“It hasn’t worked. The only confidence stimulated has been the confidence of hedge funds that stocks might be a good bet in the short term if central banks are printing money. Still missing is the kind of confidence that would boost the incomes and prospects of people who don’t own stocks for a living…

…Let’s recap: After a crisis caused by a long buildup of government-sponsored excesses in housing and elsewhere, Mr. Obama has only wanted to author more excesses: a fuel-mileage reform that doubles down on Rube Goldbergism ; a health-care reform that doubles down on trying to make health care appear affordable by shifting its cost to taxpayers; a banking reform that doubles down on Too Big to Fail. When business needed confidence, Mr. Obama saw the business community mainly as a ready supply of enemies to be beaten up for political purposes. All along, let’s face it, this set of priorities has been partly enabled by the Fed. At a speech in Paris on Friday, as fellow central bankers (even the French!) were talking about the need for deregulation and pro-market reforms, Ms. Yellen—the latest great enabler—continued to sing the praises of quantitative easing to solve all problems. Mr. Bernanke at least once or twice protested that central banks were being asked to do too much.”, Holman W. Jenkins, Jr., “Does the Fed Read the Election Returns?”, Wall Street Journal

Business World

Does the Fed Read the Election Returns?

If Janet Yellen keeps talking, we may never get pro-growth reform or a real recovery.

U.S. Federal Reserve Chair Janet Yellen at a conference of central bankers hosted by the Bank of France in Paris on Friday.

U.S. Federal Reserve Chair Janet Yellen at a conference of central bankers hosted by the Bank of France in Paris on Friday. Reuters

By Holman W. Jenkins, Jr.

Judging by this week’s election, voters didn’t appreciate the irony of Federal Reserve Chair Janet Yellen ’s speech a few weeks ago lamenting a rise in “inequality.”

The Federal Reserve’s main ministration for a weak recovery, after all, has been stoking a “wealth effect.” By levitating the stock portfolios of the top 1%, jobs and wage growth for the other 99% would be stimulated. “Higher stock prices will boost consumer wealth and help increase confidence,” once explained ex-Fed chief Ben Bernanke.

It hasn’t worked. The only confidence stimulated has been the confidence of hedge funds that stocks might be a good bet in the short term if central banks are printing money. Still missing is the kind of confidence that would boost the incomes and prospects of people who don’t own stocks for a living. The simplest and most convincing analysis of this secular stagnation is from former Fed Chairman Alan Greenspan , who emphasizes a single datapoint: the missing investment in “long-lived assets” such as homes, buildings and industrial equipment—i.e., assets that require long-term optimism by employers, entrepreneurs and young people starting families.

Alas, changing the subject to inequality is becoming a hallmark of late-stage Obamaism. We expect soon to hear the heads of the Dallas Presbyterian Hospital dilating on the horrors of inequality.

Buck Showalter, the Orioles manager who lost four straight to the Royals, probably has some thoughts on inequality.

Our cat missed the box again—she might wish to offer some ruminations on inequality.

Certainly Mr. Obama can be expected to talk—and talk, and talk—about inequality as he now disowns any responsibility for the economy’s performance and turns to opposing, in the name of fairness, Republican or bipartisan attempts to deal with overdue reforms. The big question is whether Ms. Yellen will go along.

Let’s recap: After a crisis caused by a long buildup of government-sponsored excesses in housing and elsewhere, Mr. Obama has only wanted to author more excesses: a fuel-mileage reform that doubles down on Rube Goldbergism ; a health-care reform that doubles down on trying to make health care appear affordable by shifting its cost to taxpayers; a banking reform that doubles down on Too Big to Fail.

When business needed confidence, Mr. Obama saw the business community mainly as a ready supply of enemies to be beaten up for political purposes.

All along, let’s face it, this set of priorities has been partly enabled by the Fed. At a speech in Paris on Friday, as fellow central bankers (even the French!) were talking about the need for deregulation and pro-market reforms, Ms. Yellen—the latest great enabler—continued to sing the praises of quantitative easing to solve all problems.

Mr. Bernanke at least once or twice protested that central banks were being asked to do too much. The European Central Bank’s Benoît Coeuré threw down a gauntlet last month: “Talking vaguely about structural reforms, but not doing them, is the worst of all worlds. It creates uncertainty over the path of real interest rates, without in tandem raising expectations of future growth.”

Translation: If politicians don’t start dealing with growth-inhibiting tax and regulatory policies, the global monetary Hail Mary will itself become a source of instability. The meltdown of 2008 will be nothing compared to the one that’s coming.

But give Mr. Obama credit for disabusing Americans of one piece of silliness. Pious bunk is the idea that a special providence always delivers America the leaders it needs. We’ve had good luck and bad luck in our presidents. Mostly, though, it wasn’t luck at all: It was the ordinary wisdom of each electee to try to give the country what it needed—rather than what he, in his vanity, needed to give it.

Well, voters have rendered their verdict. They want growth. They don’t want the Obama formula of stock-market bubbles for the rich and unreformed liberalism for everybody else. Is Ms. Yellen listening?

Posted on November 11, 2014, in Postings. Bookmark the permalink. Leave a comment.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: