by Chidem Kurdas
Cass Sunstein, the White House regulatory affairs chief, is going back to academia. It is not clear why he chose this particular time to return to Harvard Law School, leaving behind what looked like an experiment to implement the notions he advocated.
Has he made a difference as federal overseer of rulemaking? The record is at best mixed, at worst a prime example of how academic ideas can enable political hypocrisy. Continue reading
by Chidem Kurdas
A few days ago the House passed with a veto-proof majority the bill known as “audit the fed” or more plainly as H.R. 459, sponsored by Ron Paul. If it became law, it would open the Federal Reserve’s policy deliberations and decisions, certain operations and dealings with foreign banks and governments to scrutiny by the Congressional Government Accountability Office. The GAO currently audits the Fed’s financials but not its policy making.
A number of House Democrats supported the bill, though party chieftains are against it. The critics of the measure, prominently including Fed Chair Ben Bernanke, argue that it will open the way to political interference with monetary policy, which is best conducted on purely economic grounds.
Both sides have a valid point. Continue reading
by Chidem Kurdas
The case made for minimal government by Milton and Rose Friedman in their 1979 book, Free to Choose, has been debunked, according to Berkeley professor Brad DeLong. Basically, he avers that the Friedman program has been tried and failed. As a commentary on Friedman, this is outrageously misleading. But Mr. DeLong provides a revealing glimpse of the left-liberal mindset. Continue reading
by Jerry O’Driscoll
In today’s Wall Street Journal, David Wessel (“Capital” column, A5) revisits the question of whether current Fed policy is inflationary. He correctly states the Fed’s position is that inflation is caused by expectations. Inflation will stay low if people expect it to stay low. He quotes Fed Chairman Bernanke: “The state of inflation expectations greatly influences actual inflation and thus the central bank’s ability to achieve price stability.”
The Fed chairman of course has the causation precisely backwards. Continue reading
by Mario Rizzo
Chairman Ben Bernanke says don’t blame the Fed for rapidly increasing commodity prices and probable bubbles forming in many investment markets throughout the world. I am just doing what is necessary for a recovery in the US and that is in the interests of the world. (See “Bernanke Defends US Policies” Wall Street Journal, February 19-20).
The reality is different. Continue reading
by Mario Rizzo
Recently, there have been reports in the Wall Street Journal and the Financial Times that Ben Bernanke and others are concerned that banks have not been lending “enough” to small businesses. The accusation is that lending standards are too strict.
As Jack Hopkins, the director of the Independent Community Bankers of America, says in the WSJ article linked above:
“I keep hearing remarks that credit standards have tightened, and I don’t believe that… I need to make loans to survive, to make money.”
So what happened? The WSJ reports:
“Some lenders argued that current lending standards are a return to more-normal conditions following a period of laxity.” Continue reading
by Mario Rizzo
When people discuss the fiscal stimulus package of the Obama Administration they frequently use the word “Keynesian” to label those theories that support this policy. But the reality is that these theories owe more to the economist Abba P. Lerner than to John Maynard Keynes. Lerner, building on Keynes, called it “functional finance.” Lerner, unlike Keynes, was a socialist.
According to the theory of functional finance, periods of expansionary fiscal policy to fight recession must be later followed by contractionary (tightening) fiscal policy to prevent inflation, high interest rates and other forms of distortions. So the period of huge spending and deficits we now have must be gradually unwound as the economy recovers. Continue reading
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