Hobson's Choice
Jim Hamilton thinks the Fed has to choose between lower inflation and higher employment.
He thinks we can't have both.
Perhaps this is why China began acquiring from various countries guaranteed rights to precious commodities many years ago. Perhaps this is why China combined foreign policy, development assistance, trade negotiations and contractual rights to such commodities. It is not the case that our government was unaware of the issue. After all, Alan Greenspan said the Iraq War is "largely" about oil, but the war has plainly failed, so far, to obtain assured access to cheap oil. What is the American government plan to abate the rising cost of necessary commodities?
The next Administration faces a serious macroeconomic problem, if Hamilton is right.
There is a choice, between adjusting by looking for affordable alternatives (what all businesses and individuals do when the landlord raises the rent) and trying to use a coercive approach.
The latter is the expected, and a prescription for war. If not over oil, it will come over access to uranium, or water, or lumber.
March 1, 2008 6:44 PM | Reply | Permalink
Jim Hamilton thinks the Fed has to choose between lower inflation and higher employment. http://www.econbrowser.com/. Reed Hundt
Bad enough not to post a link; twice as bad to post only a home page url!
In the event reading a conventional wisdom twit like Hamilton (he's probably looking to move to Washington and doesn't want to upset his reputation for seriousness) is a waste of three minutes.
The Fed no longer exerts any appreciable effect on the economy via setting the FOMC hounds loose -- which is what Hamilton's talking about. Disagree?
Explain how lowering/raising the overnight rate works to change interest rates on notes, bonds, business loans, mortgages, etc. or the financial intermediaries' willingness to loan money. The Fed is a follower -- check any H.15 release; the Fed's always working to catch up with the market.
As our economists always say (or should say), "Everything I know about money and finance I learned in Finance 101" -- and we can add, sometime between 1975 and 1985.
March 1, 2008 8:29 PM | Reply | Permalink
How many employees does a corporate executive's $100 million / year salary represent?
March 1, 2008 9:58 PM | Reply | Permalink
There's a really good point here about how China has made sure that it's not paying market prices for resources by forging close relationships, and building infrastructure with resource rich governments.
Problem is... China is also in bed with a lot of very bad people because of it. So are we, I guess. But China forged early relationships with the up and comers. We can make deals in Khartoum as well. But is that what we really want?
March 2, 2008 11:17 AM | Reply | Permalink