Quoteworthy: monetary historian offers blunt views

Allan Meltzer, author of the huge historical tome on the History of the Fed, is spilling his thoughts on monetary policy and after compliments to Forbes magazine for publishing this very long and incisive interview in 9 parts, we get to find out that Meltzer advocates

- an inflation peg among US, Europeans, Japanese, China at 0-2% and have others peg on to that inflation to achieve, de facto, fixed exchange rates;

- says that Euurozone should amputate the debt-killed and put them in “soft Euro” until they fix themselves;

- Reason why monetary base has been enlarged so much is because “major banks need recapitalization. The Fed is recapitalizing them”.

Of course, by being around the block for some time Meltzer can afford to be blunt so here are some additional nuggets of quoteworthy stuff.

On gold standard:

If we were to take the gold standard and go back on it, we wouldn’t stay on it for very long. Why? Because it does two things which we wouldn’t like. One is, it elevates exchange rate stability above employment stability and the public won’t accept that. So we have to be concerned about unemployment because it’s a democratic country and that’s what people want and expect. And the second thing is, every shock in the world of any importance would force us to respond.

On inflation expectations:

Right now, the CPI is running between 2% or 3%, but 40% of the CPI is housing prices, so when housing prices eventually turn up, it’s not going to look so good. Is the Fed going to react to that? It will be slow. That’s the way it was in the 70’s. Why will it be slow? Because it will get pressure from the market, there’s 8%, 9% unemployment. You’re going to raise interest rates.

On curent monetary policy:

They’re [the Fed] paying a quarter of 1% and it is hardly different from zero. They think, they’re very committed to the idea that the way they’re going to keep inflation from rising, when they say they have a plan, what is their plan? Well, their plan is that they’re going to pay interest on reserves at one rate and at a higher rate, they’re going to lend to the banks which will set the market rate, and they’re going to keep the market rate in between those two rates… I mean, I think absolutely insane.

On political causes of Great Recession:

What caused the crisis was a policy to help low income people buy houses. And that was a policy of both administrations. Clinton started it when he appointed a man named Jim Johnson who had been Mondale’s campaign manager to Fannie Mae. Johnson decided Fannie Mae was a sleepy little agency involved in the mortgage market. He was going to make it into a big time operation and help people who didn’t have housing. And so he found people like Angelo Mozilo and they took these mortgages. Now, how dumb do they have to be to say, we’re going to give no down payment mortgages to people who have no credit record and we shouldn’t we expect a large number of defaults. Mozilo was making a fortune. We understand his incentives. He was making a fortune issuing these mortgages and selling them off to Fannie Mae. And the banks said, “Gee, you know, this is a good business.” If you hear that the MBAs from the best universities and schools in the country, Stanford, Harvard, my own school, taking these ratings, never doing due diligence, packaging them and selling them. No heroes there. What if they had said to their boss who was making a bonus on their activity that we don’t want to do this anymore? Go. You’re in the unemployment queue where you later get to say, “I was right. Not much satisfaction for most people.”

Available here.

Resource Armageddon predicted by another unverifiable scaremonger report

Back in 1798, Thomas Malthus wrote in his An Essay on the Principle of Population that geometric growth of a population must eventually exceed the arithmetic growth of resources and yesterday another do-gooder organization has come out with rhetorical platitudes appealing with poetical emotionalism restating such Malthusian syllogism.

In its biennial survey of the Earth’s health, WWF International says that the “ever-growing demand for resources by a growing population is putting tremendous pressures on our planet’s biodiversity and is threatening our future security, health and well-being”.

Whereas Malthus refused to be pinned on the actual date to the “eventuality”, WWF International says that by 2030, that’s it, humanity is toast.

“We are living as if we have an extra planet at our disposal. We are using 50 per cent more resources that the Earth can sustainably produce and unless we change course, that number will grow fast – by 2030 even two planets will not be enough,” said Jim Leape, Director General of WWF International.

By saying that there are only 18 years left until our planet enters the resource Armageddon, Leape, in contrast to Malthus, seems rather brave on his time call: It has been 215 years since Malthus predicted the resource Armageddon and some folks are still patiently waiting for it.

… and what would such dismal scaremongering predictions be without rhetorically emotional poetic platitudes nestled with symbolic and expensive unveiling of such words of wisdom.

“We only have one Earth. From up here I can see humanity’s footprint, including forest fires, air pollution and erosion – challenges which are reflected in this edition of the Living Planet Report,” said astronaut André Kuipers who went up in space in order to launch this report.

So one is supposed to be moved by the enormity of the Earth’s site from space and so inspired to do something.

“While there are unsustainable pressures on the planet, we have the ability to save our home, not only for our benefit, but, above all, for generations to come,” he said.

Not really, says WWF International because if we are to continue desiring resources at such pace we need another planet to satisfy our desires.

“We are living as if we have an extra planet at our disposal. We are using 50 per cent more resources that the Earth can sustainably produce,” Leape says.

Substantiation of all this hoopla is some sort of an Living Planet Index that tracks “9,000 populations of more than 2,600 species” and that disappearance of some of these species from certain Earth’s regions are caused by too high of demand for resources.

Like, hm, dude… could we, like, see the correlation coefficient, the t-statistic, level of confidence used to test such claim… if it even exists.

Then again, absence of credible statistics substituted with rhetorical platitudes that are endorsed by UN and other unelected bodies did manage to get at least some attention by being scrolled on the Bloomberg TV ticker.

Related to this:
Psychological anchors and oil prices: John Kemp

2011, in quotes

“Apple denies that its correct name is Apple, Inc. The correct name of Respondent is Apple Inc.” — Apple’s response to an HTC complaint.

“There are two types of companies: those that work hard to charge customers more, and those that work hard to charge customers less. Both approaches can work. We are firmly in the second camp.” — Amazon CEO Jeff Bezos on the new Kindle Fire’s price.

“He thought it was safe to smoke because it said so on the Internet.” — Tonya Rice, mother of Westmoreland County teen Brandon Rice, who died Oct. 27, commented on the effects of lung damage from smoking synthetic marijuana.

“It’s like Elizabeth Taylor and husbands. That has to be unprecedented.” — Beano Cook, ESPN analyst, on Pitt having Dave Wannstedt, Mike Haywood, Phil Bennett, Todd Graham and Keith Patterson as coaches in a one-year period. Dec. 14.

“Our assessment is that the Egyptian government is stable.” – Hillary Clinton on the stability of Mubarak’s Egypt 18 days before he stepped down.

“Egypt is free!” – Editorial, The Register-Guard, Eugene, Oregon.

“I love Chinese food, but I don’t want to live in it.” – Jill Wirtz, a neighbor of 99 Ranch Market in Rancho Cucamonga, testifying at an Air Quality Management Board hearing in May on cooking smells allegedly emanating from the market. The Asian supermarket installed odor-control equipment.

RAPEST.” – Misspelled word forcibly tattooed onto the forehead of a mentally impaired Oklahoma City man in April. Stetson Johnson had a bar code tattooed over the word to hide it. His attackers also bound him, beat him, shocked him with a stun gun and tattooed “I like little boys” onto his chest.

Verizon to charge $2 convenience fee – Verizon.

“Occupy Wallstreeters are 0.00001% of people claiming they are 99%” – unknown message board.

“But one mustn’t forget that a banker is always at risk, the minute he lends money.” – Former Deutsche Bank CEO Hilmar Kopper.

“The more you spend the more you save.” – TV ad.

“It’s a hill … get over it,” written on a shirt of a high school cross country runner.

“The best things in life aren’t things … ,” bumper sticker.

“They had no intention of winning the game…They did what they set out to do.” – US soccer star Donovan, after the Galaxy’s 1-1 draw against the Revolution on March 20.

“The bar owner owns the air within the building, and we are saying the county is trying to claim de facto public easement in the air. That’s a taking of property.” — Muncie attorney Bruce Munson, July 28, after filing a lawsuit on behalf of bar owners to stop the county’s new prohibition on cigarette smoking in taverns.

“I think one of the real challenges was not knowing what the challenges were going to be… So, it requires a lot of new solutions that no one has never thought up.” – Mat Marquis, principal designer, The Boston Globe, discussing the paper’s “responsive redesign” project with RWW’s Dan Rowinski, September 14, 2011.

“They…say, ‘clock,’ but they mispronounce it. They drop the ‘l’ from it. I don’t want to react because I don’t want them to know it’s a bad word, but I want to encourage them to talk so I’m like, ‘That’s good!’” -  Jerry O’Connell, on the unexpected joys of raising his 2-year-old twin daughters Dolly and Charlie, on Rachel Ray Show.

“When they ask me, ‘Who is the president of Ubeki-beki-beki-beki-stan-stan?’ I’m going to say, ‘You know, I don’t know. Do you know?’ “  – former GOP presidential candidate Herman Cain who is eyeing Defense Department Post!

“I should tell my story. I’m also unemployed.” – Mitt Romney, whose net worth is around $200 million, speaking to unemployed workers in Florida.

“The world is using up its natural resources at an alarming rate, and this has caused a permanent shift in their value.” – Jeremy Grantham, hedge fund manager and Chief Investment Strategist of GMO Capital echoes Irving Fisher’s quip, three days before the 1929 crash, that “Stock prices have reached what looks like a permanently high plateau.”

“In his early activist days, Barack Obama the community organizer sued banks to ease their lending practices. Now his administration is suing banks for issuing risky mortgages.” -  Jim Hoft.

“Juarez is reported to be the most dangerous city in America.” — Rick Perry.

”The president, he put us in Libya. He is now putting us in Africa.” – Michele Bachmann, unaware that Libya is in Africa.