Bell Curve The Law Talking Guy Raised by Republicans U.S. West
Well, he's kind of had it in for me ever since I accidentally ran over his dog. Actually, replace "accidentally" with "repeatedly," and replace "dog" with "son."

Saturday, October 29, 2005

New Fed Chair

This story got somewhat overshadowed by the Wilson Affaire (that's for you LTG) and the Miers withdraw. But I think we should pay some attention to this. In fact, I wonder if the most powerful man in the world is really the US president. My money (pun intended) goes on the Fed Chair instead. Ben Bernanke, according to the Economist, was a favorite pick of online betters by a wide margin. He is former fed governor and reputed to be a respected monetary economist. He is Republican and currently serves as chair of Bush's Council of Economic Advisors, however, it is said that his politics do not affect his economic decisions.

The Washington Post reports that Bernanke does now believe that there is a national housing bubble; the 25% increase in home values over the last 2 years is reflecting the "strong economic fundamentals" of the US economy. He sites strong job growth, incomes and increasing numbers of households as proof of the strong economic situation. Does it feel like incomes are rising and that we have strong economic fundamentals? When everyone is living off of credit cards, holding risky home loans, and failing to save, how can policy makers ethically continue to promote consumer spending?

Bernanke, like Greenspan, would not take action to spare individual homeowners should housing prices fall. In fact, he believes that the Fed should only take action if stock or housing prices start to affect inflation rates and/or economic growth rates. So he will more than likely continue Greenspan's policies.

What do the Citizens and their guests think of the new Fed Chair?

As a side note on inflation: I recently went to my local bagel shop and I noticed that they are now charging me 5 cents to slice my bagel and 10 cents to toast it. That is, in effect, a 15 cent increase in price for nothing. My hotel in Washington found all sorts of reasons to charge all of my colleagues different room rates for the same type of room. And room tax was outlandish. My DSL company is always trying to nickel and dime me. These are hidden charges that have an inflationary effect on consumers, but are never counted.


Anonymous said...

I almost posted something on this but stopped myself. He's not a Hariet Meiers that's for sure. This is a serious person who know's their business. I'm a little worried that he advocates trying to fiddle with exchanges a bit more than Greenspan did. Greenspan simply did gradual adjustments to the interest rate to resist inflation or recession. Bernanke advocates finding/predicting an ideal interest rate for given conditions and actively trying to meet that. It's a subtle differenc but it could mean a more agressive fed which could mean a more volatile currency. That would probably not be popular on Wall Street where they like things nice and predictable.

Interestingly, independent central banks (like the Fed) are one of the few (if not only) successful instances of institutions in democracies based on the Platonic Golden Guardian model. What's more the accepted view is that countries are better off the fewer political checks they place on their central bank. In the interest of intellectual honesty and fair play I feel I should mention that.

However, I've also heard about emperical work that contests the advantages of central bank independence.  

// posted by Raised By Republicans

Anonymous said...

We ARE in an inflationary period, no doubt. I wonder if the new fed chairman wants to do anything about that. 

// posted by LTG

Anonymous said...

Another side note on inflation along the lines of hotel fees - I went to Seattle on business recently and was fairly annoyed when various traveler/accomodation/airport convenience taxes caused the price of my "cut-rate" car rental to nearly double.

Also, the end of many apparel quotas has not led to a decrease in the price of most clothing. In fact, most lower-end clothing is more expensive now than it has been in the last few years (at least in my experience). Luxury clothing prices seem pretty flat, though (or slightly higher).

-Seventh Sister  

// posted by Anonymous

Anonymous said...

Seventh Sister notices the same thing I do. Notice for instance that Starbucks just raised its prices and it announced it was doing so. I am supposed to get a government rate on my car rentals. However, they charge a special fee for government rentals that in effect makes the discount mute. This last trip, I had a signed contract with the hotel for $153 a night. When I got my bill, it said $166 a night. When I went to talk to the front desk, they informed me that as of Oct 24, government per diems had increased to $166. It was easy to infer that since they could get more money, they would. I paid it, but will be on the phone tomorrow to settle the matter in a better way as a matter of principle.

United Airlines has created two classes of Economy. Regular Economy class will button you up so snugly that you won't be able to bend over and touch your toes and your neighbor will recline into your lap. But if you are willing to pay, you can upgrade to Economy Plus and get a whole extra 6 inches, or the 6 inches that your were supposed to have but that they took away from you so that they could charge you another $50.

I recently squabbled with SBC over a DSL connection at my mother's house. They basically trumped up some silly story about a credit issue so that they could avoid giving us the internet promotion rate and the tried to tell us that we'd have to purchase all sorts of additional options.

Something more than inflation is going out there. It's greed and poor customer service combined. But I really believe it is a way of increasing prices without really appearing to do so. And if wages aren't keeping up, then you get a feedback loop.

The Economist has said that inflation is running at over 4% currently. This would lower the value of the national debt by "printing dollars" without really printing them. But doing that would be risky. Like RBR, I am curious what the new fed chair will do if anything. For the moment he can't do much. We still have Greenspan until January.

// posted by USWest

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