A bit of a wonky discussion on the radio today with the guest host. Policy stances for both fiscal and monetary policy were the major topics, mostly with relations to stock price movements. I could talk policy all day, as I did for most of the hour on the radio.
In an epic display of the more things change, the more they stay the same Paul Ryan is unhappy with the process of fiscal policy under his own leadership. I will wait to comment on the legislation more fully when the votes are in (what the end passing coalition looks like may be the most interesting part of this). With this policy we essentially put in place tax cuts and spending increases, so something for both parties to celebrate or at least sell as a victory. Of course it is fiscally irresponsible and leads me to the generic comment I want to make: fiscal policy is not working. As much as people (in and out of government) want to take aim at the Fed, their policy decisions can be justified as following a defined approach to policy and the world.
I think we should expect a government shutdown. When you read the stances of the different leaders, and believe me I use the term loosely, it seems unlikely there will be any common ground found soon. One case is particular I will bring up is Harry Reid. As I look at the situation he faces I see little reason for him to soften his stance from a game theoretic perspective.
The Fed has been wrong about growth lately in their forecasts, and wrong in a very bad way. The Fed forecasts have not yet taken into account fundamental changes in individual behavior. It would not be a surprise that such forecasts were wrong during or in the immediate aftermath of the crisis, but to still be so wrong at this point is worrisome. What is the problem? People are scared.