James Pethokoukis

Politics and policy from inside Washington

Kudlow’s insight on Yellen

Mar 15, 2010 17:19 UTC

Larry Kudlow isn’t thrilled with the Janet Yellen Fed pick. This is the crux of his beef:

There is no evidence in Ms. Yellen’s public opinions or speeches that she might use a market-price rule — targeting commodities, gold, bond rates, or the dollar — as a forward-looking inflation (or deflation) signal. So the absence of a commodity- or dollar-price rule will continue at the Fed. Ben Bernanke doesn’t use a market-price rule, and Obama’s additional Fed appointees — whoever they are — will undoubtedly come from the same Phillips-curve camp.

Supply-siders like myself who believe that only market prices can provide accurate signals of the supply and demand for money are going to be very disappointed. If the Fed supplies more cash than markets want, the inflation rate can go up whether unemployment is high or low. We learned this painfully in the 1970s, when high unemployment was accompanied by high inflation.

The cure for high unemployment

Mar 15, 2010 17:14 UTC

Gary Becker gets straight to the point:

The only real remedy for the long-term (and other) unemployed is to have the economy grow fast, as it did after the severe recession in 1982 when unemployment peaked in December of that year at 10.8%, and then fell rather rapidly. There is no magic bullet to accomplish this, but I do believe it would help a lot if the leaders in Washington did not try to radically transform various aspects of the economy while we are recovering from a serious recession, and thereby magnify the high degree of uncertainty that is typically caused by a recession. Instead, they should be concentrating on fighting the recession, and stimulating long-term economic growth.

Me: During the 1980s, the economy notched 19 quarters of 3.5 percent GDP growth or better. In the 1990s, the economy also notched 19 quarters of 3.5 percent growth or better. So far this decade before the recession? Just eight. Or look at the number of quarters of “hypergrowth”—5 percent or better. (This was JFK’s GDP goal in the 1960s, by the way.) There were 12 in the ’80s, eight in the ’90s. So far this decade? Just a single quarter, the third quarter of 2003.

COMMENT

The high unemployment situation will not change.The jobs lost in manufacturing is the main cause of ub-nemployment and recession.
There is no sector which will replace manufacturing jobs.The West and America are blinded by cheap imports and Free Market. China and India are growing at tremendous rate and in another year they will acquire many sucessful Companies . Still time to wake up and encourage consumer goods manufacturing.Scrap minmum wage and lets compete.Make our own goods for our own benefit .we will all be happy working again

Posted by I A | Report as abusive

Inside Dodd’s financial reform bill

Mar 15, 2010 16:35 UTC

A few thought on the Dodd bill:

1) The key to the consumer finance piece is how much influence regulators have in rule creation. Giving some final veto power to the systemic risk council with a two-third vote is a joke. Would never happen.

2) Does the bill end TBTF? Only if you believe regulators would actually wind down a big firm — or multiple firms. This is why some want to make banks smaller preemptively.

3) Do Democrats even want a bill? Senate Banking Chairman Chris Dodd does, though some Ds would love to use a stalemate as a way of portraying Rs as pro-Wall Street and campaign on it for the November midterms.

4) And what about Fannie & Freddie, housing policy, Fed policy — all keys aspects of true reform which the Dodd bill and the whole “financial reform” process ignore.

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