Where the rubber meets the road

Dude, where's the Dharma: "t seems to me, after reading the latest from Stephen Roach, that critiques similar to mine found their way to him. He acknowledges that deciding to do a thing is not the same as doing it. Yet, I still believe Mr. Roach's sanguinity on the expected rebalancing of international accounts is premature. I am less confident than he that the current US administration will allow financial solvency arguments to trump security arguments in their deliberations.

This perspective shifts the argument from one of policy recommendation, i.e. the job of a pure economist, to one of policy implementation, i.e. where the rubber meets the road. I agree with Mr. Roach's prescription, the dollar needs to fall to a more realistic level, but I don't agree that such considerations will be very influential if President Bush thinks we are fighting World War III and Vice President Cheney thinks Reagan taught us deficits don't matter. The buck, after all, stops with them.

(Blogosphere debate note: whether they actualy said such things is less important than whether they believe them, as their policy choices seem to indicate.)

While the esteem in which Central Bankers are held has risen markedly during the Greenspan era, this was, I contend, mainly a function of his easy money policies. And even Greenspan's suggestions of fiscal discipline fell on deaf ears with this administration. They are, as they have repeatedly said, on a mission to which other concerns are subordinated. As Arthur Burns related in his Anguish of Central Banking, it is easy to accomodate in a monetary sense, very difficult to restrict.

This development is not unique to the Bush administration. Each President's focus varies. Moreover, the virtues accruing to the issuer of the world's reserve currency have lent empirical credence to the view that deficits"