Couldn’t Help But Notice (091807)

Over the weekend, Don Luskin told us that inflation is not under control, and that a big rate cut by the Fed today would be a mistake. He also takes shots at former Fed Chairman Greenspan that, in hindsight, are richly deserved:

In reality, the economy appears to be doing quite well by almost all indicators.

Yet the panic is a reality, too. And after a while, whether or not the panic is really justified, it becomes a self-fulfilling prophecy. We may be looking at a situation in which the economy will fall into recession for no better reason than because people fear that it will.

So what’s Bernanke to do? Cut rates just because a bunch of bond traders are panicking, when there’s no real sign of economic weakness? Yes, that’s probably exactly what he’s going to do.

….. Bernanke isn’t free to cut interest rates the way Greenspan did, because inflation is suddenly very much coming back to life. In the last several weeks, while the credit crisis has caused the market to expect a Fed rate cut, all the classic indicators of inflation have gone into the red zone.

….. Let’s remember that none of this is really new. It’s a continuation of trends that began in 2002 and 2003 when the Fed slashed interest rates to absurdly low levels and held them there. The Fed made money so cheap and so plentiful, it was virtually inevitable that commodities like gold and oil would rise, and that the dollar would fall.

….. So while it’s refreshing to hear Alan Greenspan admit that he doesn’t know everything, it would be even more refreshing to hear him admit that blunders while he was Fed chair are what got us into the fix we are in today.

At this point, I just hope that Ben Bernanke learns from Greenspan’s mistakes, whether or not he has confessed them. Here’s hoping that next week the FOMC holds itself to just a 25 basis point cut, not the 50 basis point cut many people expect. And here’s hoping that the Fed doesn’t promise more to come.

Don Luskin is correct.

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The Wall Street Journal delivered a Greenspan post-mortem and history lesson in a subscription-only editorial yesterday:

The housing recession has caused the overall economy to slow, and recession worries are rampant. Many on Wall Street want their bubble back, and they are begging the Fed to reflate. But inflation also remains near the upper limit of the Fed’s comfort level, the dollar is weak, gold is back above $700 and oil briefly popped above $80 a barrel last week.

For those of us who remember the economics of the 1970s, one abiding lesson is that trouble comes when the Fed is asked to spur economic growth. The job of a central bank is price stability. The Reagan-Paul Volcker policy mix was tight money combined with tax cutting, which reversed the 1970s’ mix of easy money and tax increases. Washington is in danger of drifting back, almost unconsciously, to that 1970s’ policy. Whether or not the Fed cuts rates tomorrow, we’d feel better about the decision if Fed chairmen present and past weren’t offering alibis for how we arrived at this pass.

Current Fed Chairman Ben Bernanke, in my opinion to avoid criticizing his predecessor, is blaming a “global savings glut” for the tenuousness of the current situation.

The Journal editorial is correct.

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Mike Adams thinks terror-sympathizing Kent State prof Julio Pino should be relieved of his duties — at least. A rundown of many of Pino’s blog posts is here.

The Jawa Report has more, including this February post.

Mike Adams is correct.

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Patrick Poole has a must-read on Arab Student Aid International:

The Dublin, Ohio-based not-for-profit organization, Arab Student Aid International (ASAI), has funneled millions of dollars over the last decade to the HAMAS-founded and -operated Islamic University of Gaza (IUG) – an institution well known to be a financial and operational front for the terrorist organization – in addition to two other universities, Al-Quds and Al-Najah, both with extensive ties to HAMAS and Palestinian Islamic Jihad.

….. Congress considers tightening the controls of USAID and other governmental institutions to prevent US government funds from finding their way to HAMAS, Palestinian Islamic Jihad and other terrorist organizations through the Palestinian universities, it may also want to investigate ways to prohibit US companies, universities and “charities” from doing the same.

Patrick Poole is correct.

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The Wall Street Journal had a great subscription-only op-ed by Betsay McCaughey Friday about an irresponsible decision by the American Cancer Society:

Cancer Killers

Last week the American Cancer Society announced it will no longer run ads about the dangers of smoking and other cancer-causing behaviors and the benefits of regular screenings. Instead, the Society will devote this year’s entire advertising budget to a campaign for universal health coverage. John Seffrin, the Society’s chief executive, said, “[I]f we don’t fix the health-care system . . . lack of access will be a bigger cancer killer than tobacco.”

Sadly, these ads will waste money that should be used to continue the Society’s educational campaign about prevention and detection. The evidence shows that universal health coverage does not improve survival rates for cancer patients.

That last sentence from Ms. McCaughey is almost correct. Later in her column she shows, as others have, that “universal coverage” (i.e., nationalized health care) lowers those survival rates.

Funds provided to the American Cancer Society are henceforth political contributions, and should be treated as such by tax and regulatory authorities.