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"The problem with liberals/social democrats is that they always think they can convince the right wing by the way of rhetorical exchange whereas the conservatives have no problem jumping at your throat to finish you off."
I think the problem with liberals is that they are self-righteous. If you want to have an honest exchange you should try to lay off the stereotypes. Otherwise, I thank you for the heads up on this. It certainly looks like Kohn is in CYA mode.
IMHO, all of our economic problems are the result of the stock and, now, real estate bubbles. Easy credit has bought us indebtedness. Your list are the symptoms of the larger problem. There is no easy solution for a bubble. (Keeping credit easy has only bought us time) We will just have to see how our economy handles deflation. I am sure some on the left will try blaming the right and vice versa. The truth is that very few on either side spoke out when it counted.
I think the question is what will happen when it becomes obvious to everyone that we're not going to pay off all our outstanding Treasury debt.
At some point, it begins to make a lot of sense to inflate your way out your debts. Since the dollar, as the sole reserve currency doesn't face the same kind of constraints other currencies do in terms of running balanced current account and trade deficits, American politicians can act with impunity.
But remember that of America's potential competitors face even greater challenges than we do. China and India have a long way to go before they become truly modern, and they live in dangerous neighborhoods. Europe doesn't seem to have its act together either. American profligacy could cause more pain abroad than at home.
CONTINUED: I adhere to the principle of not crticising another country's internal workings.
But let me generalize. The problem with liberals/social democrats is that they always think they can convince the right wing by the way of rhetorical exchange whereas the conservatives have no problem jumping at your throat to finish you off.
I think Kohn's finger-pointing is the beginning of a change in sentiment. Once the Fed members start diverging we are really in trouble.
I am sad I could not follow my advice to get a night of good sleep as all this worries me to an extent never felt before. In Europe we say when the US sneezes we get a cold. And I suspect the US will get serious influenza that could lead to pneumonia here.
Ben,
thinking about it again I have to add
Demographics
Declining share in technology innovations
Baseball bat diplomacy
Infrastructure in shambles
Environment (Alaska)
Boardroom wars on Wall Street.
And the Fed acts like in the early 30's - doing too little too late. See my post "experience shows..."
I am far away but the future of the US will hit the rest of the globe as well.
The Fed is in an awkward position. If they raise rates they kill off consumption as people will have to serve their loans.
The dollar has been a remarkable fiat currency, it stayed around longer than any other fiat money. But history tells us that EVERY fiat money ultimately declined to its intrinsic value. But it seems to happen only once the last person has died that had experienced hyper inflation. Why can't we learn from history, Technological advances create the illusion that mankind has evolved as well. But only the technology has become different, not the basic principles of economic cycles Kondratieff has established, The Plunge Protection Team (presidential executive order 12631) might hold up the markets a bit longer, but there was always a payday.
Regarding US politics I
The scale of the challenges facing the US become a little more daunting when you compile them all together in your list, don't they?
I sometimes wonder which is more surprising - that the Bush administration seems not to care about addressing these problems, or that the Democrats are unable to win political points from his mismanagement of the economy.
I did not list the problems according to priority, as stated below that list. That's for the administration to figure out. They have more staff.
You read my thoughts, a random walk on the Fed's website is right now being processed. I'll include risk management.
Some people are nervous, it seems. In the end it's all about human instincts. The most important one is that nobody wants to be blamed. IMHO the finger-pointing has started with these footnotes.
Will the next Fed decision be unanimous? I don't think so. Or the problem is much bigger than anyone dares to think. I note that I read "hedge funds", "stress tests" and "un-whatever", especially "UNPRECEDENTED" with higher frequency.
We will know within the next 12 months, the turning point probably being around Greenspan's retirement. Do you think there will be much competition for that position?
Until then the game is "calm the markets, calm the markets..."
What is amazing in your comprehensive list of pressing issues is that consumer debt is near the bottom
One curious question is what do they (the FRB govs)specifically know that they have not pulled together from the broader mosaic. Is someone major curently in default? Has the chain reaction already begun to happen without it being marked to market? Or are we just seeing typical noise surrounding an inflection point. This is not a conspiracy point but a generic and almost rhetorical question that we may be able to validate someday with full and complete information. It may even become known as the greatest "signaling theory" event in history.
With this speech it now seems like someone wants to be on the record ahead of that "tail event". In my short experience, the noise levels are highest at or near inflection points.
Amazon.com has a neat feature called concordance, counting how many times a key word shows up in the text. It might be fun to do that on the FRB speeches to date to see just how accelerated the terms "risk management" have become.
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