http://krugman.blogs.nytimes.com/2009/08/17/nick-beaudrot-explains-it-all/?emc=eta1
Our 7/31 post was intended as a summary of both Peggy Noonan's reaction to President Obabma's rather uninspired press conference on health care as well as Professor Uwe Reinhardt's description of our perpetual national conversation over the last 30 years on that same subject.
Krugman's post today on a new flowchart summarizing potential changes in health care and the groups effected is a breath of fresh air. Take a look at the initial flowchart and then click on the header above it for more current versions and descriptors.
Aside from the politics of possible health care improvements, President Obama has suffered from the very "complexity" of potential changes and I do not think his attitude of "throwing it in the moat to see if it floats" (an old advertising axiom) works when congress has difficulty agreeing on what time it is. As Krugman has said, we will probably get some form of health care improvement by the end of the year.
I'm hopeful that, whatever the new health care program(s) we get, we will see an end to denial of coverage because of "pre-existing conditions" and removal of insurance coverage from individuals because they "cost too much". Some things are basic and are not "complicated". Profit margins will still be there for the insurance companies.
Tuesday, August 18, 2009
Friday, August 14, 2009
The Keeper of That Tapping Pen
http://www.nytimes.com/2009/03/22/business/22corner.html?emc=eta1
http://roomfordebate.blogs.nytimes.com/2009/08/02/do-women-make-better-bosses/?emc=eta1
"The Keeper of That Tapping Pen" is Anne Mulcahy who retired as Chairwoman and CEO of Xerox in May of this year. After 8 years of hard work turning around a company that the NY Times characterized as "...in disarray", she replaced herself with her own handpicked successor Ursula M. Burns, who was her second in command as president. Ms. Burns became the first African-American woman to run a company as large as Xerox ($17.6 billion in 2008 revenues).
Mulcahy took over Xerox in 2001 when security analysts described it as a lethargic company that had lost ground to Canon and Ricoh...at one point the analyst consensus was that Xerox was headed for bankruptcy. In an interview with Adam Bryant of the NY Times earlier this year (attached), Mulcahy said that, when you have a window of opportunity called a "crisis", move as quickly as you can, get as much done as you can. You learn about "failure" quickly and you perform "triage" (my word) on your investments.
Mulcahy's "tapping pen" comes from her meetings where, although she was not formal, she was impatient for people to get to the point. She rose through sales and looked to transfer out because she felt she was running out of steam. So, she chose human resources because she thought it was really interesting and could play a powerful role in organizational change. In that role, she discovered quickly how little honest feedback people got in companies and how important it was for people to have a sense of candid assessment.
Aside from the brilliance of what Mulcahy accomplished, she also broke the standard assumption that the CEO should come from Marketing, or Finance (and what a disaster that has been for GM), or Manufacturing. She came from Human Resources and knew the company. She had a feel for what was needed and made the hard decisions when they were required.
I see her as an excellent example of great management being "gender neutral". She was brilliant, results-oriented and empathetic. And, this brings me to my second attachment from the "ROOM FOR DEBATE" blog at the NY Times where the editors posed the question: "Do Women Make Better Bosses?" This subject choice resulted from a short interview done a week earlier with Carol Smith, the senior vice president and chief brand officer for the Elle Group, who said that female bosses are better advisers, mentors and rational thinkers. She also went on to say that male bosses love to hear themselves talk - this, of course, generated a lot of reaction.
It is interesting to me that the modern organization behavior texts do take a position on this issue stating, based on studies done by Alice Eagly (chairman of the department of social psychology at Northwestern University), and others, that the leadership performance of female leaders is comparable to, and in some dimensions such as transformational or change-oriented leadership, superior to, the performance of male leaders (Organizational Behavior, Bauer and Erdogan, 2009). Eagly is the first to respond in the blog mentioned above and states there that she has read hundreds of studies that compare women and men as managers, and summarizes: female managers are more collaborative and democratic than male managers. Eagly goes on, as do the opinions in the blog, and I recommend it as excellent reading.
My own thoughts go back to "The Keeper of That Tapping Pen" who was not the first choice of the Xerox Board of Directors. Their first choice was someone who failed, so they turned to her in desperation and, on the brink of failure, she saved the company and created a CEO role model for this decade.
http://roomfordebate.blogs.nytimes.com/2009/08/02/do-women-make-better-bosses/?emc=eta1
"The Keeper of That Tapping Pen" is Anne Mulcahy who retired as Chairwoman and CEO of Xerox in May of this year. After 8 years of hard work turning around a company that the NY Times characterized as "...in disarray", she replaced herself with her own handpicked successor Ursula M. Burns, who was her second in command as president. Ms. Burns became the first African-American woman to run a company as large as Xerox ($17.6 billion in 2008 revenues).
Mulcahy took over Xerox in 2001 when security analysts described it as a lethargic company that had lost ground to Canon and Ricoh...at one point the analyst consensus was that Xerox was headed for bankruptcy. In an interview with Adam Bryant of the NY Times earlier this year (attached), Mulcahy said that, when you have a window of opportunity called a "crisis", move as quickly as you can, get as much done as you can. You learn about "failure" quickly and you perform "triage" (my word) on your investments.
Mulcahy's "tapping pen" comes from her meetings where, although she was not formal, she was impatient for people to get to the point. She rose through sales and looked to transfer out because she felt she was running out of steam. So, she chose human resources because she thought it was really interesting and could play a powerful role in organizational change. In that role, she discovered quickly how little honest feedback people got in companies and how important it was for people to have a sense of candid assessment.
Aside from the brilliance of what Mulcahy accomplished, she also broke the standard assumption that the CEO should come from Marketing, or Finance (and what a disaster that has been for GM), or Manufacturing. She came from Human Resources and knew the company. She had a feel for what was needed and made the hard decisions when they were required.
I see her as an excellent example of great management being "gender neutral". She was brilliant, results-oriented and empathetic. And, this brings me to my second attachment from the "ROOM FOR DEBATE" blog at the NY Times where the editors posed the question: "Do Women Make Better Bosses?" This subject choice resulted from a short interview done a week earlier with Carol Smith, the senior vice president and chief brand officer for the Elle Group, who said that female bosses are better advisers, mentors and rational thinkers. She also went on to say that male bosses love to hear themselves talk - this, of course, generated a lot of reaction.
It is interesting to me that the modern organization behavior texts do take a position on this issue stating, based on studies done by Alice Eagly (chairman of the department of social psychology at Northwestern University), and others, that the leadership performance of female leaders is comparable to, and in some dimensions such as transformational or change-oriented leadership, superior to, the performance of male leaders (Organizational Behavior, Bauer and Erdogan, 2009). Eagly is the first to respond in the blog mentioned above and states there that she has read hundreds of studies that compare women and men as managers, and summarizes: female managers are more collaborative and democratic than male managers. Eagly goes on, as do the opinions in the blog, and I recommend it as excellent reading.
My own thoughts go back to "The Keeper of That Tapping Pen" who was not the first choice of the Xerox Board of Directors. Their first choice was someone who failed, so they turned to her in desperation and, on the brink of failure, she saved the company and created a CEO role model for this decade.
Wednesday, August 12, 2009
Averting the Worst/School for Scoundrels
http://www.nytimes.com/2009/08/09/books/review/Krugman-t.html?emc=eta1
Krugman has two perspectives for us this week that are worth a few minutes of our time.
Krugman has two perspectives for us this week that are worth a few minutes of our time.
In "Averting the Worst" (copy attached), Krugman's point is that what kept us from a second Great Depression was "Big Government". He qualifies his position about us being "saved" with an emphasis that I have continued to espouse in this blog: the economic situation remains "terrible". The U.S. has lost 6.7 million jobs since the recession began - if you include a growing working-age population, we are probably 9 million jobs short of where we should be. And, the job market hasn't turned around - that slight dip in the measured unemployment rate last month was probably a statistical "fluke". What we can celebrate, as Krugman points out, is that things are "...getting worse more slowly."
With that as a "qualifier", Krugman goes on to point out that what saved us is the very different role played by "government"..."Probably the most important aspect of the government's role in this crisis isn't what it has done but what it hasn't done: unlike the private sector, the federal government hasn't slashed spending as its income has fallen (State and local governments are a different story). Tax receipts are way down, but Social Security checks are still going out; Medicare is still covering hospital bills; federal employees...are still being paid."
He goes on to point out that "All of this has helped support the economy in its time of need, in a way that didn't happen back in 1930, when federal spending was a much smaller percentage of GDP. And, yes, this means that budget deficits - which are a bad thing in normal times - are actually a good thing right now." This parallels a point made by Krugman's fellow Economics Nobel winner Joseph Stiglitz last week on CNN, and referenced in a prior post here, that "deficits" are sometimes needed, especially if they can create "assets" useful to the economy.
Last, Krugman points out that, while he has consistently argued that the Obama stimulus plan is not enough (and we have logged that here), he feels that "reasonable estimates" suggest around a million more Americans are working now then would have been employed without that plan. So, "big government" has made a difference.
In our second attachment, we reference a double book review by Krugman in Sunday's (8/9) NY Times. While some would argue that we don't need another book on the financial crisis, Krugman sees Justin Fox's "Myth of the Rational Market" as different because it focuses not on the errors and abuses of the bankers but on the "professors" who enabled those abuses under the banner of the financial theory known as efficient-market hypothesis. Krugman's review is a refreshingly brief but relevant perspective on the growth of financial theory in the academic world including the critical voices of Robert Shiller (who has become famous for predicting both the Internet crash and the housing bust) and Lawrence Summers (now a senior official in the Obama administration) who began a paper thus: "THERE ARE IDIOTS. Look around."..."And a whole counterculture emerged in the form of 'behavioral finance', which argued that investors are irrational in predictable ways." But, the sheer scope of "efficient markets hypothesis" allowed it to brush off these challenges. Krugman's review, alone, is worth the "read" let alone the book he refers to.
Krugman's second review is on "The Sages" by Charles Morris and he connects the two books thru the successes of Warren Buffet, George Soros and Paul Volker described in the Morris book. After reading both books, Krugman concludes that little will change on Wall Street where there has always been an appetite for complex strategies that sound clever. So, the myth of the "rational market" isn't going away anytime soon. My guess is that Krugman's review is better than the books he was "reviewing" but I'm fascinated by his support for Fox on his position that those professors, who were lavishly paid (for their "credibility") to design complex financial strategies, played such a crucial role in the worldwide financial crisis. For me, it would make the Fox book worth reading.
Wednesday, August 5, 2009
Regulatory Overhaul
http://online.wsj.com/article_email/SB124934399007303077-lMyQjAxMDI5NDA5NDMwNDQzWj.html
So, where are we with with an improved approach to regulation, something that beats Alan Greenspan's "...financial markets are self-regulating"? Evidently the administration's "plan" is faltering (see the input from the Wall Street Journal attached). Since the "plan" was unveiled in June, it has been criticized by the financial services industry, as well as by financial services regulators wary of encroachment on their turf.
Why am I not surprised?
The administration's proposal would give the Fed broad discretion to supervise any major U.S. financial company and would also create a "financial services advisory council" to coordinate policy and help resolve disputes among regulators. How power would be balanced between the Fed and this entity has emerged as a flash point, one that administration officials debated. I'm "shocked", "shocked". Does this mean that regulatory officials don't want to sit around the camp fire and sing songs of togetherness?
The Fed has been weakened in the resolution of this mess because of its role in allowing AIG to pay large bonuses to employees. Hopefully, this will get resolved soon, but the dynamics of the situation don't look promising.
So, where are we with with an improved approach to regulation, something that beats Alan Greenspan's "...financial markets are self-regulating"? Evidently the administration's "plan" is faltering (see the input from the Wall Street Journal attached). Since the "plan" was unveiled in June, it has been criticized by the financial services industry, as well as by financial services regulators wary of encroachment on their turf.
Why am I not surprised?
The administration's proposal would give the Fed broad discretion to supervise any major U.S. financial company and would also create a "financial services advisory council" to coordinate policy and help resolve disputes among regulators. How power would be balanced between the Fed and this entity has emerged as a flash point, one that administration officials debated. I'm "shocked", "shocked". Does this mean that regulatory officials don't want to sit around the camp fire and sing songs of togetherness?
The Fed has been weakened in the resolution of this mess because of its role in allowing AIG to pay large bonuses to employees. Hopefully, this will get resolved soon, but the dynamics of the situation don't look promising.
Has Anything Changed?
http://online.wsj.com/article_email/SB124908601669298293-lMyQjAxMDI5NDA5MTAwODE2Wj.html
http://www.nytimes.com/2009/08/03/opinion/03krugman.html?emc=eta1
Paul Krugman's OP-ED on "Rewarding Bad Actors" (8/3/09: copy attached) addresses two recent news stories that caught his attention (and mine). The first is on "high-speed trading" and the second on Andrew J. Hall at Phibro (now a division of Citigroup). On high-speed trading, I've attached an excellent WSJ article that explains what it is and some of the terminology that's used in that business (high-frequency trading is defined as computer-driven, algorithm-based trading at computer speeds measured in millionths of a second): flash orders, naked access, etc.
As Krugman points out, "... crashing the economy and fleecing the taxpayers aren't Wall Street's only sins. Even before the crisis and the bailouts, many financial industry high fliers made fortunes thru activities that were worthless if not destructive from a social point of view."
With high-speed trading, some institutions, including Goldman Sachs, have been using super fast computers to get the jump on other investors, buying or selling stocks in a tiny fraction of a second before anyone else can react. Profits from high-frequency trading are one reason Goldman is earning record profits and likely to pay record bonuses.
Andrew Hall leads an arm of Citigroup that speculates in oil and other commodities. His operation has made a lot of money recently, and, according to his contract, Mr. Hall is owed $100 million. Seriously.
What do these stories have in common? The politically salient answer is that in both cases we are looking at huge payouts by firms that were major recipients of federal aid. Citi has received $45 billion from taxpayers; Goldman has payed back the $10 billion it recieved in direct aid, but it has benefited enormously from federal guarantees and from bailouts of other financial institutions. As Krugman points out, "What are taxpayers supposed to think when these welfare cases cut nine-figure paychecks?"
Now, financial speculation, Krugman continues, can serve a useful purpose - it's good, for example, that futures markets provide an incentive to stockpile heating oil before the weather gets cold and stockpile gasoline ahead of summer driving season. But, speculation based on information not available to the public at large is a different matter. Such speculation often combines "private profitability" with "social uselessness".
Read on in Krugman's article for the economics of how the activities of high-speed trading and Mr. Hall's trading in gas and oil (amongst other commodities) make us all "poorer". When you fill up your tank with gasoline, think about how the worlwide demand for oil has dropped 4 million barrels per day since the financial crisis began and that the refinery production of gasoline in the U.S. has been cut back consistent with that slack demand. But, prices at the "pump" are going up because of "speculation" that the economy is coming back (so, obviously, "demand" is coming back). So, who's doing the speculating? And, how large will Mr. Hall's bonus be?
http://www.nytimes.com/2009/08/03/opinion/03krugman.html?emc=eta1
Paul Krugman's OP-ED on "Rewarding Bad Actors" (8/3/09: copy attached) addresses two recent news stories that caught his attention (and mine). The first is on "high-speed trading" and the second on Andrew J. Hall at Phibro (now a division of Citigroup). On high-speed trading, I've attached an excellent WSJ article that explains what it is and some of the terminology that's used in that business (high-frequency trading is defined as computer-driven, algorithm-based trading at computer speeds measured in millionths of a second): flash orders, naked access, etc.
As Krugman points out, "... crashing the economy and fleecing the taxpayers aren't Wall Street's only sins. Even before the crisis and the bailouts, many financial industry high fliers made fortunes thru activities that were worthless if not destructive from a social point of view."
With high-speed trading, some institutions, including Goldman Sachs, have been using super fast computers to get the jump on other investors, buying or selling stocks in a tiny fraction of a second before anyone else can react. Profits from high-frequency trading are one reason Goldman is earning record profits and likely to pay record bonuses.
Andrew Hall leads an arm of Citigroup that speculates in oil and other commodities. His operation has made a lot of money recently, and, according to his contract, Mr. Hall is owed $100 million. Seriously.
What do these stories have in common? The politically salient answer is that in both cases we are looking at huge payouts by firms that were major recipients of federal aid. Citi has received $45 billion from taxpayers; Goldman has payed back the $10 billion it recieved in direct aid, but it has benefited enormously from federal guarantees and from bailouts of other financial institutions. As Krugman points out, "What are taxpayers supposed to think when these welfare cases cut nine-figure paychecks?"
Now, financial speculation, Krugman continues, can serve a useful purpose - it's good, for example, that futures markets provide an incentive to stockpile heating oil before the weather gets cold and stockpile gasoline ahead of summer driving season. But, speculation based on information not available to the public at large is a different matter. Such speculation often combines "private profitability" with "social uselessness".
Read on in Krugman's article for the economics of how the activities of high-speed trading and Mr. Hall's trading in gas and oil (amongst other commodities) make us all "poorer". When you fill up your tank with gasoline, think about how the worlwide demand for oil has dropped 4 million barrels per day since the financial crisis began and that the refinery production of gasoline in the U.S. has been cut back consistent with that slack demand. But, prices at the "pump" are going up because of "speculation" that the economy is coming back (so, obviously, "demand" is coming back). So, who's doing the speculating? And, how large will Mr. Hall's bonus be?
Trying to Recover
http://www.nytimes.com/2009/08/01/opinion/01sat1.html?emc=eta1
The NY Times Editorial Board has weighed in (copy attached) on the need for an "immense federal stimulus" now that second quarter GDP numbers are in. While I was unaware that I was putting together an informal poll, I can now put Krugman, Stiglitz, Zuckerman and Warren Buffet together with the Times on the side of why the stimulus was/is needed. And, while the stimulus is a positive, it's not enough.
The Times takes shots at "Republican opponents" of the stimulus that have routinely asserted that the ongoing recession is evidence that the stimulus has "failed". Playing "politics" with unemployment and much needed economic growth is certainly not something I want to see, but, forgetting the political branding for the moment, politicians in congress (Republican or Democrat) that espoused "no stimulus" and asserted the failure of stimulus before it has had a chance to impact the economy, is, as the Times says, "silly". For those of you not familiar with my "cruise ship" analogy, it takes a 1,000 foot long cruise ship, cruising at 24 knots, 1 mile to stop if its engines are thrown into full reverse. Moving the U.S. economy is a similar problem - it's huge and it takes time to move it.
Thanks to the Times, I have for the first time seen a calculation on the difference in 2nd quarter 2009 U.S. GDP growth with and without current stimulus spending. While the "improvement" in second quarter GDP growth was over 5% (from a negative 6.4% to a negative 1%, and I'm sure there will be "revisions"), the second quarter contraction would have been 4% instead of 1% had there been no stimulus. And, from July thru September, when the largest chunk of the stimulus money is scheduled to be spent, the boost in activity is projected to be even greater. So, there is "math" that supports the "stimulus" making a difference.
Unfortunately, there is a general consensus among economists that the "recovery" will be "muted" because the stimulus, while helpful, was designed for a "milder recession" than what has actually occurred...if that's not bad enough, whatever growth the economy manages to eke out over the next year is bound to be constrained by unrelenting foreclosures and tight credit.
The Times concludes that, while the stimulus is helping, more stimulus would help even more. And, what they don't say but is implied, is that rising unemployment (perhaps as high as 11% next year) will be a major drag on GDP in 2010 and beyond.
The NY Times Editorial Board has weighed in (copy attached) on the need for an "immense federal stimulus" now that second quarter GDP numbers are in. While I was unaware that I was putting together an informal poll, I can now put Krugman, Stiglitz, Zuckerman and Warren Buffet together with the Times on the side of why the stimulus was/is needed. And, while the stimulus is a positive, it's not enough.
The Times takes shots at "Republican opponents" of the stimulus that have routinely asserted that the ongoing recession is evidence that the stimulus has "failed". Playing "politics" with unemployment and much needed economic growth is certainly not something I want to see, but, forgetting the political branding for the moment, politicians in congress (Republican or Democrat) that espoused "no stimulus" and asserted the failure of stimulus before it has had a chance to impact the economy, is, as the Times says, "silly". For those of you not familiar with my "cruise ship" analogy, it takes a 1,000 foot long cruise ship, cruising at 24 knots, 1 mile to stop if its engines are thrown into full reverse. Moving the U.S. economy is a similar problem - it's huge and it takes time to move it.
Thanks to the Times, I have for the first time seen a calculation on the difference in 2nd quarter 2009 U.S. GDP growth with and without current stimulus spending. While the "improvement" in second quarter GDP growth was over 5% (from a negative 6.4% to a negative 1%, and I'm sure there will be "revisions"), the second quarter contraction would have been 4% instead of 1% had there been no stimulus. And, from July thru September, when the largest chunk of the stimulus money is scheduled to be spent, the boost in activity is projected to be even greater. So, there is "math" that supports the "stimulus" making a difference.
Unfortunately, there is a general consensus among economists that the "recovery" will be "muted" because the stimulus, while helpful, was designed for a "milder recession" than what has actually occurred...if that's not bad enough, whatever growth the economy manages to eke out over the next year is bound to be constrained by unrelenting foreclosures and tight credit.
The Times concludes that, while the stimulus is helping, more stimulus would help even more. And, what they don't say but is implied, is that rising unemployment (perhaps as high as 11% next year) will be a major drag on GDP in 2010 and beyond.
Monday, August 3, 2009
Adding Some Inflation
http://www.nytimes.com/2009/08/02/business/economy/02view.html?_r=1&emc=eta1
Professor Joseph Stiglitz, of Columbia University, was chairman of President Clinton's Council of Economic Advisors and won the Nobel Prize in Economics in 2001 for his work on the economics of information. He appeared on CNN yesterday and, among other observations, took the position that the U.S. economy needs more stimulus. He now joins Paul Krugman (a fellow "Nobel" in Economics), Warren Buffet, and Mort Zuckerman all of whom share that same position.
Stiglitz sees the weak recovery that is coming thru the perspective of unemployment which he, and other noted economists, estimates at 11% (or more) for 2009. His position is that any reasonable added stimulus combats the very unemployment numbers that will be a drag on economic recovery. This, of course, engenders questions about the inevitable deficit spending which would be required for more "stimulus". His response to that is that "deficits" are not automatically "bad". If deficit spending creates "assets" (like the right infrastructure spending on bridges, roads, schools, teachers, etc.), then the spending was worth it.
For my generation, the words "deficit" and "inflation" are bad words. My own experience with "Wage and Price Controls" in the early 70s was enough to swear anyone off any potential inflation-inducing policies. I administered the wage side of those controls at a large company (Citibank) and was in the unenviable position of telling SVPs and EVPs (let alone, the CEO) that they could not process "merit" increases for their best people ("promotions" were OK - if they were "bona fide").
Tyler Cowen's article in the Sunday NY Times (attached) refers to potential new monetary remedies for the economy since fiscal stimulus has not been a "striking success." I think most people would think that the Fed is out of bullets because Fed interest rates are an effective "zero." But, Cowen points out that Professor Scott Sumner (of Bentley College) has an idea that is "doable": the Fed makes a firm commitment to raising expectations of price inflation to 2 to 3% annually. While his views are controversial, they are based on some assumptions that are not. It is commonly agreed among economists that deflation brings layoffs and sluggish investment. Yet, energy prices aside, we have been seeing downward pressure on prices. The Fed can print money and commit to spending it on various financial assets if necessary but, Sumner believes, that may not be necessary, since the very announcement itself would be inflationary. Further, a Fed stance in favor of mild price inflation need not require higher taxes or larger budget deficits.
While these arguments have not won over the economics profession, neither have they been refuted. Paul Krugman has suggested that a Fed policy favoring 2 or 3% price inflation isn't politically realistic in today's environment. That doesn't mean it won't work.
Professor Joseph Stiglitz, of Columbia University, was chairman of President Clinton's Council of Economic Advisors and won the Nobel Prize in Economics in 2001 for his work on the economics of information. He appeared on CNN yesterday and, among other observations, took the position that the U.S. economy needs more stimulus. He now joins Paul Krugman (a fellow "Nobel" in Economics), Warren Buffet, and Mort Zuckerman all of whom share that same position.
Stiglitz sees the weak recovery that is coming thru the perspective of unemployment which he, and other noted economists, estimates at 11% (or more) for 2009. His position is that any reasonable added stimulus combats the very unemployment numbers that will be a drag on economic recovery. This, of course, engenders questions about the inevitable deficit spending which would be required for more "stimulus". His response to that is that "deficits" are not automatically "bad". If deficit spending creates "assets" (like the right infrastructure spending on bridges, roads, schools, teachers, etc.), then the spending was worth it.
For my generation, the words "deficit" and "inflation" are bad words. My own experience with "Wage and Price Controls" in the early 70s was enough to swear anyone off any potential inflation-inducing policies. I administered the wage side of those controls at a large company (Citibank) and was in the unenviable position of telling SVPs and EVPs (let alone, the CEO) that they could not process "merit" increases for their best people ("promotions" were OK - if they were "bona fide").
Tyler Cowen's article in the Sunday NY Times (attached) refers to potential new monetary remedies for the economy since fiscal stimulus has not been a "striking success." I think most people would think that the Fed is out of bullets because Fed interest rates are an effective "zero." But, Cowen points out that Professor Scott Sumner (of Bentley College) has an idea that is "doable": the Fed makes a firm commitment to raising expectations of price inflation to 2 to 3% annually. While his views are controversial, they are based on some assumptions that are not. It is commonly agreed among economists that deflation brings layoffs and sluggish investment. Yet, energy prices aside, we have been seeing downward pressure on prices. The Fed can print money and commit to spending it on various financial assets if necessary but, Sumner believes, that may not be necessary, since the very announcement itself would be inflationary. Further, a Fed stance in favor of mild price inflation need not require higher taxes or larger budget deficits.
While these arguments have not won over the economics profession, neither have they been refuted. Paul Krugman has suggested that a Fed policy favoring 2 or 3% price inflation isn't politically realistic in today's environment. That doesn't mean it won't work.
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