There were two posts yesterday. The first was “Lowflation and the Fed:”
At the aforementioned economics dinner, we went around the table to ask who believed the Fed would actually raise rates in 2015. Officials at the Fed have been signaling that they will; but most of the people around the table didn’t believe them. This morning’s consumer price report explains why.
Basically, while growth and job creation have finally been pretty good lately, there is so far no sign whatever that the economy is overheating. Core inflation remains below the Fed’s target (the Fed focuses on a different measure that usually runs lower than the CPI, so this report is actually fairly far below target.)
Add to this troubles abroad — the direct spillover from Russia or even Europe is fairly small, but the rising dollar means that good news on manufacturing may not last — and there is a real risk that any rate hike will turn out to have been a mistake. And it’s a mistake that would be very costly, because it could all too easily set the stage for a Japan/Europe style long-term low-inflation trap (yes, at this point I think we can put the euro area in the same category).
Of course, this is all about what the Fed should do, not what it will. But I guess I believe that top officials at the Fed have a view of the world not too different from mine, and will come around to the same conclusions.
The second post yesterday was “Jeb’s Bubble:”
So not-George Bush is running. Why, exactly?
I’m not talking about his motivations; I’m asking why, exactly, he is considered presidential material.
Back in the day, there was an answer; glowing profiles like this one declared that he had been a fabulous governor, as demonstrated by his economic success:
In a state with a surging population, Bush has presided over a booming economy with the highest rate of job creation in the country and an unemployment rate of 3.0 percent (the national average is 4.6 percent).
Actually, this would have been silly even if Florida had a well-founded boom — governors don’t matter that much. But in any case, we now know something about the other “Bush boom” — as you can see from the attached chart, it was all about a monstrous housing bubble. Bush the other didn’t cause that bubble — but all his alleged success involved taking a ride on it.
So he wasn’t an exceptional governor, or actually an exceptional anything — except maybe exceptionally good at cashing in after leaving office. Why, exactly, is he running?
Because thus far he seems the (possibly) least insane among the riders in the 2016 Clown Car…