I’m still waiting for my updated prescription eyeglasses. Until I receive them my activities including both reading and blogging are considerably constrained. For example, with my newly-operated on eyes I can read with some effort for about twenty minutes particularly if I keep my left eye closed. After twenty minutes I begin to experience eyestrain.

If I haven’t received an update on the availability of my new glasses from my optometrist be 3:00pm today, I will reach out to them. It will have been ten days since they received the prescription.

On Monday I had my final post-operative examination by my ophthalmologist, had an eye test, and received a new prescription for glasses. I took my prescription to my optometrist and should have new glasses early next week. I have now been cleared to engage in “strenuous activities” and resuming something approximating a normal schedule. I celebrated by mowing the lawn.

As things stand I can’t drive and can only read for a few minutes at a time without experiencing eyestrain. Going down to my oral surgeon for the final step in my dental implant (Round 2) was quite an adventure. The oral surgeon’s office is in River North so I took an Uber down and the El back up to the Northwest Side. My wife was kind enough to pick me up after I arrived at the Montrose station. As I’ve said before, she’s a saint.

When I get my new prescription I hope to resume my regular blogging schedule. Except for the last month and a half I have averaged four posts per day. Fingers crossed.

Also I hope to be able to drive. In normal circumstances I’m a daily shopper and have been responsible for all our grocery, pharmacy, and hardware store shopping. Maybe I’ll also be able to read for pleasure again. From the time I was 7 I read a book (or more) a day. Maybe I’ll enjoy reading again.

There’s an article at Barron’s by Brij Khurana that echoes some of what I said in yesterday’s post. Read the whole thing but here are some snippets.

Monetary policy is also becoming less effective in shaping longer-term interest rates. Historically, when the Fed cut short-term rates, long-term yields declined as well. That is no longer true. Since the Fed began its ongoing easing cycle in September 2024, 10-year Treasury yields have actually risen. This reflects resilient economic expansion and a fiscal deficit that has grown so large as to mute the effects of the cuts.

Given these changes, it is worth considering whether the Warsh Fed should prepare markets for more forceful and less predictable rate adjustments ahead.

and

The federal debt complicates the Fed’s ability to achieve its dual mandate of maximum employment and price stability. If foreign investors, who finance a third of U.S. debt, trim their Treasury holdings and the Fed responds by expanding its balance sheet, the dollar could weaken, fueling inflation.

Heavy Treasury issuance creates distortions between government bonds and derivatives linked to them. Hedge funds use substantial leverage to arbitrage these discrepancies. An estimated $1.5 trillion of such trades are outstanding, posing a risk to financial stability. Finally, government spending has helped lift equity markets, supporting wealth-driven consumption and keeping services inflation persistently high.

concluding:

Perhaps the Fed should shrink its balance sheet so the real cost and liquidity of government debt can be fully known. Maybe it should use interest-rate and balance-sheet policy to lean against debt-fueled asset price appreciation, regardless of where that debt originates.

I doubt that will have the results he’s seeking.

If the FOMC were following the Taylor Rule, interest rates would be around 5%. Given the changes in the structure of our economy it might well need to be substantially higher than that to achieve the effects that are needed. My point is not that the Fed doesn’t have the tools to curb inflation. The Fed almost certainly retains the ability to suppress inflation but doing so may require much higher interest rates, a much larger decline in asset prices, and a much deeper economic slowdown than policymakers have recently been willing to accept. My question is whether they have the political will.

I wanted to post this before incoming Federal Reserve Chairman Kevin Warsh chaired his first FOMC meeting. The Washington Post’s editors urge the FOMC to make curbing inflation their highest priority:

Wednesday’s announcement of 4.2 percent inflation in May, up from 3.8 percent in April, is the worst reading from the Labor Department in three years. Prices are again rising at more than double the Federal Reserve’s target, but this isn’t an unsolvable problem.

and

Monetary policy can help. The Federal Reserve will have its first meeting with Kevin Warsh as chair next week. The markets expect interest rates to hold steady but are now pricing in an increase later this year. In other words, investors are expecting Warsh to be independent, as he’s promised, and resist any outside pressure from Trump.

The editors of the Wall Street Journal are wary:

The core rate is still too high, but its decline to 0.2% from 0.4% in April suggests the oil shock isn’t spreading into the broader economy, at least so far. This is ammunition for those who think the Federal Reserve should look through the oil price shock when its Open Market Committee (FOMC) meets next week.

That’s the tough call for new Fed Chair Kevin Warsh as he faces FOMC members who may want to raise interest rates based on the move in overall consumer prices. Count us in the hold rates steady camp.

A rate hike doesn’t seem warranted until price increases start to spread beyond energy, and no one knows when the Iran war will end. The oil shock is a blow to economic growth, and it doesn’t need the Fed raising the price of borrowing to compound the blow.

This isn’t a repetition of the Fed’s happy talk in 2021 that inflation was “transitory.” That era’s inflation was caused by excessively easy monetary policy that accommodated blowout federal spending. The FOMC didn’t move its target interest rate from near-zero until March of 2022, if you can believe it. Inflation hit 9.1% on an annual basis three months later.

Today the fed funds rate is 3.5% to 3.75%. Inflation vigilance is always necessary, but caution may be the better part of that vigilance given the energy price shock.

That raises a question in my mind: how? How would the Fed lower inflation? To their credit the WaPo editors give at least a hat tip to fiscal policy as a driver. We’ve seen this game before—monetary policy and fiscal policy pulling in opposite directions.

More seriously, when Paul Volcker raised interest rates to curb inflation it was almost 50 years ago. The U. S. economy was very different than it is now. Today interest on the public debt is fully two orders of magnitude higher than it was then. Interest on the debt is the single largest item on the federal budget, the second highest if you ignore debt the government owes to itself. Higher interest rates would make that higher, perhaps not immediately but it would make it higher. The makes fiscal policy and monetary policy pulling in the same direction all the more important. When federal debt is very large, monetary tightening and fiscal consequences become increasingly intertwined, making coordination problems more severe than they were in Volcker’s era.

But we’ve clearly decided to monetize the debt. Persistent deficits create political pressure for lower interest rates and make inflation a tempting way to reduce the real burden of debt. That means inflation is “baked in” to our system. We’re going to have inflation for the foreseeable future. So, how? The incentives haven’t changed. Why will the Congress act differently than it has?

I would be remiss in not mentioning David Malpass’s remarkable op-ed in the Wall Street Journal. Here’s a snippet:

The Fed needs to be reformed. It hasn’t been achieving price stability. It has lost hundreds of billions of dollars after growing in the wake of the 2008 financial crisis. Its ample-reserves policy crowds out small businesses and market innovation. Its purchases of government bonds feed inequality.

The most pressing issue concerns the Fed’s obsolete economic models, which punish growth. When the economy or jobs grow fast, the Fed’s Keynesian models prescribe rate increases. These models are built on the view that growth causes inflation and the Fed should enforce a low speed limit.

The Fed’s inflation targeting sends wrong signals. Inflation is subject to distortion from fluctuations such as the current oil price shock and China’s dumping in the 2000s, which kept U.S. inflation artificially low, contributing to the 2008 financial crisis. The inflation model looks backward, misjudges regulatory burdens, undervalues energy production and ignores changes in the value of the dollar. It can’t keep pace with our fast-changing digital economy.

The movie The Red Shoes ends with the prima ballerina having committed suicide and her shoes being carried about the stage to where she would have been by a cast member. I have never seen an opinion piece that more closely emulated The Red Shoes. Mr. Malpass seems to have forgotten the interest rates during the Reagan Administration—they were the highest they had been in memory. If there is one lesson from the Reagan Administration it is not the importance of growth. It is that robust growth is not incompatible with high interest rates. So, again, I ask Mr. Malpass, how? If growth never creates inflationary pressure, why did inflation accelerate in the late 1960s, 1970s, and again after the extraordinary fiscal and monetary stimulus of 2020–21?

There has been a flood of columns, editorials, and opinions about Elon Musk’s growing wealth. Rather than reviewing them, I’ll offer my own view.

I don’t care that Elon Musk is rich. I don’t care that he makes a great deal of money. I do care about how he has made that money.

I agree that Mr. Musk is a genius but I think his genius takes a form that is not widely recognized. He is neither an engineering genius nor a political genius. His real talent is an extraordinary ability to see where government policy, public institutions, and society are headed and to position himself ahead of those trends.

To paraphrase Bill Clinton, Mr. Musk repeatedly figured out which way the parade was going and got out in front of it.

It is a pattern. He did it first with PayPal, then with Tesla, and then with SpaceX. The common factor is not government contracts, subsidies, or tax policy. Those are merely different mechanisms. The common factor is that Mr. Musk recognized emerging government priorities before most of his competitors and built businesses that would benefit from them.

His companies might well have succeeded without government action. They almost certainly would not have succeeded as quickly.

That distinction matters. Human lifespans are finite. Capital compounds. If PayPal had grown at a tenth of the rate it did, Mr. Musk would not have become a billionaire until much later. If Tesla and SpaceX had developed more slowly, he would have accumulated wealth, influence, and opportunities at a very different pace. The acceleration mattered.

Those who respond to Mr. Musk’s wealth by demanding higher taxes are missing the point. To the best of my knowledge, no millionaire in American history has ceased to be a millionaire because of higher taxes. The same is true of billionaires. I see no reason to believe the world’s first trillionaire, should one emerge, will be any different.

The lesson is not that Elon Musk should be poorer. The lesson is that government should think carefully about the incentives it creates. If immense fortunes can be built by correctly anticipating the direction of public policy, then we should expect more people to devote their talents to that pursuit.

Mr. Musk did not create the parade. He saw where it was going and got there first. He has now done that three times.

My vision continues to be frustrating for me. My distance vision is better with the off-the-shelf glasses I purchased but is become less clear rapidly. My close vision is always fuzzy. I can only read by closing my left eye and concentrating. It’s exhausting which cuts into the voluminous reading to which I have become accustomed.

My post-operative appointment with my ophthalmologist is next week. I hope I will receive a prescription for glasses that will provide adequate vision most of the time. Until then, as I noted, it’s a strain and strain is something I should avoid while my eyes heal.

I must say that my self-imposed restriction of avoiding commenting on the politics and elections of states in which I do not reside and avoiding commenting on the politics of other countries is beginning to chafe. All I will say is something I have said before.

The ethnic states of Europe and that includes the United Kingdom, France, and Germany as well as San Marino and Albania have challenges before them different from anything that we face in the United States. By “ethnic states” I mean states identified with a particular historic people, language, and culture, however they choose to define citizenship. I don’t know how they can adapt and won’t offer my unwanted advice on what they should or should not do.

Similarly, I avoid talking about political primaries in California, New York, or Tennessee. I don’t live there and I less about their political problems those who do other than what I believe based on first principles. There are some administrative rules that appear universal. For example, they should prune their voting rolls. Based on my more than 20 years as an election judge in Chicago, they undoubtedly include people who been dead or otherwise departed for years, even decades.

I’ve noticed that the reaction to the appointment of the temporary Director of National Intelligence is overwhelmingly negative. The editors of the Washington Post characterize the appointment of William Pulte as a “terrible choice” and remark:

Somehow President Donald Trump managed to find someone less qualified than Tulsi Gabbard to replace her as interim director of national intelligence. Gabbard is a former congresswoman and combat veteran. Bill Pulte, named Tuesday by Trump, is a partisan sycophant who has none of the “extensive national security expertise” that the law requires of a DNI nominee.

They characterize him as a “sycophant”. The editors of the Wall Street Journal are just as critical:

Mr. Pulte, a housing scion, at least had some qualifications to regulate the government housing giants, Fannie Mae and Freddie Mac. He has no experience with intelligence or national security.

His main appeal to Mr. Trump is that he supports the President’s Iran policy and is known for his personal loyalty to Mr. Trump. That’s better than Tulsi Gabbard, the recent DNI who resigned in May to attend to her ailing husband. But it was no secret in Washington that Ms. Gabbard, a long-time isolationist, had lost influence in the White House.

They echo a point that I made:

Its first director, John Negroponte, quickly hired hundreds of people who duplicated the job of the analytical side of the CIA. It’s now a vast political bureaucracy. James Clapper, Barack Obama’s DNI, was a political partisan credibly accused of misleading Congress about the data the government collected on American citizens. He also contributed to the false Russia-Trump collusion narrative in the 2016 election and 2017 that did so much damage to public trust in government.

The intelligence state is large enough without the DNI. The CIA, the Defense Intelligence Agency and the rest can do the job. In a better world, Congress would use Mr. Pulte’s appointment to eliminate the DNI and send its staff back to other agencies. DOGE could have made a valuable contribution if it had looked at the intel world and recommended such a streamlining.

The recurring problem is not who occupies the office but that the office lacks direct command authority over most of the agencies it ostensibly coordinates. Every DNI, regardless of competence, faces the same structural limitations. DNI is a a sort of “matrix management” position. Matrix management only works for otherwise strictly hierarchical organizations whose members are subject to the UCMJ, i.e. the Department of Defense Department of War. It should be abolished.

The position was established in 2004 in the aftermath of 9/11. It was, as I noted at the time, a mistake then and is a mistake now. Actually, the DNI combines the disadvantages of two organizational forms. Like a matrix manager, the DNI lacks direct command authority over the agencies it coordinates. Unlike a matrix manager, the DNI possesses a large independent bureaucracy that duplicates functions already performed elsewhere. If every discussion of the DNI rapidly devolves into arguments about presidential loyalty, political trustworthiness, and ideological alignment, perhaps the office is structurally political rather than operational.

We now have two decades of evidence. Has the DNI reduced politicization? No. Has it reduced bureaucratic rivalry? No. Has it prevented intelligence controversies? No. What it has unquestionably done is create another large intelligence bureaucracy.

I do not think that William Pulte is the proper appointee to the position of Director of National Intelligence (DNI) but my reasoning is somewhat different from what either the Republicans or Democrats have presented.

Under ordinary circumstances arguing for a “seasoned intelligence professional would be appropriate but present circumstances are not ordinary. Ignore Trump. How should an ordinary, prudent president proceed? The problem is that we do not know that the DNI has been “weaponized” by Democrats and we do not know that the DNI has not been “weaponized” by Democrats.

We do know that the intelligence itself was sound (the bipartisan Senate committee found that) and we do know that the procedures followed were quite unusual. We do not know whether the decision to commission the intelligence was politically motivated or not.

Under the circumstances the ideal candidate for the position would combine independence from the intelligence bureaucracy with sufficient knowledge to evaluate its practices. Such individuals are rare and bipartisan trust may be impossible to achieve in the current political climate.

To my eye William Pulte has not demonstrated the combination of independence, credibility, and commitment to evidence that the current moment requires. The country does not need a defender of the intelligence community nor does it need a prosecutor of the intelligence community. It needs someone capable of determining and convincing the public what actually happened.