Two well-written items on economics caught my attention recently. They’re worth reading to get some perspective on issues that are sure to be mangled, spun, highlighted or covered up by the political candidates running for president in the US.
One is an essay written by South African tech entrepreneur, Mark Shuttleworth, a couple of weeks ago, in response to the first of the Fed’s two panicky rate cuts. With admirable simplicity, it explains the impact of using interest rates to modulate the economy, and why the US Federal Reserve, both under Alan “Maestro” Greenspan and Ben Bernanke, must shoulder much of the blame for causing the credit crunch, and for eroding economic performance with inflationary monetary policy. Shuttleworth says people who take over at the bottom and lead upwards do so even if “their voodoo had no mojo”. Which, applied to central banking, is as good an explanation as any of where the real “voodoo economics” lies.
Another is an angry editorial in the Wall Street Journal yesterday that takes offence at the fact that the fiscal stimulus on which the Bush adminstration and Democratic leaders in congress agreed will prove to be nothing but an injection that merely postpones the pain, and increases the budget deficit for no discernable long-term benefit. Worse, the resultant deficit will be unjustly wielded as a blunt weapon in the election campaign, and could derail what should have been one of Bush’s most durable and important legacies: making his tax cuts permanent.