In their editorial in reaction to the recent employment situation report, the editors of the Wall Street Journal made two points that I wish more people understood. The first is that the global economic turmoil of the last couple of months is at the very least in part and possibly largely our own chickens coming home to roost:
In a blog post, the White House Council of Economic Advisers attributed the jobs miss to “slowing growth abroad and global financial turmoil,†which is true as far as it goes. What they didn’t say is that some of that turmoil and slow growth has been caused by the whipsaw effect in emerging markets from Federal Reserve policy.
Capital that rushed into those markets during the Fed’s bond-buying heyday is now flowing back into dollar assets as the Fed considers raising interest rates. Commodity markets have also deflated as the dollar has risen, with considerable damage to the U.S. oil and gas boom that had been a rare bright spot.
That’s right. Developing economies have been exporting deflation back to us and it’s having an effect.
Here’s the other one:
If the economy is slowing down, don’t expect much help from the rest of Washington. In their blog post on Friday, the White House economists said “we must take steps to continue the domestic momentum that the U.S. economy has enjoyed in the last several years. That includes passing a budget that reverses the sequester and makes critical investments that help our economy continue to grow, reauthorizing the Ex-Im Bank so that our businesses can compete on a level-playing field abroad, and increasing investments in infrastructure.â€
Is that all there is? Revive a loan-guarantee bank and spend more on roads and bridges? Really? This White House is either intellectually tapped out, or too partisan even to consider Republican growth ideas such as tax and regulatory reform. This week the Administration piled another costly rule on the economy to limit ozone in the atmosphere, even though only parts of California are in serious breach of current U.S. standards.
That’s been my complaint about the Obama Administration over the period of the last four or five years. They’ve never produced an economic plan or proposal that would do anything but nibble at the margins of our problems. The Republicans might oppose such plans but that doesn’t mean that the president’s economic advisors should just sit on their ash heaps, scraping their sores with a potsherd.
And demonstrating interconnectedness, unintended consequences and beggar thy neighbor……
European interest rate environment was engineered even lower than the US. As a result dollar demand to chase what paltry yield was available in US fx income securities caused the dollar rise and………you get the picture.
I know you disagree, but I don’t think the administration really gives a damn about overall economic performance. It’s the nexus of playing to special interests for votes and the mother of all dorm room late night bull sessions, and if the economy lags, that’s just the excuse for more government intervention. It’s very convenient.
We tried Republican tax and regulatory reform. Look where it got us. That said, I wish Obama would go after some reasonable tax and regulatory reform, even if the GOP would not go along.
At this point I am pretty skeptical about any governmental action giving us growth that can be sustained that also works quickly. Things like investing in research and infrastructure, which would be more than roads and bridges just so small minded conservatives understand, take a while to have an effect.
Steve
“just the excuse for more government intervention”
Speaking of which, shouldn’t you be off preparing your testimony for the upcoming SEC investigation?
Yeah, me too. His silence on the most vitally important issue of his tenure in office (the economy) makes you wonder what he’s about.
The Europeans are considering banning cash and going to negative interest rates. (There may be negative interest rates somewhere.)
Nobody ever considers the costs of the military engagements. These things are not free even if they are off the books. I have never seen the impact of Iraq and Afghanistan detailed.
Does anybody remember that little dustup in Southeast Asia? It was in a place that started with a “V”. I cannot remember what it was called. Does anybody really think Nixon’s dollar action and the war debt was just a coincident?
If these military actions are not funded through taxing, borrowing, or printing, how are they funded? If free-trade is the end-all-and-be-all, should the US import its military equipment, armaments, and munitions? If not, why? (Just curious, does the same apply to imported domestic goods?)
You know it’s bad when Schuler goes to the ash heaps and potsherds….