We still rule

December 21, 2008

Everyone seems excited about the Fed’s actions this week lowering discount rate to zero, and announcing they would come up with whatever programs were necessary to continue injecting liquidity (‘quantitative easing’ I guess is the fancy new term).

I agree that short term our concern is negative growth and deflation, so injecting dollars is the right medicine (of course the Fed will have to time the recovery right and pull back on a dime or else we’ll end up with a nasty inflationary hangover).

This is obviously bad for the dollar (more dollars chasing the same Yen, Euro, etc. drive price down).  It will probably lose a third of its value before it swings back.

But someone on CNBC’s Fast Money claimed the danger is that we’ll start a devaluation war, and everyone seemed to agree.

I don’t think that’s a problem because of the unique position the Dollar still has as the world’s main reserve and trade currency:

In the short term a weaker dollar will help promote exports and demand from domestic producers.

In the medium term everyone else will have to devalue.  They will do this either by decree, by lowering rates and if they run out of room via ‘quantitative easing’ (effectively following the Fed’s lead), or by buying dollars in the open market (or rather treasuries, which will lower yields and help us finance our stimulus programs).

We will lead, everyone will follow, until we reach balance again.

It’s nice to think that as banged up as we are, we still rule.

Wishful thinking perhaps.  We’ll see.


Blue Dogs on the take?

December 21, 2008

Evan Bayh is organizing a sub-caucus with conservative Democrats which will meet weekly before the full caucus.

I think Matt Yglesias nails it. Nate Silver disagrees.

With Republicans powerless, special interests need someone else’s help, and some Democrats will be happy to oblige.  Let’s watch these guys.

Give the seat to Caroline

December 21, 2008

Democrats are going to need some serious PR punch in the senate to get Barack’s agenda past Republicans’ filibusters.

The battle for those extra couple votes is going to be waged on the airwaves.  Just like Reagan had to (succesfully).  Obama comes with tremendous strength, but he can’t do it alone, and there is currently no one in the senate that has the gravitas to get any airtime.  Especially now that we lost Hillary, Biden and even Salazar.  And Reid is terrible (he could help more by staying quiet).

Whether she has the experience and qualifications is not the issue (many senators are routinely elected without much of either).

What she has for sure is a great name and a fresh face.  As long as she demonstrates even average eloquence she will quickly become a media darling that can echo Barack’s message and steal precious airtime away from Gingrich, McCain and the army of GOP talking heads.

People will listen to her.

UPDATE 12/20:  BTW I don’t often disagree with Kos, but I think he’s focused exclusively in promoting a (small ‘d’) democratic process and not thinking strategically as a Democrat.  I commend him, but excuse me if I choose to be a little cynical on this one.