Remember the Arkansas Basketball Team's Full Court Press? 60 Minutes of Hell? Well what we are going to have over the next few months is a full court frontal assault by the Obama Economic Team to alert the masses that they are doing "Gods Work."
Ever get the idea that Team Obama is in full Cognitive Dissonance Mode?
The following was an opinion piece by current Columbia University Professor and Former Fed Governor Frederic Mishkin. Although he is no longer in the Fed he is widely listened to by Team Obama. I can only sadly say that we are going to see a lot of this in the near future.
http://www.ft.com/cms/s/0/98e7c192-cd5f-11de-8162-00144feabdc0.html?nclick_check=1
The title of this story should be "MISHKIN IMPOSSIBLE".
What we have is Former Fed Governor Frederic Mishkin this past week explaining that bubbles are not that bad. Some bubbles are good. That the best way to deal with a bubble is to let it pop, then clean it up quickly. If you remember this is the basis for Geithner's FSA Plan to deal with systemic risk. Forget about defusing the bomb. We are way past that. Its all about the clean up.
There is no talk of prevention or regulation anywhere in Mr. Mishkins world. In fact Mr. Mishkin along with the FED has learned nothing and are still clueless after all that is happened. Any bubble that bursts causes genuine risk, but actually identifying bubbles is a hard tough job. You actually have to work at it.
"But if bubbles are a possibility now, does it look like they are of the dangerous, credit boom variety? At least in the US and Europe, the answer is clearly no. Our problem is not a credit boom, but that the deleveraging process has not fully ended. Credit markets are still tight and are presenting a serious drag on the economy."
"Tightening monetary policy in the US or Europe to restrain a possible bubble makes no sense at the current juncture. The Fed decision to retain the language that the funds rate will be kept “exceptionally low” for an “extended period” makes sense given the tentativeness of the recovery, the enormous slack in the economy, current low inflation rates and stable inflation expectations. At this critical juncture, the Fed must not take its eye off the ball by focusing on possible asset-price bubbles that are not of the dangerous, credit boom variety."
Mishkin would like for for us to believe that he along with the FED can in fact cleverly identify bubbles as long as they are of a particular variety. That the FED has to distinguish between bad bubbles and good bubbles. Mishkin distinguishes that bubble from what he calls a "pure irrational exuberance bubble" like the Tech/Telecom Equity Bubble. This is not a bad bubble, nothing to worry about and the FED should stay on the sidelines. But with Credit bubbles all bets are off. The FED has to engage in QE. Has to keep printing money.
This is where we get the term "CHOPPER FINANCE."
Mishkins entire argument is absurd. He is making the case for the Feds willful blindness to asset price bubbles. Their willful need not to do the heavy lifting in keeping a stable Monetary Policy. He is making the case that bubbles are OK only if the Fed happens to clean them up quickly.
This only reinforces my opinion that MBA Programs need to be gutted. The simple fact that we have people like Mr. Mishkin teaching MBA students his sordid logic is so disconcerting that it borders on the sublime. The reality of it is that Mr. Mishkins thinking is so widely shared by the Obama Economic Team that no real reform and or regulations ever will be enacted.
No comments:
Post a Comment