Tuesday, November 24, 2009

Let's Be Thankful


Congress is looking closely at the Fed. In the last few years, the Fed has done a terrible job, and then a good (but risky) job dealing with the consequences of its terrible job. Some close scrutiny and double guessing would be healthy for the Fed. Congress may moderate the Fed's responsibilities and power, which could turn out for the better. Making the Fed into an uber-regulator, as proposed by the administration, would be a very risky move. Virtually all of the government's power to deal with a financial crisis would be vested in a single agency that too vigorously resists oversight. The potential for narrow focus, an oversupply of certitude in its own wisdom, and increased traffic through the revolving door make such a concentration of regulatory power a bad idea. Even though Congress is proceeding with a maximum of soundbite histrionics that obscure the substantive importance of the issues, it's making the Fed take a hard and careful look at itself. That's Congress' role in the Constitutional structure of the government, and the Fed will be a better agency after enduring the cacophony of democracy.

Retail investors have sat out the stock market rally. An objective look at the evidence strongly suggests that, for the next year or so, the market has quite a bit more downside risk than upside. Maybe stocks will drift a bit higher. But only those that believe assets only rise in value and never fall would think that 2010 will be a banner year for stocks. The good thing about retail investors sidelining themselves is that if and when the market falls, the impact on consumption will probably be less than 2008's nosedive. If your portfolio hasn't been hammered, you'll have less gut level fear of $4 lattes.

Health insurance reform is progressing. It seems like just about every alternative is criticized for involving increased costs. But the question is compared to what? Health care costs have risen faster than inflation for decades. Health care now absorbs about 16% of GDP and is expected to rise to about 20% in ten years. If a reformed health insurance system provides more comprehensive and fairer coverage, isn't that a worthwhile result? Costs are going to rise anyway if we leave our current incomplete and unfair system in place. Costs are a very important issue, but not reforming health insurance coverage isn't going to keep costs under control. We should work to achieve comprehensive and fair coverage now. Costs will be debated and dealt with as far as one can see into the future, because they'll always be an issue.

U.S. troop levels in Iraq are falling. Iraq wasn't and isn't of strategic consequence to the United States. That's why W and Dick, with their juvenile, tunnel-vision machismo, recklessly weakened the U.S. military by fighting an unnecessary war at a time of rising worldwide commitments for America. The real problems--the growing quagmire in Afghanistan, a soon-to-be nuclear armed Iran, the security of Pakistan's nuclear arsenal, safe havens for terrorists in Pakistan, Yemen and elsewhere, and the twilight zone quality of North Korea's bipolar Kabuki theatrics over missiles and nuclear weapons--will absorb all the resources the U.S. can muster.

Jon and Kate are going off the air. We like the 8. But, toward the end, Jon and Kate were mostly enriching TLC and the tabloids while sounding, shall we say, a bit tiresome.

We're reading less about Lindsay, Paris and Britney. After you've read 100 train wreck stories, the 101st really isn't all that interesting. But fear not for the tabloids. They've always got Brad, Angie and Jennifer.

No comments: