August 10, 2004, To raise the federal funds rate, or not to raise the federal funds rate... that is the question...
Supplicants to the altar of the famed oracle, St. Alan of Greenspan, will now take to pondering the burning question of whether or not the Federal Reserve will raise the preposterously low federal funds rate from 1.25% to 1.50% or not. The anemic jobs growth (32,000 in July) would suggest holding the line, lest any more pressure be placed on a stagnant economy (at least, before the November election, of course, which St. Alan is hoping goes a certain way, lest his sage advice on tax cuts back in 2001 be reversed in some kind of orgy of fiscal responsibility).
On the other hand, as there appears to be some level of inflationary pressure ($42/bbl. oil will do that!), it is feared that not raising rates will be perceived as a testament to the Fed recognizing that the economy is actually as weak as feared, which may, alas, hurt the all-important consumer cofidence numbers, not something anyone in power wants to see happen lo 84 days before Election Day.
Simple reality, of course, is that we have some structural problems in our economy: we borrow more than we save, by hundreds of billions of dollars a year, and we import goods and services worth hundreds of billions of dollars more than we export. And a humongous federal deficit just puts more pressure on the economy all around, as government borrowing competes with private borrowing for plant expansions, research and development, new hiring, etc. To be fair, I will concede we would have had a significant budget deficit under a President Al Gore-- recessions cause or worsen deficits, and we were preposterously lucky during the Clinton years. However-- this President's decision to cut taxes at all, and then to peculiarly chose the least stimulative and most upwardly redistributional taxes of all-- such as estate taxes and dividend taxes and top-bracket-income taxes--
has unquestionably worsened the budget deficit (and hence, ultimate pressure on interest rates).
"In the long run", said the sages John Maynard Kenyes and George Walker Bush, albeit for different reasons, "we're all dead." The question is, whether, in the short run, given the fact that the Fed has to literally consider not making an otherwise needed quarter point interest rate adjustment for fear of being perceived as recognizing a dismal economic reality, George W. Bush's political future is dead. The President can repeat "9-11" as his mantra all he likes; other numbers are not boding well for him.
UPDATE: Those of you who bet on the Fed holding the line and not increasing the rate by 25 basis points... you're wrong. Indeed, not only did St. Alan raise the rate now, but he said via the bizarre tea leaves in the tea St. Alan always serves to his attendees (along with the oracle's pronouncement) that he would do so again in September.
In some sense, this means that St. Alan may be souring on the Imperium: he did, after all, lower rates well over a dozen times between the Chimp's taking office in early 2001 and late 2003 when the rate reached the preposterous 1%, and stayed there.
Of course, this could also mean higher rates as part of some interest rate belt tightening as sort of a poison pill welcome gift to the Kerry Administration (which St. Alan may feel is going to be the new gang in town, come late January); kind of like the Chimp's attempt to foist psychotically partisan Porter Goss on the nation as CIA Director.
Or it might not mean much of anything.
Comments
TD, stop blaming me for other's posts. I post in my own name. I can't believe you thought that idiot drivel was from me.
Today's announcement of the appointment of Porter Goss to CIA Director was of no surprise to me. He was first choice on my list. He's from Florida, which means he can be trusted.
WallyCoxLives, I thought you were dead.
Posted by Hassan Bar Sinister at August 10, 2004 01:58 PM
Hassan--
Sorry. But you should guard your computer's i.d. number more carefully-- interlopers or passers-by like Mr. Blumpkin might start pounding things out on it, and I might make that mistake. [Jeez, I thought everybody in the White House was security-crazed unless a CIA agent or AQ double agent had to be outed or something...]
Yeah, Goss comes as a suprise to no one. And you are correct, Sir-- he has been one of Bush's most reliable partisan whores, always willing to sacrifice the interests of the American people to those of the Imperium. Well, with 12 weeks to go, its good to see the Prez means bid'ness as usual. Perhaps President Kerry can wise up replace Goss in January... a guy can dream... Interesting question is if Goss can be vetted before the election... Goss may have some baggage somewhere, I'm sure...
Its an advise and consent of the senate thing-- but it would be fun if Goss got to testify before his own intelligence committee!
And while he's replacing Goss, I think he should seriously consider super-annuating old Alan "I like deficits only when REPUBLICANS cause them" Greenspan.
Posted by the talking dog at August 10, 2004 02:11 PM
"...an orgy of fiscal responsibility"? Oooh, oooh! Can I join?
Posted by Glen at August 10, 2004 03:23 PM
I can't tell:
Is Glen's posting legit, or is one of those porn spams?
Psychotically partisan? I see. But all the liberals are mentally healthy aisle crossers. We'll see at his confirmation hearings.
Finally, how do all you space kids feel about the daily admissions from your vaunted Presidential candidate, that he would have done the exact same things on Iraq as the President that you vilify?
Posted by They Call Me Mr. Crabcake at August 10, 2004 10:39 PM
Well, Goss is on record as saying he doesn't really care that Plame-- a covert operative working on WMDs-- was burned for political jollies, but he said "bring me a blue dress and some DNA and THEN I'll investigate". So, I'M not alone in saying Goss is psychotically partisan: GOSS JOINS ME IN SAYING IT!
AS to Kerry, he may as well admit he'd do the same thing as Bush, seeing as he and Edwards voted FOR the war, out of craven political calculation. Is it a black mark against them? Yes, Yes it is.
Does it matter, given how rapidly things are unraveling for the Imperium? No, No it does not.
Glen, btw, is a fine Brooklyn blogger who works downtown, and I met him recently -- first alphabetically on the dog run, btw.
Posted by the talking dog at August 10, 2004 10:47 PM
During the making of Fahrenheit 9/11, Michael Moore interviewed Porter Goss, who Bush recently tapped to run the CIA. What did Porter Goss say then regarding his qualifications?
"It is true I was a case officer, clandestine services officer, and yes, I do understand the core mission of the business. But I couldn't get a job with the CIA today. I am not qualified. I don't have the language skills. You know, my language skills were romance languages and stuff. We're looking for Arabists today. I don't have the cultural background probably, and I certainly don't have the technical skills, as my children remind me every day. "Daddy, Daddy, you gotta get better on your computer." And so the things you need to have, I don't have."
The video is located at http://www.michaelmoore.com/_media/qt/goss_2.mov.
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