The Wheat from the Chaff

January 26, 2016

Sometimes you’ve got to read a lot of op-ed to find a few sentences that are worth considering. I found these acorns in a Wall Street Journal op-ed from Gerald O’Driscoll, Jr.:

The Fed’s monetary policy of extraordinarily low interest rates helped create the asset bubbles in stock and commodity prices that are now bursting. Low rates also distorted investment decisions.

The second sentence isn’t at all controversial. That’s exactly what Fed policy over the last eight years has been intended to do. And the first sentence flows from the second. When you combine excess Chinese demand with what’s called “accommodating” Fed policy, you get a commodities bubble. That’s a lot of deadweight loss.

I don’t think the foreign debt China owes is likely to be troublesome for China. No one knows how much it is but it’s probably a drop in the bucket compared to the $28 trillion of debt in the country.

It will be more difficult for other, smaller economies.

Meanwhile, IMO in the long run the deadweight loss will probably be more problematic but in the short run foreign debt is more likely to cause the global “meltdown” the op-ed is purportedly about.

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    Speaking of distortion, how about this from the WashPo:

    The U.S. was supposed to leave Afghanistan by 2017. Now it might take decades.

    The new American outlook marks a striking change for Obama, who campaigned on a promise to bring American troops home and has said repeatedly that he does not support the “idea of endless war.” And it highlights a major shift for the American military, which has spent much of the past decade racing to hit milestones as part of its broader “exit strategy” from Afghanistan and Iraq. These days, that phrase has largely disappeared from the military’s lexicon.

    In its place, there is a broad recognition in the Pentagon that building an effective Afghan army and police force will take a generation’s commitment, including billions of dollars a year in outside funding and constant support from thousands of foreign advisers on the ground.

    “What we’ve learned is that you can’t really leave,” said a senior Pentagon official with extensive experience in Afghanistan and Iraq who like others spoke on the condition of anonymity to describe internal discussions. “The local forces need air support, intelligence and help with logistics. They are not going to be ready in three years or five years. You have to be there for a very long time.”

    Senior U.S. commanders have also been surprised by al-Qaeda’s resilience and ability to find a haven in the Afghan countryside, as well as the Taliban’s repeated seizure of large tracts of contested territory.

    Good times, good times!

    Basically, this is Obamacare all over again. Obama slammed Hillary’s healthcare proposals in the primaries and then essentially adopted them once elected. Now he’s adopting McCain’s stance on Afghanistan taking 100 years to get it right.

    I expect to be on a full war footing in Iraq before the year is out….

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