ScratchPad 2024-08-07 We: Barry Eichengreen Says the Fed Will Move "with Feet of Lead"; Moral Fault Attaches to Anyone Who Boosts the "New York Times"; & MOAR...
A scratchpad…
A scratchpad…
Economics: Smart words from Barry Eichengreen. The Fed is likely to move, as King Felipe II Habsburg liked to say, “with feet of lead”. But recognizing that makes the Fed’s decision not to reduce interest rates last December and January, and last week, even more puzzling. Did they seriously fear a reäcceleration of inflation? I do wish Barry would say more about what r* is, and how fast in an ideal good-data non-political world the Fed would move the interest rates it controls to r*:
Barry Eichengreen: The Federal Reserve will not let markets dictate a rate cut: ‘Speculation is rife, as always in the wake of such moves, that the Federal Reserve will cut interest rates…. FOMC members are likely to wait and see…. Even a larger than expected 50 basis-point reduction in September, is more likely to panic than settle the markets…. Preserving such independence as the Fed enjoys requires not attracting undue political attention and criticism, now or in the future. This in turn means that the Fed is likely to move cautiously and incrementally…. Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of ft.comft.com and ft.com. Email ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be ft.com. ft.com such independence as the Fed enjoys requires not attracting undue political attention and criticism, now or in the future. This in turn means that the Fed is likely to move cautiously and incrementally… <ft.com/content/0fc8ebb4-7e98-4276-940f-…>
Journamalism: Moral fault attaches to everyone who boosts the New York TImes in any way:
Journamalism: As in 2016, the New York Times goes all-in in putting both elbows on the scale for Donald Trump:
They are shamed out of this particular atrocity, eventually:
Although not before first going all-in on “it doesn’t matter because all our readers will vote for the Democrats anyway” and “you’re not complaining because it is false, but only because you want us to boost the Democrats”:
Public Sphere: In my view, this from Noah Smith is wrong. What is weird about modern American conservatives and makes them feel out of place is not that they are conservative, but that they are fundamentalist—falsely pretending to certain knowledge about the A & Ω that they simply do not have. They are thus not here for the mission of a liberal, open society:
Noah Smith: ‘To Republicans, being called “weird” is a bitter demonstration of their defeats in the culture wars of the 1990s, 2000s, and 2010s…. It was conservatives who felt out of place in the liberal knowledge-worker enclaves that my generation carved out. If you admitted to being gay in my hometown, you might have been shunned, or even bullied; in San Francisco in the 2010s, it would be as normal as admitting you were left-handed. But whereas if you declared that “Christ is King” in my hometown, you would have elicited nods of assent from most people, if you declared that in a room full of Silicon Valley tech workers in 2015, you might generate some uncomfortable stares. This inversion of ingroup and outgroup naturally dismays and rankles conservatives…. Their everyday experience is as a counterculture and an outgroup, but they still have the cultural memory <x.com/PalmerLuckey/status/1818363276549… of when they were the “normal” majority… <noahpinion.blog/p/whos-weird>
As I have lived it, it all depends on what follows the declaration that “Christ is King!”:
If it is “therefore I live a life of service—for when on the Last Day you ask “Lord, when saw we thee an hungred, and fed thee? or thirsty, and gave thee drink?” HE will answer “Come, ye blessed of my Father, inherit the kingdom prepared for you from the foundation of the world…. Inasmuch as ye have done it unto one of the least of these my brethren, ye have done it unto me”—then you get no more stares than if you are a believer in peyote, Freudian psychoanalysis, or Global Harmonic Convergence—rather less, in fact, as you will get more respect for actually acting locally.
It is only if you follow the declaration with “and if you do not agree, you and yours—especially the Uncoverted Jews—are damned for eternity in the Lake of Fire, that is the Second Death” that you get the uncomfortable stares.
It is the falsely pretending in public to certain knowledge about the A & Ω—knowledge that polite society has agreed since the Enlightenment that none of us will claim in public that we have—have gets you the stares.
It is the failure to maintain any sort of a non-fundamentalist conservatism that makes being conservative uncomfortable in America today, outside of its own enclaves.
But that is not at all new. That dates back to the Tudor Dynasty:. It was the fact that England in the 1600s was too tolerant and cosmopolitan that induced the Pilgrims and (some of) the Puritans to emigrate to New England, after all.
“But non-religious conservatives feel outgrouped as well!” you say. “How about Peter Theil? Isaac Perlmuttre? Sheldon Adelson? Marc Andreesen? Steve Schwartzman? Elon Musk? And company?” My response is they are (a) cryptogrifters, (b) plutocrat-grifters, (c) other grifters, or (d) Effective Accelerationists who make their own false pretenses to certain knowledge about the A & Ω—the Singularity as the Rapture of the Nerds, and so forth.
Remember David Frum? Not an unreligious man. Yet his pro-George W. Bush book The Right Man begins:
“We missed you at Bible study.” Those were, quite literally, the very first words I heard spoken inside the Bush White House. I had just stepped through the side door to the West Wing…. The reproach about missing Bible study was directed to [Michael] Gerson, not to me. Even so, it made me twitch…. The news that this was a White House where attendance at Bible study was, if not compulsory, not quite uncompulsory, either, was disconcerting to a non-Christian like me…. Gerson challenged me directly: Conservatives had been losing political battles for a dozen years. Was I really content to heckle from the sidelines as they lost again?… Yes, I was ready to join the adventure myself. I had been looking in from the outside for a very long time. If only for a little while, I would like to look out from the inside. Besides, it wouldn't kill me to know my Bible better…
And now, of course, David Frum is a political exile, a stranger in a strange land. He was thrown out of his perch at the American Enterprise Institute for his unwillingness to tell enough lies about the Republican Party’s then-priorities—an unwillingness to twist with the changing party line. Now he is one of the stalwart anti-Trumpers. Yet he is still very conservative indeed. He is just not a conservative who falsely pretends in public to certain knowledge about the A & Ω .
America’s movement conservatives will not become unweird until they become, shall we say, more catholic in their tastes?
References:
Frum, David. 2003. The Right Man: The Surprise Presidency of George W. Bush. New York: Random House. <archive.org/details/rightmansurprise00f…>.
Smith, Noah. 2024. "Who's Weird?" Noahpinion. July 31. <noahpinion.blog/p/whos-weird>.
Neofascism: I confess that I might have to revisit my opinion that JD Vance would be a stronger candidate for the Republicans than Trump—besides Vance being much smarter, much more reality-based, and less weird: a B-lister who might become an A-lister—and that as a result the Republican Party and Vance should push Trump off the island. Vance is turning out to be as weird as Trump. And instead of being a B-lister who might grow into an A-lister, he is looking like a C-lister who successfully pretended to be a B-lister for a while:
Marc Cooper: Coop Scoop: Oh Lord, Please Keep JD on the Ticket!: ‘The only real positive reaction to Trump’s televised melt down was, drumroll… from J.D. Vance who… sa[id] he loved what Trump said and found it “hysterical” <notus.org/trump-2024/jd-vance-kamala-ha…….Oh Lord… please do not dream of kicking J.D. Vance off the Trump ticket…. I know there’s some buyer’s remorse in the White House. And Kelly Anne Conway is in the doggie house accused of leaking nasty tid bits about old J.D. to that Fake Media. She’s just one big name in a whole faction of MAGGATS who fear that Trump has chosen the toxic vote-killing spawn of Sarah Palin as Veep (he has)…. I deeply suspect that Vance, having observed Trump and Trump followers, said to himself, “Hell, I can do that same act better than that old fart and I’m gonna replace him…. So there is an audience for J.D.’s incredibly twisted arguments about gender. It’s just small. And somehow it hasn’t dawned on him that women voters outnumber males and the former are already somewhat agitated by Clarence Thomas insisting he accompany them on OB-GYN visits. Not that smart a line, J.D. But great! Again, the more Vance the better… <thecoopscoop.substack.com/p/coop-scoop-…>
Economics: The FOMC vote, the FOMC statement, and Fed Chair Jay Powell’s opening statement at the press conference were all “hawkish”: all suggesting that the Federal Reserve is unconcerned with its current posture, in which monetary policy is substantially restrictive even as inflation draws close to the Fed’s target. And yet, after the press-conference Q&A, markets concluded that it would take inflation numbers over the next two months like those we saw last winter to keep the Fed from cutting interest rates in September. And so bond yields fell. It was a not-a-cut that Powell, in the Q&A, turned into an interest-rate cut:
Chris Anstey: Powell Says Downside Risk to Fed’s Labor Mandate Is ‘Real’: ‘As we have sometimes seen before, it really took a little while before we got the full picture of the state of play today. The FOMC statement, as many observed, was balanced. No specific mention of September. Powell’s opening statement was also quite balanced. Only in the back-and-forth with reporters did it come out that, yes, September is specifically on the table for a rate cut and that there was a discussion of reducing rates even today. We got a picture of a Fed that is clearly moving to lower rates at the next meeting, barring some unexpected series of data points that suggested a reacceleration in inflation alongside a continued solid job market… <bloomberg.com/news/live-blog/2024-07-31…>
CryptoGrifts: This rent-seeking failure mode of American governance is a powerful reason why it is not completely stupid to have a powerful Treasury Department with a first response of “no” to everything that is proposed. I do confess that I had not imagined that the next move in the BitCoin grift would be “have the U.S. government spend real money to prop up BitCoin’s price. Nor did I think the fallout from FTX and Sam Bankman-Fried would turn out to be the death of Web3 as a technology searching for use cases, and that crypto as a way to scam investors with Ponzi schemes would continue unabated:
Max Read: Why is Bitcoin even a campaign issue in 2024?: ‘It seems pretty obvious why RFK and Republicans would sense a natural affinity with highly online, fraud-adjacent, low-social-trust investors. But why are so many Democrats seeking conciliation with an “industry” that is cammy and reactionary down to its very architecture <maxread.substack.com/p/ragequit? For some Democrats there is, obviously, a financial interest, either direct (in the form of crypto investments) or indirect (in the form of crypto donors). But there is also the fact that, as Josh Brown points out <maxread.substack.com/p/ragequit, the politics of crypto suffer from an enthusiasm imbalance, and there just isn’t much short-term political upside to staking out an anti-crypto position: “As I mentioned earlier this summer, there is no anti-crypto constituency <downtownjoshbrown.com/p/crypto-conquere… outside of some lawyers and regulators inside the Beltway. Literally no one else cares. They may not trust crypto currencies or want to be involved with them, but they certainly do not get animated by their existence or start writing checks to the politicians who want to eradicate the space. All of the energy is on the other side… <maxread.substack.com/p/why-is-bitcoin-e…>
Journamalism: Wow! It’s a miracle! The New York Times shamed into, for once, deciding it’s a bad idea to keep slamming two elbows on the scale for Trump!:
CryptoGrifters: It did not take very much actual $$ to move Trump from “seems like a scam to me” to offering BitCoin holders a bit of hope for an actual use-case—selling their BitCoin to the federal government:
Duncan Black: The Strategic BitCoin Reserve: ‘There is something almost too perfect about the demand from The Bitcoin Community for the federal government to buy up hundreds of billions of their libertarian fake money. Gimmetarianism every time <https://www.eschatonblog.com/2024/07/the-strategic-bitcoin-reserve.html>
Harrison Miller: Bitcoin Reserve, Fire SEC's Gary Gensler, Trump Makes Campaign Vows: ‘Trump… promised to make the U.S. the "crypto capital of the planet" and create a bitcoin "strategic reserve"…. He also repeated his campaign promise to commute the sentence of Ross Ulbricht, founder of the online black market, the Silk Road…. Robert F. Kennedy Jr. also pitched a national bitcoin reserve while speaking at the conference Friday. Kennedy said he would sign an executive order for the U.S. Treasury to purchase 550 bitcoin a day. Kennedy's goal is to establish a strategic reserve of 4 million bitcoin to match the country's gold stake… <https://www.investors.com/news/bitcoin-price-trump-bitcoin-reserve-gary-gensler/>
Economics: Dan Davies observes a bad start to the Starmer-Reeves government in the UK:
Dan Davies: ‘Cancelling investment programs as a means of achieving a deficit target is bad. (It’s one of the key things they teach you in business school that investment and financing decisions have a separation theorem – you can’t make a bad investment good by leveraging it, and a good investment doesn’t become bad if it needs to be debt-financed). And so, if the news speculation is right, Chancellor Reeves is about to do a dumb thing…. The problem is that in order to continue with those projects, she would need to raise taxes. Not necessarily in a “how are you going to pay for it?” sort of way, but in the sense of “the overall contribution of the government sector to demand has to be neutralised to avoid making the budget inflationary” sense. And as it happens, our Chancellor has boxed herself in by pledging not to raise any of the big important taxes that could achieve this goal during the election campaign… <backofmind.substack.com/p/the-present-t…>
ُThe underlying principle, I believe, is this: do not make promises during an election campaign that commit you to do stupid policy afterwards.
Economics: Again: this is just stupid:
Nick Timiraos: A Fed Rate Cut Is Finally Within View: ‘Central-bank officials meet in the coming week looking ahead to a September rate cut to maximize chances of a soft landing…. One reason officials aren’t likely to deliver a cut this time despite the growing case for one is that it would likely be the first reduction in a sequence to recalibrate rates lower. Officials have been surprised by inflation in the past and want more evidence it is truly cooling before crossing the rate-cut threshold… <wsj.com/economy/central-banking/fed-nea…>
Cutting interest rates does not mean that you are committed to cut them again in a month, or two, or three. Alan Greenspan had no worries about cutting interest rates once in the summer of 1995 by 0.25%-points, waiting to see what would happen, deciding to cut them again in the winter of 1995-1996 by 0.50%-points, and then stop. Yes, the Fed has trained markets to believe that the first rate cut will be “consequential”. But it did not have to do this. It was a stupid thing to do. Moreover, Powell could reset by coming out of the FOMC meeting and say: “We view this situation like 1995. We have cut, we will look around, we might cut again, we might not. Remember, the next move after the winter of 1995-1996 was a single 0.25%-point increase in the spring of 1997…”
Neofascism: Martin Wolf joins me in saying: plutocrats think kleptocrats are their friends, but kleptocrats know plutocrats are their prey. I presume this column of Martin’s is directly addressed to Steve Schwartzman, Marc Andreesen, Peter Thiel, & Elon Musk—and others:
Martin Wolf: Naïvety about Trump threatens all our futures: ‘Plutocrats must understand that wealth is only a source of power if it is protected by a law-governed state…. Wealth is a source of power if and only if it is protected by a law-governed state. Under a despotism… wealth… is the tyrant’s plaything…. The US is not Russia. Donald Trump is not Putin. Nevertheless, Trump has made it clear that he would like to use the office of president to punish his enemies. Indeed, he has specifically referred to former representative Liz Cheney, President Joe Biden and vice-president Kamala Harris as his targets…. In the past, the power of the US president has been contained by a strong civic morality, by the decency of its senior political figures, by an independent judiciary and by independent political parties. But much of this has been eroded. Given all this, the re-election of Trump will have global implications… <ft.com/content/a3958b80-02d4-4d8c-a58c-…>
I am curious as to what more evidence is required for the non-insider economics community to "mark their beliefs to market" and accept that the Fed has an unwritten and seldom spoken third mandate:
3) Never under any circumstances take any action would would be positive for a Democratic President or Presidential candidate approaching re-election/election.
And with it a corollary:
3i) Do whatever can be done to assist Republican Presidential candidates without being too obvious about it.