What lessons do conservatives need to learn?12th April 2019
The Financial Times has a mildly critical piece on the monetary policy views of US conservatives, which still ends up being too generous:
Governing parties naturally gravitate towards lower rates as they seek re-election, and the change in mood within the broader party is in part a reflection of Mr Trump’s ability to make the political weather, said Michael Strain, director of economic policy studies at the conservative American Enterprise Institute.
“The president is an easy-money guy. That has an effect,” he said.
This is followed by a long list of examples of Republican politicians and pundits (like Moore and Cain) bashing the Fed’s so-called easy money policies under Obama, and then recently flipping the other way.
Then the excuse making:
Mr Strain and other analysts think there is more afoot than simply politics.
Ike Brannon, a senior fellow at the Jack Kemp Foundation in Washington, said conservatives who had warned of inflation during the great recession are now being forced to re-evaluate. . . .
“Steve [Moore] has figured out like the rest of us that inflation is no longer the spectre and we need to think about monetary policy with a different context,” Mr Brannon said. “People have learnt from mistakes that were made — including by people in the GOP a decade ago.” . . .
Doug Holtz-Eakin, who advised the late John McCain’s presidential campaign, said the post-crisis experience had been a salutary one for conservatives.
“Inflation dynamics are not what they used to be,” he said.
Actually, inflation dynamics are exactly what they used to be. Herbert Hoover’s QE did not cause high inflation, nor did the Japanese QE of the early 2000s. This was all clearly explained by market monetarists back in 2009, but conservatives were too attached to their outdated models to pay any attention. And why did this conservative reappraisal of monetary policy suddenly occur the moment Trump was elected?
In a few places the truth slips through:
Alabama senator Richard Shelby was among the Republicans who opposed Ms Yellen’s nomination to be Fed chair five years ago because he believed she was displaying a bias towards inflation and backed QE.
In February, however, Mr Shelby lavished praise on Jay Powell, Ms Yellen’s successor, saying it was “the best economy I’ve seen in my lifetime”. . . .
At the same hearing Patrick Toomey of Pennsylvania was the only Republican member of the Senate banking committee to raise concerns about a potential overhaul of the Fed’s inflation target under which the central bank could sometimes shoot for higher-than-target inflation.
In earlier times such a policy might have prompted far more anxiety among inflation hawks.
It’s not just that the GOP wrongly thought QE and low rates would create high inflation; in the early 2010s they actually favored low inflation. Now Toomey seems to be just about the only one left who is strongly committed to a policy of low inflation.
If the conservative movement were serious about learning from their mistakes in the early 2010s, they’d be looking at the group that provided the most accurate description of what was likely to happen, especially given that this group has a number of people with right-of-center views on economic policy issues. They’d be embracing market monetarism and encouraging Trump to nominate David Beckworth to the Fed, not Herman Cain and Steve Moore. Don’t hold your breath, as this not about getting to the truth.
PS. Off topic, I have a (probably stupid) question for those who know more physics than I do. The picture of a black hole that was recently released looks like a donut. Actual donuts only look like donuts when viewed from a certain angle. Does the black hole in M87 always look like a donut from any angle, or only from our perspective? For example, AFAIK the Ring Nebula only looks like a ring because we are viewing it down one of its poles.
PPS. Now that I realize just how big M87 is (a trillion stars, and presumably roughly as many planets), it makes our current debate over level vs. growth rate targeting seem rather unimportant. I’d guess there are already about 379 planets within M87 using NGDP level targeting. I’m assuming that 1/1000th of their star systems have life, and 1/100 with life have animal life, and 1/1000 with animal life have civilizations with monetary policy, and 3.79% of those with monetary policy have NGDP level targeting.
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