John McCain Is Not Qualified to Be President

Since before 1844 central banks have been in the business of managing financial crises. That's what they do. Milton Friedman is spinning in his grave. The prevention of large-scale bank failures--"bailouts," in McCain's terms--is an essential part of responsibly managing the money supply.

John McCain does not know that. And nobody working for John McCain knows that:

John McCain: Finally, the Federal Reserve should get back to its core business of responsibly managing our money supply and inflation. It needs to get out of the business of bailouts. The Fed needs to return to protecting the purchasing power of the dollar. A strong dollar will reduce energy and food prices. It will stimulate sustainable economic growth and get this economy moving again...

Comments

[Bruce Bartlett]

I do not think that the word "bailout" means what McCain thinks it means.

[Hedley Lamarr]

At least the old fellow didn't claim that the Fed lowers taxes.

[CN]

"Strong dollar"? Those days are gone,John, and they ain't coming back.

[Chris]

Worse, Brad. The fact that John McCain is not qualified to be president is disturbing, but what's worse is that one of our two major parties has decided that it's a good idea to nominate someone who's not qualified (by temperament, intellect, or character) to be president -- and tens of millions of Americans are going to vote for this person out of some combination of spite, cluelessness, and disdain for the concept of American democratic governance itself.

Because apparently the only thing worse than having an interminable war, a self-destructing economy, spiraling healthcare costs, global environmental degradation, and the rule of law in American politics, is the prospect of someone *doing* something about those things, and proving that conservative policy and philosophy doesn't work.

Aesop's fox with the sour grapes had *nothing* on these guys.

[Joe Fine]

Oh come on. He's qualified to be President. Hyberbole doesn;t help here.

He knows shit about economics and economic policy, and he has no instincts about who are the right people to listen to at a time like this.

[And he is a kneejerk bomb-bomb-bomb flyboy on foreign policy. That word "qualified"--I do not think it means what you think it means.]

He is demonstrating that he would make a lousy president for our times. I would think that is enough.

[pgl]

A strong dollar? Lawrence Kudlow for Federal Reserve chairman! But excuse me - a strong dollar means less net exports. Getting the dollar to appreciate means higher interest rates, which would discourage investment. Could we get one of McCain's economic advisors to please explain how reducing aggregate demand right now is the path to faster economic growth?

[howard]

Joe Fine, awesome!

Bruce Bartlett, i've been longing to hear an honest conservative's perspective on the crisis and what (if anything) to do. have you posted any thoughts?

[Rich]

More irrelevant still is McCain's call for Christopher Cox to resign as chairman of the SEC. The SEC's primary responsibilities--transparency in the documentation of publicly traded financial instruments, and maintaining fair trading markets--couldn't stop deleveraging on their own. I don't know what Obama says, but most of what McCain has said is irrelevant or wrong.

[Doctor Jay]

Well, I think someone in his campaign knows, but they are just trying to pander. Does that speak better of John "Mr. Straight Talk" McCain, or worse?

If he loses his honor when it's under pressure, it really isn't any good to him or to us.

[bob h]

As a sorry shareholder in some of the affected financial institutions, I know that I am going to take a haircut because the government will take an equity stake as they did with AIG. So in what sense is this a "bailout"? The shareholders are getting shafted.

[Must Remain Nameless]

Brade, I disagree.

"Large scale bank failures" -- we've had a whopping 14 FDIC-insured bank failures since August 2007. Senior creditors of Bear, Fannie, Freddie will all be repaid in full. (AIG is too recent to draw conclusions). Equityholders of all kinds of stocks go bust occasionally; that can't be cornerstone of any rational policy. That leave LEH as the only failure in which large numbers of creditors and counterparties are hurt. Is our economic system so fragile that the failure of the #5 player in an industry, ANY industry, is a global crisis? Pathetic.

When the #1 futures broker on the Chicago Merc, Refco, went bankrupt in 2005, we had no crisis. When Barings went bust in 1995, no crisis spread. So why are LEH and AIG a "crisis"? Why were Enron and Worldcom called part of a "crisis"? Because the economy was weaker when they failed.

This DOESN'T mean a bailout is needed. It means cyclicality is part of economic growth. To try to eliminate all cyclicality is impossible. Bailouts during economic weakness encourage moral hazard and excessive risk-taking, and only sets the stage for greater instability. Read Hyman Minsky.

"Responsibly managing the money supply" -- exactly! It's NOT "responsibly managing credit." Extension of credit is a private sector function, so let those who made unwise loans be accountable for their decisions. Managing the money supply would include, in Walter Bagehot's words from 1873, "lend freely during crises on bona fide collateral at a penalty rate." Emphasize LEND, not "buy without recourse", as Tsy is about to. Emphasize BONA FIDE, not "throw bad assets to Tsy." Emphasize PENALTY RATE, not "move discount window and TSLF rates down with Fed Funds."