Tuesday, February 12, 2013

By the way, it's NOT Bernanke who needs to be credibly irresponsible

Krugman and others have been optimistic that newly elected Shinzo Abe can spring Japan out of its near-deflationary lethargy and get it growing again by, as Paul says over and over,"credibly promising to be irresponsible". Abe's threatened the BOJ, let it leak that the government is targeting the stock market, proposed fiscal expansion, and just kind of given the impression that he's an "anything it takes" kind of guy.

Current central bankers can't credibly promise to be irresponsible. The whole thrust of the Central Bank Independence movement was to install and insulate conservative central bankers. Sure, Bernanke can say he's going to be irresponsible, but he can't get you to believe it. Perhaps this is why the Fed can sit with $3 trillion on its balance sheet and core inflation (and expectations) remains under 2%.

It's the politician who can run on a platform of "irresponsibility" and then perhaps be credible when they implement it.  The last President we had like that? FDR, I'd say. He took us off gold, he packed the Supreme Court, he ran massive direct jobs programs. In short, he was a bit of a wild man and Shinzo Abe role model.

BHO is no FDR.

No comments: