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April 27, 2005
Roach To Fed: J'Accuse! (The End)
My obsession concludes.
I may appear to have been a bit defensive in this series of posts. Perhaps it is so. But statements like this...
The Fed is not only hard at work in the engine room in keeping the magic alive with a super-accommodative monetary policy but is has also become the intellectual architect of the New Macro. Time and again, since Alan Greenspan rolled out his New Paradigm theory in the late 1990s, senior Federal Reserve policy makers have taken the lead role as proselytizers of a new macro spin that condones the saving, debt, property bubble, and current-account excesses of the Asset Economy.
... are just plain silly.
OK. I'll be generous and chalk that up to creative writing for effect. But a really constructive conversation would tackle these sorts of questions:
-- I gather the prescription favored by those who feel the same as Stephen Roach is for the Fed to be more aggressive in tightening policy. Fine, but is that what you really would have done in 1997, confronted with the circumstances at the time? In 1998? Would you have been impervious to the global financial stress I noted in the second post?
-- Would you choose to ignore the fact that employment growth in the U.S. has consistently struggled to gain traction? Would you be confident enough that bubbles exist, and that monetary policy can do something about them if they do, to tighten monetary policy if you had some concerns about the underlying strength of the real economy?
There is a reasonable debate to be had on all of these issues. Let's have it.
Did you gather that I didn't particularly care for the Roach column? Right. The critics, on the other hand, loved it: Resonance says "If you're into this topic, go read the whole thing"; The Housing Bubble bubbles "Mr. Roach is right on the mark again and the article is worth the few minutes it takes to read"; Bill Cara advises "I think you ought to be reading Stephen Roach’s daily commentary as I do"; The Cunning Realist claims "Stephen Roach, one of the few Wall Street pundits worth listening to, put out an excellent piece..."; James Wolcott agrees that, in that of which Roach speaks, "Fed chief Alan Greenspan has ignobly, disastrously, almost incomprehensibly failed"; The House of Cards endorses Wolcott; Moon of Alabama exclaims "Go read the whole piece, it provides more in-depth explanations of how the Fed has dug itself deeper at every turn, by inflating a new, bigger bubble whenever the previous one threatened to burst".
UPDATE: In my initial post I complained about the dearth of critical reaction to Roach's comments. Not to fear. Calculated Risk has filled the void.
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