Ben Bernanke Vs. Unexpected Populism

There are a good number of political issues where the general American public forms strong opinions despite being very, very uneducated about the issue. Global warming, the complexities of foreign policy, or pretty much anything about economics come to mind. A recent example of this unfounded consensus that I find fascinating is the public’s disdain with the Federal Reserve.

From what I know about it, the Federal Reserve does more harm than good. What sets the Federal Reserve apart from something like the DMV though is that it is probably second only to the President in terms of the most powerful entity in the world. By dictating the money supply in the world’s largest economy, something the U.S. government legally has a monopoly on, the Federal Reserve has the power to make a lot of people and a lot of people pissed off – without much regard for that subtly undetected thing called inflation.

But the complexities of monetary policy have meant that the Federal Reserve usually does a lot of things that Americans have no idea about. Interest rates, reserve ratios, derivatives? I don’t think there are many people that can actually give you an educated and legitimate opinion on whether the Federal Reserve is acting well or poorly. Ron Paul introduced a bill to “audit the Fed” to make the Fed be more transparent about its operations. In this isolated occasion, the public seems to be in agreement with Paul. Some progressive bloggers here and here blame Bernanke for the state of the economy (why?). Every Republican member of the House supported Paul’s bill.

I voted for Ron Paul in the last Republican primary because I thought he was, at least, a breath of fresh air on the political landscape. I am in no position to make a qualified judgement on auditing the Fed, but what I will say is that most economists (aka the people who study monetary policy for decades as their job) think Bernanke is doing a great job. What I can say is that anyone who blames Bernanke for not creating enough jobs is delusional. Rates are close to zero and he’s doing everything in his power to stimulate the economy (too far, according to Ron Paul and a lot of other people).

I usually don’t like supporting a certain side of an issue with a blanket statement of “the experts say so”, but I do think when it comes to the populism against the Federal Reserve, most of the anti-Fed activism is quite unfounded.

 

The Spirit of Thanksgiving

I realize I’m a little behind on this, but as Swarthmore goes into finals week I’m already nostalgic for Thanksgiving.  Thanksgiving is about a lot of things (reflection, family, gratitude, football), but this really rubbed me the wrong way: Jonah Goldberg likes Thanksgiving because  he doesn’t have to pretend to care about non-Americans.

• [Thanksgiving is] America’s only nationalist holiday. The Fourth of July, President’s Day, and even Veterans’ and Memorial Day are celebrations of the nation-state created by the American founding. In short, our other holidays are about patriotism, not nationalism. Thanksgiving meanwhile celebrates a pre-constitutional relationship with the Almighty. I wouldn’t quite say it’s a pre-modern or blood-and-soil holiday, but it is about Providence and the great gift being here, in this place, is. A little mystic nationalism is a good and healthy thing because it provides the emotional sinew that helps us hold onto our patriotism. This country is great and good for many reasons. But one reason for its greatness,  too often forgotten, is that it is ours.

• It’s all about family, formal and informal. The Thanksgiving table is one of the few times every year where you can define your own little nation-state, your own little Hobbit warren, in your own little Shire. I’m not saying that we lose our concern for our fellow man, but we are reminded that life’s joys come not from abstract people, but real ones.

The sentiment that a reason for our country’s greatness “is that it is ours”, which is regrettably widespread among Americans, is one of the most destructive attitudes in our political culture.  It causes people to defend and support unjust wars and immoral policies  and state actions that can only be justified on the grounds that they are ‘ours’.  How many soldiers have needlessly died because of the many policymakers and political elites who share Goldberg’s affinity for “mystic nationalism”?  This nationalism crowds out intelligent discussion in our public discourse and should be done away with.

 

Bush Should Have Gotten the Noble Peace Prize

No, not really.

But in light of Obama’s recent troop increase, it doesn’t sound that implausible. Obama is sending 30,000 more troops to fight the war in Afghanistan. Forget what one thinks about the legitimacy of said war, just think instead what would have happened if Bush had done this. Everybody left of center would be up in arms (they were). Bush is hated by all of the world, Obama wins the Peace Prize. Such a fact proves, I think, how most people judge politicians not on their actual policy actions but merely on their personality and party platform.

Don’t believe me? Take this fact: Bush gave more aid in terms of money to Africa than any other President in American history. Throughout his two terms, did Republicans criticize him for all of this superfluous spending that was essentially international welfare? No. Did Democrats praise him for his efforts? No. Why? The only reason I can think of is that both sides already had made up their minds about Bush, no matter what he did. Republicans decided they’d trumpet him as a fiscal conservative – which he wasn’t – and Democrats would paint him as an unsympathetic prick.

I always find myself in an awkward position when I am defending Bush in any context. I really dislike(d) the guy’s policies. But the inconsistency of most of the population regarding his actions is laughable. Bush was more liberal than a lot of Democrats in terms of immigration, he increased federal spending on education an absurd amount, spent more on the arts than any other President, and except for tax cuts, wasn’t really a fiscal conservative. But most progressives, when asked for a synopsis of the man’s Presidency, will probably give a formulaic regurgitation showing a southern oil man who cares about nobody but the rich. Then you tell them about how he’s relatively liberal on immigration. Or how that social security privatization idea that sounds good them was pushed by, uh, him.

Bush should not get the Noble Peace Prize. Ever. But sometimes it’s important to judge Obama with the same critical lens that we viewed Bush through for 8 years.

 

Global Warning

This guy was on the IPCC and is a distinguished professor at M.I.T. Because of this, I’m going to assume he’s pretty credible. So why is he contradicting everything else I seem to hear? Maybe it’s like if a biology professor at Princeton told me evolution was a myth: I’d just think he was an exceptional kook and irrelevant compared to the other 99.99% of people in his field. Either way, something fishy is going on. My best bet is that global warming, while a problem that needs to be urgently solved, is not as catastrophic as movies like The Day After Tomorrow make it out to be.

 

Virginia Smoking Ban

A smoking ban went into effect today in Virginia. Even in hookah bars, I kid you not. I’d love to hear an argument in favor of that that does not wreak of “prohibition”.

 

Incentives Change How We Act: Part 842

We all agree that things like prices change individuals’ behaviors regarding things like purchases at the supermarket. But many people are skeptical to extend the concept of incentives to things that involve more ‘ethical’ acts like organ donations. To this I say pshhh. Markets are efficient and give desirable outcomes over government intervention in essentially every area. Equally, the market for blood donations is easily swayed by shifting incentives, as a recent paper has pointed out.

 

Nuclear Option

With world leaders meeting in Copenhagen to discuss how to tackle climate change, support for nuclear power seems to be on the rise by even the peskiest of environmentalists. From a bystander with limited knowledge’s point of view, nuclear power, though not a silver bullet for solving environmental problems, seems to be a good feasible solution to reducing carbon emissions in the least costly way.

The plants are expensive. The mishandling of it can be more than lethal. Putting nuclear power in the hands of Holocaust-denying lunatics doesn’t make the world safer. But I think environmentalists need to stop believing that windmills and solar power can fuel a world that is seeing energy demands soar. The eradication of poverty by the hundreds of millions in Southeast Asia in the last twenty years accompanies with it the inconvenience that those people need power. A renewable, perfectly clean, abundant, cost-efficient, aesthetically pleasing, and quickly attainable energy source has yet to be found. So until that perfect thing is found, let’s explore the best alternatives.

 

Housing Bubble Didn’t Just Burst, It Evaporated

The Detroit Lions used to play their games in the Silverdome. Although it was originally built in 1975 for the cost of $55.7 million, the Silverdome sold today for $583,000. That’s not a typo. Detroit’s problems just keep getting worse:

Michigan’s economic woes are well known. The state’s unemployment rate is 14.3 percent, well above the national rate of 10.2 percent. Two of the state’s Big Three automakers went through taxpayer-funded bankruptcy. Heck, the Lions even went 0-16 last year.

Pontiac, the Detroit suburb where the Silverdome is located, is even worse off. The 60,000-person city is in dire straits. It could no longer afford the $1.5 million upkeep on the Silverdome, which has been largely empty since the Lions left for their new Ford Field in 2002.

 

Unintended Consequences: Australia Edition

Economies are complex systems, so actions that individuals, and especially governments, take often have unforeseen effects.  Here is Air America reporting on recent credit card reforms in Australia:

In 2003, after years of lobbying from merchants, the Australian central bank cut Visa and MasterCard’s interchange fees in half. Those lower fees cost the credit card giants about 1 billion Australian dollars.

But banks and credit card companies are famous for their ability to find new revenue streams, and soon they turned to consumers to make up the difference. Australian banks cut credit card perks and shrunk rewards programs, like frequent-flier miles. They ramped up interest charges and raised annual fees.

The new law passed Down Under also made it possible for merchants to impose surcharges on transactions made with a credit card and even though their interchange fees had been cut in half, many Australian companies began do to just that. In some cases, these new fees exceeded the old ones.

It would be great if the US Congress would study the Australian example as it considers passing additional reforms to supplement the CARD act from last spring.  I hope that we can at least avoid the brain dead economic free-lunchism  of an interest rate cap, which is unfortunately but unsurprisingly being pushed by my own state’s junior senator, Bernie Sanders, who has proudly been ignoring basic economics ever since the people of Burlington were foolish enough to elect him mayor in 1981.

 

Assorted Links

• Arianna Huffington: Is current high unemployment Obama’s Katrina?
• Gary Becker on China’s decisions regarding its currency.
• Youtube: The future of the Republican Party (hopefully not, for everyone’s sake).
• Steve Chapman: Chicago politicians’ hypocrisy on guns.
• David Rogers: War should be ‘Pay as You Fight’.
• Paul Krugman: Stop worrying about the deficit.
• Ian Ayres: California’s Tuition hikes might not be so bad after all.