The Flinchum File

Thoughtful Economic Analysis and Existential Opinions
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Yesterday’s blog noted the list of serious worries has dwindled over the past year.  One reader questioned why there was no mention of the tapering problem.  Briefly, the Fed is now buying $85 billion worth of Treasury and housing bonds each month.  This has been very good for the stock market, obviously.  Three months ago, Bernanke suggested the time to decrease the monthly buying was coming to an end, and the stock market promptly had a “taper tantrum,” causing the lull we saw this summer.  Next week, it is expected to begin, with the Fed decreasing its purchases from $85 billion to $75 billion.  There is fear that this could let the bear out, creating stock market losses.  I didn’t include this as a serious concern, because it has been a concern for only the last three months and, more importantly, because it is already priced into the market.  Of course, if the Fed reduces the monthly purchases from $85 billion to only $50 billion, you can expect the market to react negatively . . . but the Fed won’t do that!

Secondly, one reader took issue with my repeatedly referring to members of Congress (and Administration) as “elected children” who demand everything be done their way.  Maybe, the problem is not the immaturity of the legislators (agreed), nor the gerrymandered political districts (which I do believe).  Maybe, it is a structural problem.  Here are his comments, and I couldn’t say them better:

I heard on a recent Fareed Zakaria CNN show several “experts” talk about how on both the national and state levels there seemed to be enough space between the politicians and the citizens that real gridlock could result.  At the local level, however, the politicians were often so close to the issues they were dealing with that practicality could prevail and something constructive could be done.
Maybe the problem isn’t gridlock or “this Congress.”  Maybe it is that too many problems are being addressed at too high (distant) a level.  (That isn’t to say that there are not some problems that really must be addressed at the broadest level.)
I believe many business people believe that once a plant gets to be beyond a certain number of employees that something fundamental changes.  I think the same applies in other places – think high schools.  Maybe we would all be better off if there was less governing and legislating and the people in Washington (and Richmond) spent more time at those cocktail parties where they could actually get to know one another.

That is good old-fashioned, but currently unfashionable, Reagan Republicanism.  All I can add is . . . amen!