Opinion

Nicholas Wapshott

Yellen shows her hand

Nicholas Wapshott
Apr 19, 2014 05:19 UTC

The difference between the Federal Reserve Board of Chairwoman Janet Yellen and that of her immediate predecessor Ben Bernanke is becoming clear. No more so than in their approach to the problem of joblessness.

Bernanke made clear that in the post-2008 economy, his principal goal was the creation of jobs, not curbing inflation. He settled on a figure, 6.5 percent unemployment, as the threshold that would guide his actions.

While remaining true to the spirit of Bernanke’s principal goal, Yellen and the rest of her board refined the target in their meeting on March 18 and 19, a change in approach that at first sent the wrong signal to the stock and bond markets. At the press conference following the meeting, Yellen said she would not be raising interest rates “for a considerable time,” which could mean “something on the order of around six months.”

The Fed decided it would no longer be tied to the “quantitative” 6.5 percent jobless figure, which is fast being approached. The February unemployment numbers, for example, are 6.7 percent. After listening to Yellen, the markets assumed — wrongly — that the Fed was about to abandon the jobless target, end quantitative easing and start raising interest rates.

That misreading by the markets was evidence of what might be called the “Thumper Rule” for Fed chairmen, named after the rabbit in Walt Disney’s Bambi, whose father told him, “If you can’t say something nice, don’t say nothing at all.” To avoid saying anything, Yellen’s wily predecessor at the Fed, Alan Greenspan, only spoke in gobbledegook.

The EU-U.S. love-hate relationship

Nicholas Wapshott
Apr 11, 2014 17:51 UTC

The elaborate gavotte between the American and European economies continues.

While the Federal Reserve has begun to wind down its controversial quantitative easing (QE) program, the European Central Bank (ECB) the federal reserve of the eurozone, has announced it is considering a QE program of its own.

It is a belated acknowledgement, if not an outright admission, from Mario Draghi, president of the ECB, that five years of the European Union’s austerity policy has failed to lift the eurozone nations out of the economic mire. The ECB has presided over a wholly unnecessary triple-dip recession in the eurozone and sparked a bitter rift between the German-dominated European Union bureaucracy and the Mediterranean nations that must endure the rigors imposed from Brussels. All to little avail.

If there are any “austerians” left standing, let them explain this. Ignoring the cries of the unemployed and those pressing for urgent measures to promote growth in Europe, the ECB blithely imposed its punishing creed, arguing that there would be no gain without pain. The result? Little gain, endless pain.

Crimea: Too small to matter

Nicholas Wapshott
Apr 1, 2014 16:41 UTC

Crimea is permanently lost to Russia.

That is implicit in President Barack Obama’s remarks about where the Ukraine crisis heads next; the terms of the Paris talks between Secretary of State John Kerry and the Russian Foreign Minister Sergey Lavrov, and the West’s rejection of military action to hurl back the occupying Russian forces.

That Crimea is gone forever is also the view of former Defense Secretary Robert Gates, who declared, “I do not believe that Crimea will slip out of Russia’s hand.”

It is now generally accepted in Washington that short of sparking a shooting war, Crimea is lost and will now always be Russian. President Vladimir Putin, presiding over an economy of $2 trillion, barely equal to California, has roundly defeated the United States and the European Union, with a combined worth of more than $34 trillion.

Rand Paul: The pied piper

Nicholas Wapshott
Mar 24, 2014 19:35 UTC

The warm welcome that Senator Rand Paul (R-Ky.) received from an audience of mostly young Americans at the University of California, Berkeley, last week should send a shiver down the spines of Democrats.

Paul was in the Bay Area ostensibly to complain about the National Security Agency’s snooping on Americans. He described “an intelligence community drunk with power, unrepentant and uninclined to relinquish power.” The crowd applauded as he said, “What you do on your cell phone is none of their damned business.”

His real purpose, however, was to demonstrate to Republican primary voters that he alone is capable of extending the party’s reach beyond its current narrow boundaries. He likened the Republicans to a tarnished brand that had finally turned itself around. “Remember when Domino’s finally admitted they had bad crust?” he said. “Think Republican Party. Admit it. Bad crust. We need a different kind of party.”

Will secession seal Putin’s doom?

Nicholas Wapshott
Mar 20, 2014 06:00 UTC

Russian President Vladimir Putin chose a referendum on secession, attended by 15,000 menacing troops, as the means to pry Crimea away from Ukraine. This choice runs directly counter to his long-held beliefs about the need to maintain the integrity of his nation at all costs.

With the results in, it may seem that Putin has achieved exactly what he set out to do: restore Crimea to Russia after 60 years as part of Ukraine. But promoting the principle that secession can be legitimate on the basis of a single hastily-arranged plebiscite in the middle of a military occupation provides a precedent that may prove Putin’s ultimate undoing.

Until Putin annexed Crimea, secession was the dirtiest word in his playbook. He watched, appalled, as one after another former Soviet republic opted for independence from Russia. He has repeatedly punished those brave dissenters who dare advocate leaving the Russian federation.

European leaders show their weakness

Nicholas Wapshott
Mar 10, 2014 22:24 UTC

 

The European Union, at the forefront of the hostilities between Russia and the West, is in a bind.

It has belatedly adopted Ukraine as one of its own. Yet the EU economy is so frail,  thanks to its beggar-thy-neighbor economic policies, that it is reluctant to use financial and trade sanctions to punish Russia for occupying Crimea and threatening to occupy the eastern part of Ukraine.

Even if the EU appeases Russian President Vladimir Putin’s territorial expansionism and allows Crimea to be annexed, it is going to pay a heavy political and economic price. Had German Chancellor Angela Merkel, who drives the European enlargement project, and the International Monetary Fund been more clear about wanting Ukraine to eventually join the European Union, and more generous in their dealings with the nascent democracy there, they would have saved the Ukrainian people a lot of suffering, the world a deal of agony — and the EU a lot of money.

The fight over the best form of defense

Nicholas Wapshott
Mar 4, 2014 15:57 UTC

With Europe on the brink of a shooting war over Russia’s occupation of Ukraine, it may seem an odd time to propose a sharp reduction in the size of the U.S. Army. But that is what Defense Secretary Chuck Hagel will do Tuesday when President Barack Obama’s new budget request to Congress is published.

Hagel wants to reduce the Army to its smallest size since 1940 — before Japan’s surprise attack on Pearl Harbor propelled  the United States into World War Two. Hagel’s plan would see the Army shrunk to 450,000 regulars, slightly less than the 479,000 troops we had in 1999, before we rapidly expanded after the 2001 al Qaeda attacks and we embarked as well on the optional war to free Iraq from the despot Saddam Hussein.

Obama’s appointment of Hagel, a former moderate Republican senator from Nebraska, was canny. Democrats have often employed Republicans in Defense to disguise what is often regarded as a weakness on military matters by the Democratic Party, which has become the natural home to the nation’s pacifists.

Where is Ukraine’s Lech Walesa?

Nicholas Wapshott
Feb 24, 2014 20:05 UTC

The popular pro-Western revolution in Ukraine that has deposed pro-Russian President Viktor Yanukovich is part of a far wider and longer historical tug-of-love between the West and Russia.

Who is chosen to succeed Yanukovich will decide whether it is possible to forge a permanent Ukrainian settlement that will satisfy both the European Union and Russia. The prospect right now looks bleak.

As candidates start lining up for the elections slated for May, no one has emerged with the suitable stature, political sophistication, public integrity and plain honesty needed to put to rest a lingering dispute about national identity that has cast a long shadow over the politics of Europe. Tensions between Russia and the Western European powers, particularly Germany, France and Britain, have been rumbling for centuries.

Comcast: How to win at monopoly

Nicholas Wapshott
Feb 18, 2014 17:51 UTC

The proposed merger between the cable television interests of Time Warner Cable and its principal rival, Comcast, demonstrates a neat example of how the theory of the free market differs so radically from the marketplace in practice.

In the storybook version of how business works, companies compete for customers by offering rival services and the company with the best products and prices wins. In this fairytale, everyone wins. Customers benefit from competition through a better choice of products and cheaper prices, the good companies take a handsome profit and prosper, and the bad companies go to the wall.

In real life, this heroic version of how the world spins is far less noble. In the mythical version of the free market, companies fiercely compete with each other for market share by trying to outdo each other in pleasing customers. In reality, companies tend to forego the difficult and expensive art of wooing customers from a rival and resort to buying the competition. Buying business is far easier than earning it.

Why you should ignore the latest attack on Obamacare

Nicholas Wapshott
Feb 10, 2014 22:17 UTC

The debate around the Affordable Care Act has been mired in muddle and misinformation from the start. The latest example of deliberate obfuscation by universal healthcare’s opponents comes with publication of the Congressional Budget Office’s latest glimpse into the future, “The Budget and Economic Outlook: 2014 to 2024.”

All economic forecasting comes with a health warning — peering into the future is as riven with unforeseen danger as any other science fiction. The CBO, however, offers a cool-headed attempt to equip lawmakers and government officials with an estimate of how the economy may perform in the years ahead. It is not intended to back one side of the Obamacare debate over the other.

The section that caused all the fuss is Appendix C, “Labor Market Effects of the Affordable Care Act: Updated Estimates.” The key finding tripped headlines screaming “ObamaCare could lead to loss of nearly 2.3 million US jobs” (Fox News) and caused the Wall Street Journal to dub the ACA “The Jobless Care Act.”

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