIER for the poor to rise out of poverty! By merely holding on to a sum of cash that they earn, which they do anyway today, they can earn a return that they could not earn before, and over time, they can become more and more prosperous.

    Your rebuttal to this, that rich people will earn more absolute amounts of real return because they earn more cash, is not a valid refutation because that exists anyway with inflation! Even with inflation, rich people can earn more in absolute terms because they have more absolute sums of investment vehicles. It is no argument against poor people earning a real return on their cash earnings to say that wealthier people will earn relatively more in absolute terms. That would be like saying it’s no good to increase the quality of education for the poor, because the rich kids will still have a relatively better education!

    The proper standard of judgment for prosperity is NOT wealth inequality and differences, but individual people’s wealth over time. If individuals can earn a return, then it doesn’t matter if others are earning a higher absolute return. The poor are still earning a return! That’s what I am offering.

    Al you are offering is depression, capitulation, whining, and jealousy.

    It isn’t “making things as tough as possible” to respect people’s property rights and their personal freedom. It is making it as easy as possible on both them and every other individual, including those who produce relatively more wealth for the benefit of the poor in the mass market!

    We still should give a little boost to those trying to rise out of it where we can.

    I agree. I just don’t “help” others by advocating for stealing from yet still others. That isn’t being helpful. That is just being a coward.

    I never have claimed that the state is the whole solutiona I’m must saying it has a role.

    So I have a role in stealing from you, where I steal just a little so that you only eat a bit less, and then I give the proceeds to those poorer than you?

    If what the state does is moral, then since I am human, it means what I propose here must be moral as well. After all, I am just doing what the state does. If those in the state have a role, then so does everyone else.

    If you say those not in the state do not have a role to help the poor through forced confiscation of wealth from those who are not so poor, then you must hate the poor.

    For many people today, they aren’t able to do much deferred consumption.

    Many people today don’t live in a world of falling prices!

    You keep failing to grasp the difference between taking what exists, and understanding that what exists is a product of past and current policies, and not heretofore non-existent policies which I am advocating as beneficial.

    You want to preach to them to do wihtout, but many already do witout. People who can afford savings aren’t really poor.

    Many people who are poor would benefit from free market money, not only in terms of consumer prices, but in terms of their employment stability and other real side factors.

    Do you honestly believe that the tens of millions of people were thrown out of work because of the free market? Please say you at least realize the kind of world you’re living in. You can’t possibly know where to go if you don’t know where you are.

  28. Gravatar of Morgan Warstler Morgan Warstler
    9. August 2012 at 13:39

    “I’ve lived around a lot of Mexicans who walked across the border and started their own landscaping, drywall, taco cart businesses. Somehow they learned to husband their resources and improve their lot in life.”

    Pat, Sax does not want to tell people they will be rewarded for suffering and self-denial.

  29. Gravatar of Mike Sax Mike Sax
    9. August 2012 at 14:16

    I’ve shown ou plenty of times if you’re memory is too feeble that’s your problem.

    Remember you kept pretending that I said that wealth is only about luck. Then you pretended never to have said that.

    Just today in another thread you claimed that I am facist eugenecist because I said that the state has a rihgt to step in to prevent child abuse.

    You either have a very weak memory or are a pathological liar.

  30. Gravatar of Major_Freedom Major_Freedom
    9. August 2012 at 14:22

    Mike Sax:

    I’ve shown ou plenty of times if you’re memory is too feeble that’s your problem.

    You haven’t shown this “plenty of times”. I challenge you to tell me just one.

    Remember you kept pretending that I said that wealth is only about luck.

    I never said you said all wealth is only about luck. I was referring to two specific statements you made where I denied it is luck, as you claimed.

    Then you pretended never to have said that.

    I cannot pretend not to say something that I didn’t say.

    Just today in another thread you claimed that I am facist eugenecist because I said that the state has a rihgt to step in to prevent child abuse.

    How is that wrong? What else is it called for the state to take ultimate authority over child raising?

    You either have a very weak memory or are a pathological liar.

    It’s neither.

  31. Gravatar of Mike Sax Mike Sax
    9. August 2012 at 15:08

    Morgan my friend here’s one thing I do want to say: the polls do not like Mitt Romney.

    We had the Pew poll last week O leads 51-41. Then we had Bloomberg: 49-43.

    We had all those polls that show Obama with bigger leads in the swing states-6 in Fl, 6 in Ohio, 11 in PA

    Now we just got the third poll in two days. What does it show?

    Well yesterday Reuters put the Prez up 51-41. Then CNN shows him up 52-45. Not many undecdieds there either.

    Now the latest is in. Get where this poll is from-you guessed it, Fox News. They got him up by 9, 49-40.

    The indepedents are really not feeling him. He does worse with them than the larger electorate. 68% of them want hin to release his tax returns. So much for people don’t care about that they only want to blame the economy on Obama.

    Read all about it.

    That’s got to hurt-Romney down by 9 in Fox poll http://diaryofarepublicanhater.blogspot.com/2012/08/thats-got-to-hurt-romney-trails-by-9-in.html

    http://diaryofarepublicanhater.blogspot.com/2012/08/cnn-poll-obama-52-romney-45.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DiaryOfARepublicanHater+%28Diary+of+a+Republican+Hater%29

    By the way, I’m all in with Ryan like the WSJ said this morning. I’d relish Romney-Ryan more than anything though my head tells me it’s Portman.

    Romney better do something soon. Maybe even-perish the thoguht-level with the American people and release his tax returns.

    Look at the bright side, I’ll be a good winner-as oppposed to how you would be. Dinner will be on me. You’re richer than me too-you’re a Republican- so taht’s mighty big of me

  32. Gravatar of Alexander Hudson Alexander Hudson
    9. August 2012 at 15:10

    I certainly agree that Obama should have been more aggressive about putting ardent proponents of monetary stimulus on the BoG. However, over the last year I’ve become less convinced that this would have mattered much. After all, Obama reappointed Bernanke, and before joining the Fed Bernanke was about as enthusiastic a supporter of unconventional monetary policy as you could find. I suspect both the intellectual environment at the Fed (the so-called “Fed Borg”) and the desire to build a robust consensus around a long-lasting operating framework are major factors holding back the Fed.

    Keep in mind that the outspokenness of the doves is a recent development. Williams and Rosengren are new additions to the chorus. Evans is not new, but if I recall correctly, he didn’t become outspoken until last year. On the other hand, hawks like Fisher and Plosser have been at it since at least 2010, when they vocally opposed QE2. Kocherlakota has kind of been all over the map, but in 2010 he gave some prominent speeches that were interpreted as hawkish. Bullard supported QE2 but has since become somewhat more hawkish. Until recently, those guys had been much more outspoken than the doves.

    And let’s not forget Janet Yellen, who is on the BoG and recently came out in favor of more aggressive policy. Williams only became a regional president because of her appointment. I honestly think it’s hard to argue that the FOMC hasn’t become more dovish as a result of Obama’s appointments. Sure, other than Yellen there aren’t any outspoken voices for further action on the BoG. But there are ZERO outspoken voices for tighter money on the BoG, and that’s a big deal. I think the regional Fed presidents are simply more willing to voice their concerns publicly. I get the sense that the members of the BoG largely defer to the chairman and prefer not to publicly contradict him. For that reason, Yellen’s call for more aggressive policy is probably more significant than the others.

    At this point, I think the only way for BoG appointments to make much of a difference in the Fed’s trajectory (which seems to be evolving very slowly in the direction of greater easing) is to select people who are not only in favor of more stimulus, but who are willing to dissent in the voting. Obama perhaps made a mistake not selecting such people, but given Republican opposition to monetary stimulus, he couldn’t have filled all of the BoG seats with those kinds of people (maybe a few early on). To expect that of Obama would be to expect the president to have a better understanding of monetary policy than the VAST MAJORITY of economists. And the only time he could have done this was in 2009 and early 2010, before market monetarism started to make serious inroads.

    It wouldn’t shock me if, by the end of next year, the Fed started to take it’s dual mandate seriously again. Maybe not NGDP targeting, per se, but some kind of open-ended asset-purchase program explicitly tied to both of the Fed’s targets. And while outside observers (like us) will perceive that change to have come about very slowly, from within the institution it will probably have seemed pretty fast.

  33. Gravatar of Mike Sax Mike Sax
    9. August 2012 at 15:11

    “What else is it called for the state to take ultimate authority over child raising?”

    I don’t advocate the state to raise children in most cases. However, there are many abusive parents and there the state has a responsiblity to step in.

    I can’t imagine what basis you can deny it other than philosophical and ethical perversity.

    Note that in that case where the paretns didn’t treat their sick child and he died, that was how you want it-the state had not stepped in.

  34. Gravatar of Benny Lava Benny Lava
    9. August 2012 at 15:28

    I am reading more and more from the pundocracy about easy money and how the central banks need to close the gates. I assume this is mostly team Republican hoping that they can induce a recession before November, but I have to wonder if there are serious people making this argument as well.

  35. Gravatar of Benjamin Cole Benjamin Cole
    9. August 2012 at 20:48

    Obama’s lack of interest in the Fed is curious, and reflects a huge blind spot.

    He may have brought about his own defeat, but worse, prolonged the worst recession since the Great Depression.

    Excellent blogging by Sumner.

  36. Gravatar of Jim Glass Jim Glass
    9. August 2012 at 21:56

    I am reading more and more from the pundocracy about easy money and how the central banks need to close the gates. I assume this is mostly team Republican hoping that they can induce a recession before November, but I have to wonder if there are serious people making this argument as well.

    Never assume an election year conspiracy when political economics 101 will do.

    The average person is *not* unemployed. The average working person has received raises through 2008 and on until today, in spite of the big drop in employment and the economy being so weak.

    The “higher inflation” and “higher NGDP” remedies intend to reduce real wages modestly via inflation to enable the labor market to clear and increase employment.

    But to put it simply, the safely employed who have received pay increases since 2008 until today fear this inflation will cost them — reduced real wages, they are correct! — and they greatly outnumber the much smaller number of persons who would benefit (greatly) from gaining employment.

    In a democracy, the largest voting block wins. It also gets catered to by the pundocracy, which profits and gets higher ratings by reminding the majority of their fears. (Easy money will cost you!)

    Krugman and his kind argue that it is rich Republicans using their secret hidden powers over the entire political system to stifle inflation-increasing stimulus, since they think inflation would cost them.

    But they doth protest too much. It’s Mr, Mrs, and Ms average retiree and working American who fear they will lose by inflation, they are the big voting majority, and the median voter is among them. Median Voter Theorem, the govt delivers what the median voter wants.

    Why are Obama, the Democrats, Romney and the Republicans all dismissive of more stimulus? It’s because they know what the voters want, and are catering to them.

  37. Gravatar of Major_Freedom Major_Freedom
    9. August 2012 at 22:26

    Jim Glass:

    Silly Jim, haven’t you learned market monetarism by now? The rabble are supposed to be told what’s good for them, because they’re too stupid to know what they want. If one person or if 300 million people do not want more inflation, then ivory tower central planner wannabes who KNOW that more inflation will benefit the people, should be able to utilize the state’s guns and get what they want by force.

    If anyone doesn’t want more inflation, then they are to be attacked, ridiculed, and called evil relentlessly until the rabble become convinced that they are indeed too stupid to know what they want and that market monetarists should be respected as overlords who know what everyone really wants.

    That is how we are to think. That is how we are to view our fellow human beings. With contempt if they dare have their own wants for themselves. It’s nationalism, fascism-lite style.

  38. Gravatar of Major_Freedom Major_Freedom
    9. August 2012 at 22:29

    Or, in their words: “Given that the Fuhrer is in power, we’re just along for the ride and trying to minimize the damage he does, all the while ridiculing those who are absolutely against his rule, because, you know, when you’re on the side of smaller government, you attack those who want smaller government than you.”

  39. Gravatar of Benny Lava Benny Lava
    10. August 2012 at 15:36

    Jim Glass,

    Are you trolling me? I did not argue that the average person is unemployed but you implied that I did. In fact I never made any of the arguments that you put forth in your reply.

Leave a Reply