"My initial reaction (those who watch the ECB closely would be better able to interpret what he said) was that this was a really wimpy version of shock and awe. He did say "whatever it takes", which is important, but he didn't state any numerical target for bond yields. And does he really have the rest of the ECB behind him?"
"In a monarchy like Canada, when the Governor of the Bank of Canada speaks, all the Deputy Governors echo him dutifully, singing the chorus to the same song."
"The US is a republic, and so the Fed isn't like that. Bernanke alone cannot play Chuck Norris. He needs to round up all the other governors first. Like herding cats. Half those guys are hopeless."
"Dunno about the ECB, but I expect it's republican too, and that Draghi, although he's got the right idea, isn't a monarch. Will the Germans etc. on his board back him? More importantly, will people *expect* them to back him?"
"But yes, it still shows the power and truth of Chuck Norris, when even the wimpiest republican version of Chuck, even when he waffles without giving a number for the target, can still move markets."
"Call yourself a "Republican hater"? I'll show you a republican hater! ;-)
See what I mean? He wins, hands down. There is a sense that too much small r republicanism can be problematic. I know, there are many democracy purists that will take major issue with that. 'Democracy is messy,' they'll lecture. But that's as it should be.'
Maybe. But wouldn't it be nice to take a break even one day, to designate a Dictator for a Day who could actually get something done and then we could go back to gridlock as usual? I mean take the case of France. They went through how many different governments and various Republics between Robispierrre and De Gaulle?
Finally, they achieved a real working democracy that actually functioned with an actual rule of law after De Gaulle essentially installed himself as dictator in 1957.
Maybe that's why I do hate the Republicans so much-they are the party of gridlock. Their goal is for the system not to work. I'm in reality more of a Whig. Indeed, I have argued that John Roberts was a true conservative in finding a reason to accept Obamacare. Think about it. If a conservative takes the long view and seeks to defuse and ameliorate social conflicts than that was a very conservative move.
What I suspect his calculus was is that if the SJC had struck down Obamacare on yet another straight, partisan vote it would again increase the cynicism of the country through the roof and would have attracted a great deal of more scrutiny to the Court's every move. On the other hand, name me any post Obamacare decisions of the SJC.
If you can you're ahead of me and most people. In the American context, the real conservative position. the Whig position is to be a liberal Democrat as Garry Wills' work shows. I would recommend you check out his Confessions of a Conservative if you're not familiar with it.
Nick is certainly right that half the Fed governors are hopeless. I do agree with Sumner's argument that there should be no regional Fed governors.
Barney Frank has had bills that would at least chop their number or give them less power and put them up for a Senate vote.
The ECB is probably worse than our republican Fed by a long way. They aren't the United States of Europe but like our original government-the Articles of Confederation only ten times worse.
Think how much the states fought the idea of Union-it required a terrible war and many years after of haggling.
Meanwhile the states were much closer to each other in culture, language, and history than the various countries of the euro are today. In the U.S. it's hard enough to convince Wisconsin that they should subsidize Arkansas. Compare that with the Germans and Greeks.
I agree with Nick that Draghi's jawboning "shows the power and truth of Chuck Norris, when even the wimpiest republican version of Chuck, even when he waffles without giving a number for the target, can still move markets." However, it's important o clarify how broad this ability extends. Even those within the MMT/MR camps admit that central bankers can control interest rates and impact equity markets. The difference lies in whether those effects carry over to growth in the real economy, which I argue is limited under current circumstances (namely excessive private debt).
ReplyDeleteCBs have been very successful the past couple years, even in Europe, at sending shorts running for cover and pushing markets higher in the short-run. What they've failed to do, now going on three years, is implement any policy that prevented a reversal in optimism or stemmed the decline in growth for more than a couple months. If Draghi or Trichet had been truly credible in these "everything will be saved" pronouncements, we would no longer be discussing this issue.
The markets may have rejoiced today, but nothing has actually been altered to support growth in Europe. As Stephen Roach pointed out the other day, monetary stimulus is like "crack". This brief shot of energy will wear off soon enough.
I don;t know if anything has been altered either. It's still better than 2011 when they reasied rates out of fear of coimng inflation-due to the commmodity rise.
ReplyDeleteI'm pretty skeptical of Monetarism myself no doubt. But it can't hurt.
Plus there are real liquidty issues for countries like Spain and Italy-the threat of a major bank run.
Overall I'm just hoping if nothing else. For me the worst thing is that Europe handed the election to Romney.
Expectations matter. However; it is really amazing that the public and markets haven't come to the realization that this is an extended variation on a theme called "The Boy Who Cried Wolf."
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