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Good piece but I wonder what to think about these advisors and I also wonder how much Obama will take their advice?
Quote:
A central tenet of the economic thinking favored by Bill Clinton and his Treasury secretary, Robert Rubin, was that cutting the deficit lowers long-term interest rates, which in turn stimulates the economy. The Obamanauts are perfectly willing to accept the relationship between long-term rates and economic growth. But recent evidence suggests that low rates weren’t quite as central to the success of the Clinton years as they appeared, and that investments in infrastructure and R&D might be as important as deficit reduction. Not surprisingly, Obama plans to focus less on the deficit than Clinton did.
I wonder what to think of this? In this "coming age" of inflation, isn't a lower interest rate going to be desireable? Can we really judge economics on the last 7 years of "print, borrow and spend"? I think investing in infrastructure and R & D are important -- but I think cutting the deficit is too. And what happens if we lose our status as the world's reserve currency?
Are there other economic wonks out there? What do you think?
I dunno, but I don't think I particularly like this:
Quote:
The Clintonites were moderates, but they were also ideological. They explicitly rejected the liberalism of the 1970s and '80s. The Obamanauts are decidedly non-ideological. They occasionally reach out to progressive think tanks like the Economic Policy Institute, but they also come from a world-- academic economics--whose inhabitants generally lean right. (And economists at the University of Chicago lean righter than most.)
You know, one issue that I don't see mentioned anywhere is that it appears that Obama is really uncontrollable when he starts speaking.
His economic advisors and foreign policy advisors seem to be speaking a language he isn't always following.
Yes, great links UB50. So Obama's economic advisers are "pragmatic and non-ideological", and are also believers in "behavioral economics"? Sounds good to me.
Thanks for posting this. I now have even more confidence that Obama is surrounding himself with great people that will accomplish great things.
A big criticism of the Clinton administration was that there was too much theoretical debate and not enough action. Sounds like Obama might have learned from that criticism.
I think there is no 'silver bullet' answer to any economy. Reaganomics had it's positive side, Clintonomics had it's positive side... but they also had their negative sides.
One aspect of economy not talked about much is how economy is perceived by the population and the effect that has.
For example, If we had a plan in place to eliminate the deficit (even though it would take a couple of decades) and/or a strong committment by government to have a balanced budget, and/or a strong committment by government to not over tax the people... that perception in & of itself builds confidence in the economy. That, in turn, can be a type of generator to help the economy as people may save more by investments, spend a bit more, and possibly encourage them to lower their own personal debt.
I wonder what to think of this? In this "coming age" of inflation, isn't a lower interest rate going to be desirable? Can we really judge economics on the last 7 years of "print, borrow and spend"? I think investing in infrastructure and R & D are important -- but I think cutting the deficit is too. And what happens if we lose our status as the world's reserve currency?
Are there other economic wonks out there? What do you think?
Not sure what you mean by a lower interest rate is desirable in an inflationary environment.
The problem with the current low interest rate environment is that it has provided incentives for "investment", but really blind spending, in what proved to be many unworthy adventures, leading to such phenomena as the housing bubble, an excess of SUVs, credit card binges, not to mention the war.
The purpose of interest rates is to strike a balance between consumption and production. Worthy investments will clear the hurdle of higher interest rates, unworthy ones will not.
There isn't necessarily a contradiction between investing in infrastructure and R&D, on the one hand, and reducing the deficit on the other.
It depends on the mix of who's doing the spending (private/government sector) and how wisely and efficiently one spends.
We must put into perspective the idea under Secretary Rubin that cutting the deficit leads to lower interest rates and stimulates the economy: it came after a long period, roughly the late 1960s to the early 1980s, of high deficits, high interest rates, and slow growth. Rubin finished the job started under the Reagan administration.
Now the problem is not necessarily the tax side of fiscal policy, but the drunken-sailor monetary policy which allows for runaway spending and back-door taxation through inflation.
So the task now is to get a handle on monetary policy and restore equilbrium to domestic production and consumption. Worthwhile infrastructure and R&D projects will clear the hurdle of higher interest rates.
If the dollar loses its status as the world's reserve currency, then interest rates would go up, perhaps even more so than they otherwise already should, and in any case it would be harder to finance such adventures as foreign wars.
I am not saying that investing in the so-called Middle East to secure fossil fuel energy supplies is not a good investment, but the way the Bush administration has handled it has been grossly inefficient.
I would love to see McCain and Obama debate monetary policy.
The more I read about $obamba$ the more money I better hide because he is coming to take it.
Hold onto your purses and wallets the $obominator$ is not only a liar, he is the new "robinhood" and his "change" means that you wont have any more "change" left in your pocket.
The problem with the current low interest rate environment is that it has provided incentives for "investment", but really blind spending, in what proved to be many unworthy adventures, leading to such phenomena as the housing bubble, an excess of SUVs, credit card binges
So, low interest rates would work if Americans had an ounce of self-control?
So, low interest rates would work if Americans had an ounce of self-control?
That's one way of putting it, yes.
You know, I save a lot, but I have to invest overseas to protect my saving against US inflation. I can't find a worthy investment in something concrete domestically, except for maybe solar panels and other forays into alternative energy.
Actually it's quite sad.
Now, if we could only transform our zeal to consume into research into alternative energies, making transport more price effective and factories more efficient ...
Well, maybe not ... it's easier to keep interest rates low and borrow and spend our way into oblivion.
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