Well, while Alan plays his last shot, and Ben Bernanke waits quietly in the wings, the Economist has dedicated a global agenda article to the state of the US economy. A number of things occur to me to say.
Firstly, I got it wrong.
I thought the Fed might have paused this month for a numbers of reasons, the most important of which being the need to give some support to Bernanke during the transition. I don't think it is going to be easy for anyone to follow Greenspan's act, and if the only thing which Bernanke is left with is the possibility of keeping things on hold, then he could well get off to a rather unfortunate start. I would have left 'our Ben' with a couple of blank rounds to fire-off while he settles in.
I say this becuase of this kind of article, which I think could go the rounds:
In 1983, Mark Gertler asked his friend and fellow economist Ben Bernanke why he was starting his career by studying the Great Depression. "If you want to understand geology, study earthquakes," Bernanke replied, according to Gertler. "If you want to understand economics, study the biggest calamity to hit the U.S. and world economies."
Bernanke's fascination with the economic earthquake never abated. "I am a Great Depression buff, the way some people are Civil War buffs," he wrote in 2000. "The issues raised by the Depression, and its lessons, are still relevant today."
Bernanke's interest in the Depression, which dates back to his childhood, is a guide to the evolution of his thinking. In particular, his groundbreaking research on how mistakes by the Federal Reserve compounded the catastrophe is likely to influence how he steers the economy once he succeeds Alan Greenspan as its chairman early next year.
So here is the issue, the DeutschBank is seen as an inflation fighter becuase of the hyperinflation of 1923, and Bernanke is seen as a defaltion fighter, because of, well...
The point is, these reputations once they are acquired are hard to shake off.
On the Economist:
FOR several years now, economists have been watching American consumers with the same mixture of astonishment and anticipation that wide-eyed fans bring to endurance sports: amazing that they’ve made it so far, but how much longer can they go on like this? Strong consumer spending has underpinned America’s robust economic expansion, even as most other industrialised countries have struggled to get their economies back on track.
But consumers have been running down savings to sustain this level of spending; the personal savings rate has actually been negative since June....
Yet the consumers soldier on......It seems unlikely that consumers will have the stamina to keep this up much longer......Economists have long been warning of these risks.
Well, this is one narrative version, and a lot of people buy it. I don't.
In the longer run the US economy may well run into problems with the rise of China and India, but for now it is certainly the strongest economy in the developed world (most of the rest are dependednt upon it one way or another), and this beast has life in it yet awhile.
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