Inflationphobia: Does President Obama Read Too Much Bob Murphy?

     Ouch. All I can say is 'Say it ain't so Mr. President.' Certainly don't want to believe what we're hearing about the monetary preferences of the team.

     "In the previous post comment section Jim Glass provided me with this quotation from President Obama:

“I want a Fed chairman that can step back and look at that objectively and say, let’s make sure that we’re growing the economy, but let’s also keep an eye on inflation. And if it starts heating up, if the markets start frothing up, let’s make sure that we’re not creating new bubbles.”

     "So that’s it. The reason America is about to suffer through 8 years of high unemployment is not GOP obstructionism, but rather because our President is listening to the wrong set of progressives. We either have the monetary policy Obama wants, or we might even have a more expansionary policy than he’d prefer.

Suddenly Obama’s mystifying behavior back in 2009 doesn’t look so mysterious."

     
     http://www.themoneyillusion.com/?p=23107

     Well, I wouldn't give the GOP a total pass-surely they haven't in anyway helped the situation even if the President's team really does lean too much to the hawkish side. Regarding 2009, here is Paul Krugman.

     "the passage in question is striking; whatever it says about the Fed succession, it does give us a sense of how the people Obama listens to talk. And it’s not good:

And what I’m looking for is somebody who understands the Fed has a dual mandate, that that’s not just lip service; that it is very important to keep inflation in check, to keep our dollar sound, and to ensure stability in the markets. But the idea is not just to promote those things in the abstract. The idea is to promote those things in service of the lives of ordinary Americans getting better.

And when unemployment is still too high, and long-term unemployment is still too high, and there’s still weak demand in a lot of industries, I want a Fed chairman that can step back and look at that objectively and say, let’s make sure that we’re growing the economy, but let’s also keep an eye on inflation, and if it starts heating up, if the markets start frothing up, let’s make sure that we’re not creating new bubbles.

     "So, here we are with inflation at a long-term low, many economists arguing that we need higher inflation expectations, and unemployment the overwhelming problem we face. Yet Obama appears if anything to give more emphasis to inflation-fighting than to unemployment reduction, and throws in stuff about bubbles; basically, he has a definite tight-money lean. I don’t know who it’s coming from."

      "And this has, by the way, been true all along. Back in the fall of 2009 the word I got was that senior Administration officials believed that we were in a Treasury bubble,and that long-term interest rates — then around 3.5 percent — might soar any day now. This in turn was partly behind the disastrous “pivot” away from unemployment to deficits."

     http://krugman.blogs.nytimes.com/2013/07/29/fear-of-froth/?_r=1&

     "From various bat squeaks I’ve put together a view of what I think lies behind the surprising — and damaging — deficit squeamishness of the Obama administration. So here’s what I think they’re thinking — and why it’s wrong-headed."

      "what I hear is that officials don’t trust the demand for long-term government debt, because they see it as driven by a “carry trade”: financial players borrowing cheap money short-term, and using it to buy long-term bonds. They fear that the whole thing could evaporate if long-term rates start to rise, imposing capital losses on the people doing the carry trade; this could, they believe, drive rates way up, even though this possibility doesn’t seem to be priced in by the market."

     

    http://krugman.blogs.nytimes.com/2009/11/20/interest-rates-the-phantom-menace

     You know me, there's not a more loyal Obama apologist out there than me. However, if this really does represent the President's thinking-and no question Ezra Klein has serious access in the White House, then it's very tough to defend. It sounds like they have exactly the wrong criteria for choosing a Chairman. It's certainly not about loyalty to any Administration. 

    Indeed, if only, as Sumner puts it, he were listening to the right progressives maybe I wouldn't mind a 'loyal' chairman then-with a dovish Administration. All the reasons we're hearing why the White House is cool on Janet Yellen are terrible. 

     http://www.washingtonpost.com/blogs/wonkblog/wp/2013/08/20/why-the-white-house-is-uneasy-with-picking-janet-yellen-as-fed-chair/

     The main optimistic narrative I can come up with here-other than the reports about the Administration's attitude is simply wrong; I don't say that's likely just logically possible-is that the things that the 'right progressives' are saying: Krugman, Alan Blinder, Jared Bernstein, Dean Baker-will make them realize that they have to do Janet Yellen, she's the only acceptable choice. I don't see how they can possible go Larry Summers now.

     It's shocking to hear that the people adivising Obama in 2009 and 2010 had the same worold view as Bill Gross and Jim Rogers. 

    http://www.zerohedge.com/news/jim-rogers-sees-devastating-stagflation-would-quit-if-he-was-bond-portfolio-manager

    However, Obama apologist that I am, I should point out that the President is on the right track on many other things and I find his new educational agenda exciting-as I also find his climate change plan. 

     http://www.washingtonpost.com/blogs/wonkblog/wp/2013/08/22/obamas-higher-ed-plan-can-work-without-congress/

     What I really find exciting is the idea that he can do this without Congress.