"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister
"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."
- Daenerys Targaryen
"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"
- Tyrion Lannister
"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."
- Jorah Mormont
"These bad people are what I'm good at. Out talking them. Out thinking them."
- Tyrion Lannister
"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."
- Michael Barone
"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker
Wednesday, February 25, 2015
Republicans, who control Congress but not the agencies that interpret and execute legislation, appear frustrated with the course of economic policy. They want the Fed to retreat more quickly from its stimulus campaign and to ease some of the restrictions that a Democrat-controlled Congress imposed on the financial industry after its 2008 collapse.
Ms. Yellen, for her part, pushed back more strongly than at past hearings, sometimes speaking over her questioners to make a point. She defended the Fed’s actions and warned against proposals to constrain its independence.
The hearing opened with a sharp exchange between Ms. Yellen and Jeb Hensarling, the Texas Republican who is chairman of the Financial Services Committee.
Mr. Hensarling backs legislation requiring the Fed to adopt a mechanical rule for setting its benchmark short-term interest rate. Such a rule would have limited the stimulus campaign the Fed has undertaken since the Great Recession.
He quoted a snippet of Ms. Yellen’s remarks at a 1995 Fed meeting at which she praised rules that mechanically dictate how the central bank should balance the sometimes-divergent priorities of moderate inflation and minimal unemployment. That, he quoted her as saying, “is what sensible central banks do.”
He then asked Ms. Yellen, “Do you no longer believe that a rules-based policy like the Taylor Rule is what sensible central banks do?” The rule is a formula written by the Stanford economist John Taylor that specifies interest rates based on inflation and the gap between actual and potential economic output.
But the context of that 1995 quote is important. Ms. Yellen was then pushing the Fed to pay more attention to job growth, and she was expressing a preference for rules that considered unemployment and inflation, as opposed to rules focused solely on the pace of inflation.
That, she said at the time, “is an example of the type of hybrid rule that would be preferable in my view, if we wanted a rule.”
She continued, “I think the Greenspan Fed has done very well by following such a rule, and I think that is what sensible central banks do.”
The Yellen Fed regards job growth as its priority, a transformation so complete that hewing to a Taylor-style rule actually would curb the Fed’s stimulus campaign. Ms. Yellen has said in other forums that she sees rules as useful reference tools, but that policy should be shaped by circumstances.
On Wednesday, pressed by Mr. Hensarling, she responded sharply.
“I don’t believe that the Fed should chain itself to any mechanical rule,” she said. “I did not believe that in 1995. I do not believe it now.”
Democrats argue that Mr. Hensarling’s proposal is an attempt by Congress to meddle in monetary policy.
“I think it’s important to have transparency but not at the expense of the independence of the Fed,” said Representative Al Green, a Texas Democrat.
Representative Scott Garrett, a New Jersey Republican, said in turn that Congress had intended to shield the Fed from political pressure “to juice the economy,” while in the current situation, Republicans were seeking to curb its stimulus campaign.
Like Ms. Yellen, he suggested that circumstances had changed and that the rules should adapt.
Monday, February 23, 2015
Sunday, February 22, 2015
Now that the dust has settled a bit, we can look calmly at the deal — if it really is a deal that survives through tomorrow, which some people doubt. And it’s increasingly clear that Greece came out in significantly better shape, at least for now.
The main action, always, involves the Greek primary surplus — how much more will they need to raise in revenue than they can spend on things other than interest? The question these past few days would be whether the Greeks would be forced into agreeing to aim for very high primary surpluses under the threat of being pushed into immediate crisis. And they weren’t.
One way to see this is through careful parsing of the language, as done here. That’s quite useful. But I’d argue that in an important sense we’re past that kind of word-chopping. Instead, we need to think about what happens substantively from here out.
Right now, Greece has avoided a credit cutoff, and worse yet an ECB move to pull the plug on its banks, and it has done so while getting the 2015 primary surplus target effectively waived.
The next step will come four months from now, when Greece makes its serious pitch for lower surpluses in future years. We don’t know how that will go. But nothing that just happened weakens the Greek position in that future round. Suppose that the Germans claim that some ambiguously worded clause should be interpreted to mean that Greece must achieve a 4.5 percent of GDP surplus, after all. Greece will say no, it doesn’t — and then what? A couple of years ago, when all the VSPs of Europe believed utterly in austerity, Greece might have faced retaliation thanks to wording issues; not now.
So Greece has won relaxed conditions for this year, and breathing room in the run-up to the bigger fight ahead. Could be worse.