I voted for a third-party candidate for President this year. Aside from voting for Bob Casey, Sr. for governor back when I lived in Pennsylvania, that is unusual for someone who has generally voted Republican. Though I am generally a libertarian on economics and a conservative on social issues, I try to stay flexible enough that I can appreciate where each side of the political spectrum is coming from. Even as I write about economic policy, I write on two levels:
- Optimal policy (usually non-interventionist, or correcting mistaken prior interventions)
- Okay, since optimal isn’t on the table, what’s the best you can do if you are going to meddle?
So, I heard our president-elect on the radio today, and my friends that I met with mentioned what they heard as well. When he spoke to the Conference of Governors, he said in closing:
Now, let me just wrap up by saying this. I know these are difficult times. I don’t think anybody here is viewing the situation through rose-colored glasses. We’re going to have to make some hard choices in the months ahead about how to invest these tax dollars. We’re going to have to make hard choices like the ones that you’re making right now in your state capitols, we’re going to have to make in Washington.
And we are not, as a nation, going to be able to just keep on printing money. So at some point, we’re also going to have to make some long-term decisions in terms of fiscal responsibility. And not all of those choices are going to be popular.
But what I can promise you is this. That I’m going listen to you. I’m going to seek your counsel. And, by the way, I’m going listen to you especially when we disagree because one of the things that has served me well at least in my career is discovering that I don’t know everything. And all of you, I think, are going to be extraordinarily important in keeping us on track, not allowing Joe and myself to get infected with Washingtonitis, and to constantly be reminded of the realities that are happening to folks back home.
If he wants me to think that he has a head on his shoulders (not required in politics), he has made a good start. Yes, we can’t make our way out this situation by printing money, or borrowing money. My view is that we will only get out of this mess as overall debt levels are reduced to around 1.5x GDP, and ordinary lending to high quality borrowers begins again. It will be a smaller financial sector, but a more stable one.
1) I suggested that the US Government lock in long term yields with a century bond. Now the head of BlackRock, formerly the guy who formerly eliminated the 30-year, agrees. Hey, I admire intellectual flexibility. That takes humility.
2) Yes, others have noticed the move in the Yuan. This is a worry. If China wants to compound their own adjustment problems, and finance the US Treasury at the same time, that is a way to do it.