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Today’s Fed and Friedman’s monetary rule

Monetarists, that branch of monetary policy inhabited by conservative economists, have long stated that monetary policy is oversold. That was the thinking of the sainted Milton Friedman and my PhD advisor the great Karl Brunner. Both emphasized the destabilizing effects of discretionary monetary policy and the benefit of a monetary policy rule. I remember Friedman once saying that we did not know enough to conduct discretionary policy – the manipulation of monetary policy tools – without destabilizing the economy. The economy writ large is just too complicated for monetary policy to work effectively without disrupting its workings. 

Freidman argued that the central bank did have a role to play but it should not be one of casting uncertainty in the economy. Rather it should be one of certainty. Friedman argued that if monetary policy were too expansive, it would invariably lead to inflation (inflation is everywhere a monetary phenomenon). If the growth in money were too little, it would lead to deflation and possible recession. Fiddling around with monetary policy tools would be disruptive to the economy with households and businesses being unsettled by the uncertainty of what the Fed is going to do next. Friedman thought that discretionary policy was often the source of economic ails causing the Fed to have to fix problems that it had created itself.

The solution is a monetary rule. Friedman suggested that the Fed should allow the money supply to grow at a rate equal to the real long term rate of growth in the economy and leave it alone. No cutting the Fed funds rate. No raising the Fed funds rate. Just let the market determine the rate and leave it alone. Of course, the economy is dynamic and if there is an economic slowdown, the Fed would increase the money supply to maintain the targeted rate of change in real long term GDP. Conversely, it the economy were starting to grow faster than the target, the Fed might decrease the rate of growth in money to get the economy back on course.

It should come as no surprise that not a single central banker in the world would adhere to Friedman’s monetary rule. They are too self-important to do that. Fiddling with stuff keeps them busy and shows their worth to all to see. Yet that same fiddling is the source of criticisms regardless of what they do. Right now President Trump wants the Fed to lower rates. His representative at the Board, Stephen Miran has called for lowering the Fed funds rate by 50 basis points at each of its next two meetings. Why he just doesn’t opt for 100 basis points now and get it over with is beyond me. The president (and Miran) seem to think that lowering the Fed funds rate will overcome the woeful jobs numbers and lower the government’s borrowing costs (and other pipe dreams). But lowering will do no such things as I have detailed before. It will likely only increase inflation because the mere process of lowering rates entails creating more money. Lower rates will not increase employment and will not lower the cost of borrowing since only a small proportion of the debt is in short term Treasurys and longer term Treasury rates will likely rise due to inflationary expectations.

The other members of the Open Market Committee have varying opinions as to what to do next. One is open to lowering the Fed funds rate by 25 basis points at the next two meetings. At least three others have expressed caution about changing the rates period while two others have been quoted as indicating that they might favor a rise in rates. The Fed chairman, Jerome Powell, who increasingly is looking forward to May 2026 when his term ends, is the standard bearer for caution. Powell reminds us of the Fed’s dual mandate of price stability and full employment is now at odds. Rising inflation means to increase rates while high unemployment means to lower rates. But now with both increasing, what should the Fed do? Well it lowered the rate by 25 basis points, a move intended to give Trump a little satisfaction but do little to change the economic narrative. 

This is a classic middle of the road approach and is typical of Powell’s tenure as chairman. With all the diverse opinions about what the Fed’s course of action should be, Powell seeks compromise. In my experience, the chairman talks with each member of the Board of Governors individually prior to the meeting of the Open Market Committee. The intention is to reach a decision in which they all agree – a classic compromise. Then the chairman seeks that the reserve presidents are on board with the compromise resulting in a unanimous vote at the meeting. On those rare occasions where a compromise cannot be reached, dissents are recorded. I can guarantee that Miran will never agree to a compromise unless okayed by the president. Miran wants to go back to his cushy job on the Council of Economic Advisors where his only duty is to produce statistical confirmation of whatever Trump wants – something any graduate student could do.

I have said it before and I will say it again, the Fed should concentrate on inflation and eschew unemployment. Inflation does more long term harm to the economy while employment numbers constantly change in a dynamic economy. Putting the economy on a stable path of economic growth will virtually guarantee low unemployment numbers. 

Of course, as per usual, my solutions will never be adopted because there would be no need for all those international conferences, all the press conferences, meetings at ritzy resorts and feelings of self-importance. But a plus would be that we would be rid of those contentious congressional hearings and the constant badgering of the central bank.

Now my not so last word on free trade

I am certain by now, everyone knows my position on free trade. I am largely against tariffs and only under very specific circumstances favor them on specific items. Some agree and some disagree. That is fine with me. I believe – like a true free trader – that even if one country practices free trade by lowering its trade barriers that it will be better off (see Singapore). I know all the arguments to the contrary and shake my head in disbelief at those who argue that we will be better off if we make ourselves poorer by erecting trade barriers. I have detailed extensively on this blog the arguments for and against and have offered suggestions that will forever go unheeded. On occasions I will revisit these arguments but for now, I recommend Don Boudreaux’s website Café Hayek where almost daily he writes about free trade engaging in spirited dialogue with his readers. 

Here is an example of Don’s posting and is a recommended read.

Enough With Protectionists’ Rampaging Presumptions

Was the president’s warning on Tylenol irresponsible?

Was the president’s warning on Tylenol irresponsible? Maybe and maybe not. If it was irresponsible, it was in the way the message was conveyed. The president said that the Food and Drug Administration (FDA) will begin notifying physicians immediately that it is “strongly recommending that women limit Tylenol (acetaminophen) use during pregnancy unless medically necessary” and that the FDA would update the label for acetaminophen with enhanced information about the possible link. All well and good. That statement sounds reasonable to me.

What was irresponsible was what else that the president said at the news conference. “If you’re pregnant, don’t take Tylenol, and don’t give it to the baby after the baby is born. There are certain groups of people that don’t take vaccines and don’t take any pills that have no autism. They pump so much stuff into those beautiful little babies, it’s a disgrace.” The president then told women to “tough it out” rather than take Tylenol for fever or pain during pregnancy. The president said that “taking Tylenol is not good. All right, I’ll say it. It’s not good.” “Don’t take Tylenol. Don’t take it. Fight like hell not to take it.”

Pardon me if I think that those statements are a bit overboard. It gives the impression that researchers are certain that there is a causal link between taking acetaminophen during pregnancy and autism in newborn babies. There is no such definitive link found in the research. In fact, one large scale study in Sweden of two million children ruled out the relationship. However, others have not and have been cautious in their conclusions.

The mainstream medical groups have expressed alarm at the president’s statements saying that that acetaminophen is a safe medication for pregnant women to take and that no studies have found a direct cause-and-effect between use in pregnancy and autism. For instance, The American College of Obstetricians and Gynecologists stated that asserting a relationship between acetaminophen in pregnancy to autism is “highly concerning,” “irresponsible” and “not backed by the full body of scientific evidence.”

The president of the American College of Obstetricians and Gynecologists said “Acetaminophen is one of the few options available to pregnant patients to treat pain and fever, which can be harmful to pregnant people (pregnant people?) when left untreated. Maternal fever, headaches as an early sign of preeclampsia, and pain are all managed with the therapeutic use of acetaminophen, making acetaminophen essential to the people (people?) who need it. The conditions people use acetaminophen to treat during pregnancy are far more dangerous than any theoretical risks and can create severe morbidity and mortality for the pregnant person (pregnant person?) and the fetus (baby?).” (Note: It is a bit disconcerting that the president of the American College of Obstetricians and Gynecologists apparently doesn’t know what a woman is.)

One group of researchers published an analysis of 46 previous studies on Tylenol, autism and attention-deficit/hyperactivity disorder. Many found no link between the drug and the conditions, while a few suggested Tylenol might occasionally exacerbate other potential causes of autism such as genetics. The authors called for more judicious use of the drug. Yet even the research that found a link with prenatal Tylenol say that it would occur in on a fraction of the cases.

It is interesting that autism experts at the Centers for Disease Control and Prevention were neither consulted for the president’s announcement nor asked to review a draft of the findings and recommendations.

A White House spokesman said “President Trump pledged to address America’s alarming rising rate of autism, and to do so with Gold Standard Science.” Yet there is considerable controversy as to whether there an “alarming rising rate of autism” although it seems so. In the 1970s, autism was considered rare, perhaps 1 in 5,000 to 10,000 children. In 2000, an estimated one in 150 children aged 8 had the disorder. By 2010, that number had risen to one in 68 and by 2022 it was one in 31. However, the diagnosis of autism has changed. Once those with autism were “missed, misdiagnosed or labeled differently” say doctors. One expert says that over time, as awareness has grown, diagnostic definitions have expanded and screening has became more routine. So it’s not a surprise to see more autism diagnoses. The biggest misconception is that rising numbers mean autism itself is suddenly becoming more common. That’s scary to some people, but there does not appear to be new autism ‘epidemic.” 

So who to believe? The president, the medical establishment, your doctor or the researchers? To recap. The president says with certainty Tylenol causes autism in children. The medical establishment says it isn’t so. The researchers seem to say that if there is a link, it is a statistically small one. In that light, it depends on the severity of the mother’s (er, pregnant person’s) symptoms and the dosage of Tylenol given. I haven’t a clue as to what the doctors will do. I know some that write a prescription for every ailment and others that don’t.

So the jury’s out but expect to see the number of lawsuits rising dramatically as the tort attorneys are licking their chops. One would have expected to see the shares of Renvue (the maker of Tylenol that was spun off from Johnson and Johnson) to tank. And yes, there was a sell off but only by 7 percent and 60 percent of that decline was made up the following day. So apparently, the market must think that the risk of a massive settlement is low and that Renvue will only have to put warning labels on Tylenol. I presume this is true for all the generics as well.

Lastly, did you see the stories of pregnant women “guzzling” Tylenol in defiance of Trump? The Daily Mail reports several women have gone viral on social media posting videos of themselves taking Tylenol in protest. ‘Here’s me, a PREGNANT woman, taking TYLENOL because I believe in science and not someone who has no medical background,’ one woman wrote over a video of herself taking the pill and dancing. (Note that the woman refers to herself as a “woman”). Another woman said “About to take Tylenol for my headache while pregnant, because I don’t take my medical advice from a man who doesn’t have a degree in science, healthcare, or medicine, and who had a parasitic brain infection. Yeah, I’ll trust my doctors, who have a degree.” One advisor to RFK jr was exasperated saying “Democrats are now chugging bottles of Tylenol on TikTok.” Even women outside the US are protesting the president. One Brit who is 36 weeks pregnant said “I do not believe for one second that Tylenol causes autism, these claims have been debunked before and Trump has given no scientific evidence to back up his claims. I am from the UK and our NHS guidance still stands that Tylenol/ Paracetamol is the safest form of pain medication during pregnancy.” Yikes! With their track record, would you trust the NHS?

TDS knows no boundaries or borders. 

What goes around

One of the most basic practical insights of liberalism is that any power you give government with the goal of empowering your side will–usually within 8 years!–be captured and used by the other side against you. So you shouldn’t create any source of power you wouldn’t want your ideological enemies to possess.

One of the most basic moves of American politics is to ignore this insight, even though it has so far never been wrong. – Jason Brennan

The “vengeance is mine” tour continues. The president fired Erik Siebert who a few months ago he appointed as US District Attorney for the Eastern District of Virginia. Why? Because Siebert would not bring charges against two of the president’s enemies, Letitia James and James Comey. “After a five month investigation and interviews with more than a dozen witnesses,” Siebert said that they lacked sufficient evidence to charge New York attorney general Letitia James with mortgage fraud. Trump was clearly unhappy with his attorney general, Pam (Blondie) Bondi. He chastised her in a tweet that he probably hit “send” and then went “oops”s because he quickly deleted the post. Here is the missive:

“Pam: I have reviewed over 30 statements and posts saying that, essentially, “same old story as last time, all talk, no action. Nothing is being done. What about Comey, Adam “Shifty” Schiff, Leticia??? They’re all guilty as hell, but nothing is going to be done. Then we almost put in a Democrat supported U.S. Attorney, in Virginia, with a really bad Republican past. A Woke RINO, who was never going to do his job. That’s why two of the worst Dem Senators PUSHED him so hard. He even lied to the media and said he quit, and that we had no case. No, I fired him, and there is a GREAT CASE, and many lawyers, and legal pundits, say so. Lindsey Halligan is a really good lawyer, and likes you, a lot. We can’t delay any longer, it’s killing our reputation and credibility. They impeached me twice, and indicted me (5 times!), OVER NOTHING. JUSTICE MUST BE SERVED, NOW!!! President DJT”

Siebert had been endorsed for the position by Virginia’s two democrat senators and republican governor. Note that he left out the governor, Glenn Youngkin in this diatribe. The president knows perfectly well that any old prosecutor can find trumped up charges to indict anyone having been indicted so many times himself. What are the odds that the next district attorney for Eastern Virginia will find evidence sufficient to indict James and Comey? By the way, that person is one of the president’s former defense lawyers, Lindsey Halligan.

He did issue a mea culpa to Bondi saying “Pam Bondi is doing a GREAT job as Attorney General of the United States. She is very careful, very smart, loves our Country, but needs a tough prosecutor in the Eastern District of Virginia, like my recommendation, Lindsey Halligan, to get things moving. What we don’t need is a Democrat Endorsed ‘Republican.” Ms Halligan who is an insurance attorney has never been a prosecutor. But hey, you got to start sometime.

Bondi now has her marching orders. It’s a bit strange that the president would tweet all this out rather than just giving her a call. But the message is clear as he said when asked if he was upset with her. He said “No. I just want people to act. They have to act. But now we want to act fast. You know, they were ruthless and vicious. I was impeached twice. I was indicted five times. It turned out to be a fake deal. And we have to act fast one way or the other. One way or the other. They’re guilty. They’re not guilty. We have to act fast. If they’re not guilty, that’s fine. If they are guilty or if they should be judged, they should be charged. And we have to do it now.”

Some out there with short memories are saying that Trump is shattering the image of an independent Justice Department. I guess they have forgotten when then Attorney General Eric Holder said that he was President Obama’s wing man. Does anyone think that Merrick Garland’s Justice Department was independent of Joe Biden? It was during Garland’s tenure that I started putting quote marks before and after “Justice.” No Bondi is following her boss’ marching orders and has continued the politicization of the department instituted by her predecessors.

So returning to the quote by Brennen, what was done to Trump by his political enemies is now going to be done to them. If the charges against him were baseless then there will be baseless charges brought against them. There is no turning of the other cheek. In the vicious world of petty politics its an eye for an eye. Vengeance is mine.

President Trump and the H1-B visa

President Trump as is his wont has just unilaterally raised the annual fee for an H1B visa from $215 to $100,000. The president has claimed that the system was depriving American workers of jobs and was being abused and that abuse constituted a threat to national security (what doesn’t?). There is evidence that the visa program has been abused by some. “Since the creation of the program, the abuses of the program have been many, included vastly underpaying workers, laying off U.S. workers and replacing them with much lower-paid H-1B workers, forcing U.S. workers to train their H-1B replacements as a condition of receiving severance and unemployment insurance, and cheating the H-1B lottery to acquire additional visas.” See

https://www.epi.org/publication/new-evidence-widespread-wage-theft-in-the-h-1b-program/

The president was right in wanting to address the abuses in the system. The question is whether the increase in the annual fee is the right way to do it. One thing is certain, a fee of that size will mean that only the highest compensated foreign workers will now be brought into the country unless some type of fealty is paid to the president. Fealty – there’s that word again where it seems that kneeling before the president, kissing his ring and offering him gifts will get you an exemption. Apple anyone? Overlooked in most of the reporting is the following caveat:

“The restriction imposed pursuant to subsections (a) and (b) of this section shall not apply to any individual alien, all aliens working for a company, or all aliens working in an industry, if the Secretary of Homeland Security determines, in the Secretary’s discretion, that the hiring of such aliens to be employed as H-1B specialty occupation workers is in the national interest and does not pose a threat to the security or welfare of the United States.”

So it is possible to opt out of paying the $100,000 annual fee at the Secretary of Homeland Security’s discretion. Oh boy. I am sure that Kristi Noem is beyond reproach and cannot be bribed. Right? 

The president has made it clear that all those who currently hold an H1B visa are exempt from the new fee. That is obviously a relief to companies like Amazon that employs 14,667 such workers. Even with its deep pockets that would mean an additional $1.5 billion a year in visa costs. But going forward, unless exempted at the Secretary’s discretion, even Amazon would face increased costs to bring in new workers.

Seventy percent of the H1B visa holders are from India and has been a boon to that country and its citizens. About 12 percent of the visa holders are from China. Most are involved in skilled high tech jobs – jobs that Americans have deficient skills in. Needless to say there is much concern in India where the program has help raise countless families out of poverty.

There were 85,000 visas granted annually with another 20,000 for people with advanced degrees from American universities. Question to the president: Do Indians constitute a threat to national security?

The university programs will likely disappear given the $100,000 annual cost. This will surely impact university research and the hiring of professors and recruitment of graduate students. Most of the visa holders are in the STEM areas (science, technology, engineering and mathematics) where the majority of graduate degrees go to foreigners. The president says that now firms will have to hire Americans but of course if there are few Americans to hire, then that presents an interesting problem that will have significant impact on the economy. One thing is for certain, those skilled Americans should see a significant increase in their pay.

Trump supporters Vivek Ramaswamy and Elon Musk have defended the program while Steve Bannon has condemned it. Of course, Bannon does not operate a business dependent upon skilled workers. The largest industry for these visa holders are computer programing, professional, scientific and technical services and manufacturing. It is no surprise that tech giants are high uses of the program with Google (4,186), Meta (5,123), Microsoft (5,189) and Apple (4,202). The Indian multinational technology company, Tata Consultancy Services employs 5,586. I wonder what gifts will they have for the president.

Naturally, the new fee will face a court challenge. As one attorney put it “The only authority Congress has ever given the executive branch here is to charge fees to recover the cost of processing the application.”

The new fee is expected to cause the distribution of skilled workers to become more global as other countries that pay lower salaries will be able to attract those workers who would have otherwise gone to the US. One observer said that the biggest threat to Europe was the loss of talented innovators to the US but now Trump will have reversed that flow. The UK has responded by moving toward abolishing all visa fees for high level foreign talent and to “attract and retain high-skilled talent, particularly in science, research and technology.”

China has instituted a new K visa to attract skilled professionals in Science, Technology, Engineering, and Mathematics (STEM) from around the world. China will issue these visas without their being an employer sponsor. It is thought that many Indian professionals will now go to China rather than to the US.

Remember Harold Black’s First Law? “Any law worth being circumvented will be” means that one of the impact of the increased fee will be moving business operations off shore. Indeed there is an academic paper that shows that when H1-B immigration is restricted that US multinational shift work to other countries. Rutgers University economist Jennifer Hunt says “This misguided measure could shut down the H-1B program entirely and if that happens, it’ll have a very detrimental effect on the economy as a whole.” Hunt said H-1B workers don’t substitute for U.S. workers, but complement them instead, helping them do their jobs and making them more productive.

Another observer said that the impact on the medical profession would be “devastating” in that 30 percent of medical residents are foreigners. Also 8,200 of the visas were in general medicine and surgical hospitals. Again India is the largest single source of international medical graduates and make up about 22% of all international doctors. International doctors make up a quarter of US physicians.

As a side note, it is interesting that JD Vance’s wife is the daughter of Indian immigrants. Her father is a professor of Aerospace Engineering at San Diego State University. Her mother is a professor of Molecular Biology at UC San Diego, where she also serves as provost. It is not clear what their citizenship status is and whether they were on H1-B visas. Melania Trump came to the US on an H1-B visa. The cost was $1,500 and some doubt if she would have emigrated had the cost been $100,000. But an H1-B visa for a model? Is this what Trump means about the abuse of the system? But are the Drs. Chilukuri (Usha Vance’s parents) and Melania Trump a threat our national security?

President Trump, Nobel Laureate?

I thought the president wanted the Nobel Peace prize? He probably didn’t help his case by renaming the Department of Defense the Department of War. Also it appears that he is trying to get Maduro mad enough to attack US vessels off of Venezuela. Maduro has said that the US is trying to provoke a war with his country. Blowing up Venezuelan speedboats probably don’t sit well with the Nobel committee either.

Trump tweeted “This morning, on my Orders, U.S. Military Forces conducted a SECOND Kinetic Strike against positively identified, extraordinarily violent drug trafficking cartels and narcoterrorists. These extremely violent drug tra#icking cartels POSE A THREAT to U.S. National Security, Foreign Policy, and vital U.S. Interests. BE WARNED — IF YOU ARE TRANSPORTING DRUGS THAT CAN KILL AMERICANS, WE ARE HUNTING YOU!”

The president declared a national emergency in the drug fight. He imposed tariffs on China, Mexico and Canada because of fentanyl. He designated the Venezuelan gang Tren de Aragua, as a foreign terrorist group and labeled them a national security threat. He also signed a directive authorizing the use of military force drug cartels.

It is obvious that Trump doesn’t like Maduro – I thought he was supposed to be pals with dictators? He has put a $50 million bounty on Maduro and called him “one of the world’s largest drug traffickers.” The administration is trying to send Venezuelans who have fled their country back into the arms of Maduro. If Maduro is the drug king, then he must be a middle man. Cocaine is produced in Columbia, Peru and Bolivia, not Venezuela. Severy-five percent of the cocaine shipments come through the Pacific which Venezuela does not border with the rest coming from the Caribbean. Details. Details.

I wonder why the president did not try to get the Congress to endorse his war on the cartels and Venezuela when they had approved the use of force against Al Qaeda? This is just another case of the president going ahead and exerting his power as the chief executive without the advise and consent of the Congress. Trump also issued Maduro a direct threat claiming that Maduro sent criminals and the mentally ill to the United States. “We want Venezuela to immediately accept all prisoners and people from mental institutions — including those from the worst asylums in the world — that the Venezuelan ‘leadership’ has forced into the United States of America. Thousands of people have been been badly hurt and even killed by these ‘Monsters.’ GET THEM THE HELL OUT OF OUR COUNTRY, RIGHT NOW, OR THE PRICE YOU PAY WILL BE INCALCULABLE! There he goes again with the ransom note motif.

Well so much for the Nobel Peace prize. Remember when he said that he would end the Ukraine war in 24 hours?  In an interview with Time he said that he really wasn’t serious. “Well, I said that figuratively, and I said that as an exaggeration, because to make a point, and you know, it gets, of course, by the fake news. Obviously, people know that when I said that, it was said in jest, but it was also said that it will be ended.” Well if he wasn’t serious why did he say it 53 times? For example at a campaign rally he said “Before I even arrive at the Oval Office, shortly after we all together win the presidency, we will have the horrible war between Russia and Ukraine settled. It will be settled. The war is going to be settled. I’ll get them both – I know Zelensky, I know Putin, it’ll be done within 24 hours, you watch. They all say, ‘That’s such a boast.’ It will be done very quickly.”

Despite Trump threatening Putin with “severe consequences” if he does not agree to end the war in Ukraine, the war is still going and Putin has escalated his aggression toward Ukraine and in the region since his meeting with Trump in Alaska. Three days in a row Russians have violated NATO airspace. German, Italian, Finish and Swedish jets – but not US – jets were scrambled. I am no expert on these matters but Putin obviously has called Trump’s bluff. The questions are what is Trump doing about it and why is he treating Putin with kid gloves? DDE says I am ignorant of matters pertaining to Trump and Russia so I defer to his expertise.

Finally, most of us thought that it was mere presidential bluster when Trump insinuated that he would take back the Panama Canal by force and when his Defense (er War) secretary seemed to talk about invading Greenland. But recall that Denmark actually strengthened its defenses (such as they are) in Greenland. I guess they are putting more musk oxen on the front line. Now the president is sending ominous messages to the Taliban about getting back Bagram Air Force base. Again he went on his tweeter machine and tweeted “If Afghanistan doesn’t give Bagram Airbase back to those that built it, the United States of America, BAD THINGS ARE GOING TO HAPPEN!!!” He added “if they don’t do it, you’re going to find out what I’m going to do.”

So far he has issued idle threats to Putin. Now there are threats to Maduro and to the Taliban. Are they idle as well? So tell me this, how does he expect to get the Nobel Peace prize if he keeps threatening to wage “incalculable consequences” on all those he doesn’t like?

A refreshing debate on climate change

Remember when Al Gore said that global warming was “settled science”? Well that demonstrated that Gore did not know anything about science where very little is ever “settled”.  He was just trying to stifle debate. How on earth could any science that relies on inexact models predicting inexact measurements be settled is beyond me. But Federal governments from Bill Clinton to Barack Obama to Joe Biden have wanted you to believe that the polar ice caps were rapidly melting, that the sea was rising, that the atmosphere was poisonous and that we were all going to die. Didn’t AOC – that great climate scholar – say in 2019 that the world was going to end in 12 years if we didn’t address global warming?

Although we joke about AOC, the bigger joke is the United Nations Intergovernmental Panel on Climate Change (IPCC) which also said that only a dozen years are left to keep global warming to a maximum of 1.5 degrees Celsius. Any higher, even by half a degree, would significantly increase risks of floods, drought, extreme heat and potential poverty for hundreds of millions. Need I say that this report by such an esteemed body was nonsense?

Have you noticed that the main proponents of global warming morphed into proponents of climate change when their predictions failed to materialize. Even I am a believer in climate change as summer changes to fall. Then will come winter, then spring, the summer again. But call me a skeptic when it comes to doom and gloom. Heretofore the climate change zealots were governments who wanted to take away your freedoms. Is it a surprise that most of those on the left are true believers?

In the scientific community, sadly most of the pushers of the orthodoxy were those who profited from it. Academic publications routinely rejected papers that found little evidence of catastrophic climate change. Those scientists also were rejected for government grants. Although even a casual internet search would reveal those on the other side, few in the public had the intellectual curiousity to question the dogma.

Enter the Trump administration. The president himself has called AOC’s green new deal the green new scam. Recognizing that the billions of funding from democrat administrations to “green” energy was costly, ineffective and benefitting special interests who in turn were supporting democrats, he vowed to end it all. The president laid all this out in the White House release “Ending the Green New Scam.” https://www.whitehouse.gov/wp-content/uploads/2025/05/Ending-the-Green-New-Scam-Fact-Sheet.pdf

His EPA director, Lee Zeldin has cancelled over 400 environmental grants totaling over $2 billion saying he was ending the left’s climate grift. The president’s energy department just released a report challenging the notion that greenhouse emissions are an existential threat. The report was authored by five noted senior scientists whose work had mostly been unpublishable under the old regime of keep-them-scared. The key findings of the group can be found in the Wall Street Journal, “At long last, clarity on the climate.” 

https://www.wsj.com/opinion/at-long-last-clarity-on-climate-7c49bfb6

Needless to say there almost an instant rebuttal by those invested in the climate change industry which amazingly says that “Climate change is beyond scientific dispute.” Huh? If it was just disputed and this is the rejoinder to the dispute then how can it be beyond dispute? The report is in Politico

https://www.politico.com/news/2025/09/17/climate-change-beyond-scientific-dispute-national-academies-report-says-00568552

Both sides say that the report from the other side is a partisan act. But healthy debate on an unhealthy subject is a breath of fresh air where all the reporting was one sided and agenda driven. All of this threatens the religion of the left where evidence to the contrary is summarily rejected. But I am a climate skeptic. I want to see all the studies, weigh the evidence and come to my own conclusions. Having built economic models all my professional life, I know how difficult it is to predict any event with precision – just get within two standard errors and I’ll declare victory (the standard error of a statistic is the standard deviation of its sampling distribution). However, two standard errors with the climate is the difference between life and death.

Google “Are climate models correct” and on the same page you will get conflicting headlines, one asserting that models are accurate and one asserting that the sheer complexity of the earth make them poor predictors. I love the controversy and doubt that we will ever know the answer. But the one thing I do know is that I am not in favor of spending trillions of dollars to find out. I want cheap and plentiful energy regardless of the source. We are smart enough to make it clean and cheap. But I hate seeing all the acres of solar panels cluttering up the Georgia landscape and I hate windmills. Put the solar panels in the desert and not on farm land and get rid of the windmills which have no redeeming social virtues. Thank the president for bringing sanity bank to the debate.

More Fed, tariff handouts, coffee, tea and barbecue

The BLS strikes again reporting North Carolina jobless claims last week at 205. The actual number was 19,335. Whoops.

The president has asked for and is receiving an expedited hearing on whether he can fire Fed governor Lisa Cook. Two lower courts have said that he can’t. As noted all the judges who voted to leave Cook on the Fed were democrat appointees. The sole dissent was by a Trump appointee who appeared to dissent only on the grounds that a dismissal could not await a hearing if the person in question were continuing to make decisions. That seems to say that the person accused should recuse themselves while the decision is being adjudicated. Sounds reasonable to me.

Don’t you just love all the people on the Fed board making decisions regarding monetary policy when only one (Waller) is trained in the subject? No wonder policy is so disjointed. This gives further support to my contention that the Fed should be separated into two parts: one dealing with monetary policy and the other with bank regulation and supervision. All of the current governors – save Wallace – would be on the regulation/supervision board. Waller and 6 new appointees would be on the monetary policy board.

Why all the concern about the democrats shutting down the government over the stopgap spending bill now being debated? They are in the minority in both houses. How can they shut down anything? Only if a few republicans side with the democrats can this happen. Didn’t Obamacare pass without a republican vote? Why can’t this happen with the republicans in the majority?

The democrats want the health care extensions enacted during Biden to be extended moaning that if not millions of people would be affected. Weren’t the extensions put into place as a temporary measure during the pandemic?  Just goes to show that once enacted, it is difficult to repeal anything.

The duty free program on African exports to the US is set to expire soon. It looks as if the administration has not gotten around to deciding whether to renew it or whether to negotiate with each African country individually. Meanwhile the tariff on Kenyan exports is a “low” 10 percent. I wonder if the 10 percent is because Kenya is probably our closest ally in Sub-Saharan Africa? Anyway I have a personal interest because my Jockey underwear are from Kenya.

Talk about mixed statements! The president of the Minneapolis Fed, Neel Kashkari, sees two more 25 basis point reductions in the Fed Funds target rate by year end. If that is the case then why didn’t he push for a 75 basis point cut and get it over with? On the other hand, there is a Fed observer who puts more weight on inflation than on unemployment and argues for a rate increase.

The Fed’s Wrong Move

The 50 percent tariff on Brazil is starting to bite. Don Bacon (R-Neb) and Ro Khanna (D-CA) are introducing a bill to exempt coffee from Trump’s tariffs. Bacon said “Why are we tariffing American citizens on something that we don’t even grow? It doesn’t make sense.” I wonder what the Kona coffee growers have to say about that? Since I am not a coffee drinker I am most affected by the 145 percent tariff on tea from China and the 50 percent tariff on India. Maybe Kenya will be the beneficiary of the tariff wars on tea too. And yes, Don Bacon is on the House Agriculture Committee.

Agriculture is one of the sectors hardest hit by Trump’s tariffs. It is a double whammy. First, their equipment costs have increased and second, their market has shrunk mainly because of the Chinese. What to do? Bail them out with the tariff money of course. This is a repeat of the first Trump term where farmers received a billion dollar bailout. Agriculture secretary Rollins is saying that there are discussions to use the tariff revenues to bailout the farmers. Special treatment for farmers? You bet! Got to keep those farm states voting republican.

Californians represented by the few republican congressmen are outraged that Newsom is trying to gerrymander them out of their representatives by combining their district with those in the bay area. Too bad they can’t ever secede.

Speaking of secession, a lot has been written about how conservatives want to secede from liberal states but little about whether progressive cities want to secede from republican-run states. Surely Austin and Houston might like to leave Texas. Tulsa might want to leave Oklahoma. Memphis, Nashville, Kansas City (Mo) and Atlanta also might want to secede from their republican-controlled states. But they, like their suffering brethren in democrat run states must continue to toil under unsympathetic state leaders.

Trump is going to send the national guard into Memphis to sample the barbecue (I prefer Kansas City’s) and visit BB King’s Blues Club. Actually I was shocked to find out that Memphis, not Chicago has the country’s highest rate of violent crime. In a signing at the White House creating the law enforcement task force, there were the two US senators and Tennessee governor Bill Lee. News reports appear to say that Lee was “blindsided” by the president’s actions and just flew to Washington at the last moment to be at the announcement. True or not, missing were any officials from Memphis itself. Memphis mayor Paul Young said he was not happy with the announced deployment of the national guard in his city. But he said that he hoped that at least the feds and the governor would keep him informed about what they were doing in his city saying “The authority to call the National Guard lies with the governor and the president, and, so as mayor, my goal is to make sure that if they are indeed coming, that we have an opportunity to drive some of the decisions around how they engage in our community.” 

Just like with DC, it will be interesting to see what happens to crime when the Feds leave. But in the meantime, how bout them ribs?

Miran gets outvoted. Harvard’s money and Naval target practice

Is there any news other than Trump?

Trump’s man at the Fed, Stephen Miran, voted for “only” a 50 basis point drop in the Fed funds rate. Recall the president wanted 300 basis points. The other Trump appointees apparently disagreed and supported the 25 basis point drop. Miran was the only member of the Open Market Committee to dissent. I was mildly surprised given that two members – both reserve bank presidents – had express some hesitancy about decreasing the rate at all given the uptick in prices. However, concerns about the faltering economy as evidenced by the loss in jobs carried the day. Look to see the impact on short term rates and the 10 year Treasury.

There are signs that the job loss is not just due to immigration issues but that middle managers along with lower paid workers are being laid off. The previous narrative was that there was just lower hiring but also low firing. Now the thinking is that in those areas that are affected by the tariffs, companies are not only not hiring but have started to fire employees. Again the Fed’s mandate is full employment and price stability. The 25 basis point cut is actually a sop. It is too small to make a difference in either the fight against inflation or for full employment. Yet once again any size rate cut would not make employers want to hire unless consumer sentiment increased leading to increased business investment and hiring. As long as we continue to have fiscal irresponsibility and high tariffs, there is precious little that the Fed can do to boost GDP.

I wonder if there has been another Fed appointee who has been on the job less time than Miran and participated in an Open Market Committee meeting? Miran may have a PhD and be chair of the Council of Economic Advisors, but I wager he has precious little knowledge of the workings of monetary policy. I guess that he doesn’t need to know anything except vote how Trump wishes him too. It will be interesting to see what other duties and responsibilities as a governor he will be responsible for in his short time at the Fed. I am sure that Miran is smart but his resume is almost devoid of accomplishments, unlike those of Kugler who he replaced or Cook, Jefferson and Waller, the other PhDs on the Board. It just looks like he gets positions because he knows the right people. If I am wrong, please correct me. But that is my impression.

I am somewhat reminded of an appointment to the Board by Jimmy Carter. One story that was widely circulated was that the appointee was quoted as saying that when he came to the Board, he was overwhelmed with all of the theories, statistical analyses and intricacies of monetary policy and its relationship to the economy and to bank regulation. But after a couple of weeks, he now understood it all. A staffer said that if he came to work with a hangover, the quickest way to get sober was to talk to that governor who lasted less than a year.

It’s Harvard’s money – now

A dear friend sent me an article about a federal judge ruling that the Trump administration could not cancel the Federal government’s research funding. Judge Alison Burroughs (an Obama appointee) wrote “The government-initiated onslaught against Harvard was much more about promoting a governmental orthodoxy in violation of the First Amendment than about anything else.” I don’t know if it was a violation of the first amendment. It may surprise some that I agree with the ruling on the cutting off of future Federal funds. That funding came from a previous administration and not from this one. It should remain in place. However, any future funding coming from the Trump administration should in aligned with this administration’s wishes. It’s their (rather our) money. If Harvard or any other university disagrees with how the administration wants that money used, then it should not apply for it. Hillsdale College anyone?

After her ruling on the research cuts, the president tweeted “Trump hating judge. She’s a total disaster.” Burroughs was the judge who rejected the lawsuit brought by Asian students against Harvard’s race based admissions. 

Burroughs is also the judge who ruled against Trump’s attempt to ban foreign students from Harvard. I wonder if there will ever be an instance where she rules in favor of the administration?

Naval target practice

Lastly, I am a bit uneasy with the Navy’s blowing up the two speedboats killing 14 (alleged) drug smugglers. Couldn’t they just arrest them and confiscate their illicit cargo? Maybe blow them up if they couldn’t apprehend them but only as a last resort. I’m a bit surprised that the president hasn’t gotten much push back on this. The president justified the attacks as an act of self-defense. But isn’t that just a wee bit farfetched? Like 007, the president apparently as a license to kill. The vice president seemed absolutely giddy. He said that the U.S. should treat drug traffickers as if they’re combatants in a war. I guess that is the “act of self-defense” argument. Vance said “I think the rules of engagement should be similar to what they are in war, because we are, in fact, in a war against these drug cartels.”

Vance also said “Killing cartel members who poison our fellow citizens is the highest and best use of our military.” I am not going to quibble over words but “highest and best use”? Only Rand Paul (who else) among the republicans had the temerity to disagree. Paul said “Did he ever wonder what might happen if the accused were immediately executed without trial or representation??” Paul asked. “What a despicable and thoughtless sentiment it is to glorify killing someone without a trial.”

I am in favor of interdiction of fentanyl into the US. But there is little evidence that these attacks on the speedboats were for any reason other than Trump sending a message to Nicholas Maduro.

Does President Trump really want to erase “Peter” from our history?

The president’s purging of DEI knows no bounds. The National Park Service is slated to remove dozens of photographs of slavery including the famous one of “Peter”, the slave with the scarred back. Trump’s executive order “Restoring Truth and Sanity to American History” ordered the Interior Department to purge historic sites of any content that “Inappropriately disparage Americans past or living.” The order accused the Biden administration of indulging a “corrosive ideology” that sought to cast the U.S. as “inherently racist, sexist, oppressive, or otherwise irredeemably flawed.” But wasn’t slavery “oppressive ideology”. Wasn’t the slavery part of America “racist, sexist, oppressive, or otherwise irredeemably flawed”? Hasn’t America struggled to redeem itself from those evils. I know that there are some who are “bitter clingers” to the racist, sexist narrative claiming systemic racism. But as I wrote for the Liberty Fund, I beg to differ.

https://oll.libertyfund.org/publications/liberty-matters/systemic-racism-in-education-and-health-care#post_823

For those who do not know this history, “Peter” (who later took the name Gordon) was an escaped slave in Louisiana whose scarred back increased the opposition to slavery in 1863. The website History says that “By the time Peter had made it to a Union encampment in Baton Rouge in March 1863, he had been through hell. Bloodhounds had chased him. He had been pursued for miles, had run barefoot through creeks and across fields. He had survived, if barely. When he reached the soldiers, Peter’s clothing was ragged and soaked with mud and sweat. But his 10-day ordeal was nothing compared to what he had already been through. During Peter’s enslavement on John and Bridget Lyons’ Louisiana plantation, Peter endured not just the indignity of slavery, but a brutal whipping that nearly took his life. And when he joined the Union Army after his escape from slavery, Peter exposed his scars during a medical examination.”

https://www.history.com/articles/whipped-peter-slavery-photo-scourged-back-real-story-civil-war

The purging of Peter’s photograph is a mistake of monumental proportions. Peter’s scars were only revealed when he enlisted in the Union Army. Peter’s story motivated free blacks to enlist in the Union army. He should be memorialized by the administration rather than erased by it. Juxtaposed to his picture with the scars of slavery is him in a Union uniform. Is this the same man? Is this the same poor man scarred by the whip? Yes but look at him standing proud in his uniform that symbolizes his freedom. Is he bitter and if he is, is his bitterness superseded by his pride? “Peter” is a triumph of overcoming the horrors of slavery and triumph over adversity. Is Trump also going to eradicate the 100,000 blacks who served in the Union army as well? Think of the courage of Peter and his fellows who took up arms to fight for their freedom against white confederates who loathed their being in the Union Army. Is Trump going to ignore their bravery? Is he going to purge Fort Pillow from the history books? Is he going to eradicate their role in the defeat of John Bell Hood at Nashville? Is he going to ban the movie “Glory”?

Pardon me, but this is outrageous. Peter and those like him should serve as a model of Americancourage and grit. Trying to erase him from our history is a slap in the face for all of us who love this country and every black who has ever served or is now serving in our country’s military.

Miran to the Fed. Banning drug ads

As expected the Senate confirmed Stephen Miran to the Fed’s Board of Governors. The vote was 48-47. Trump tweeted. Triumphally that now the Fed “MUST CUT INTEREST RATES, NOW, AND BIGGER THAN HE HAD IN MIND. HOUSING WILL SOAR!!!” Only Lisa Murkowski among the republicans voted against Miran. This was somewhat of a surprise to me because I thought that Rand Paul would also be a “no.” However, Paul did not vote, as did Bernie Sanders and three republican senators, Lee, Lummis and Daines.

Pardon me if I remind the president that housing has fallen due to lack of demand even though the Fed funds rate was unchanged. Again, mortgage rates are more closely aligned to the 10 year Treasury than to the overnight Fed funds rate.

A couple of senate democrats said that Miran would be Trump’s “puppet” at the Fed. Of course he will be and I doubt if anyone thinks differently. Miran wants to return to his job at the Council of Economic Advisors and will do the president’s bidding. I really don’t care one way or the other since Miran is a short timer with this term expiring in January. Trump will still have a minority voice at the Fed with only two other possible allies at this meeting of the Open Market Committee.

No matter what the Fed does on rates, the president will tweet out more caps and exclamation points lambasting them. I know that historically some pundits have wanted the president – regardless of party – to have total control of monetary policy. But the consequence would be an economy characterized by high rates of inflation. I know it is easy and fashionable to be hypercritical of the Fed but it is really really hard to conduct monetary policy in an environment of fiscal irresponsibility. And by the way, if fiscal policy is irresponsible, what do you think monetary policy would be in the absence of the Fed?

No ads for Big Pharma?

In an earlier post I mentioned that RFK jr opposed Big Pharma’s ads to the general public. Only the US and New Zealand allow such advertising. Even though the drugs are only available by prescription, Big Pharma spends billions advertising very expensive drugs with the hopes that patients will urge doctors to prescribe those drugs. There is mixed evidence on whether this leads to greater drug demand. But the president has recently issued a memorandum that does not ban the ads but requires more disclosure. Politicians on both sides of the aisle support some curtailment of the ads. Kennedy claims that the advertising leads to overmedicalization of American children. This is curious since I have not seen any ads targeting children. The mostly appear to be ads on cancer drugs, diabetes and weight loss. Senators Durbin (D-Illinois) and Braun (R-Ind) have expressed the same sentiment. Braun (R-Ind.) wrote “Unfortunately, it appears there are gaping holes in FDA’s oversight of DTC (direct to consumer) promotions that are being exploited on social media at the expense of children and patients.” Maybe I have been looking at just old folks TV. Is there drug advertising on Disney and Nickelodeon? 

Why shouldn’t the drug companies advertise? Are consumers better off or worse off if they have information about the drugs? Suppose there were no advertising. How informed would consumers be about the options available to them for their particular ailment? I guess they could google the information if they were so motivated. No one is contending that the drug companies are advertising fraudulently. That is already illegal. If there were no advertising many patients would be wholly dependent upon their physician for recommendations about drugs. While that recommendation is likely the one taken by the patient, there is little harm in the patient asking about options seen from the ads.

Maybe the opponents are against the volume of ads with the drug companies spending $10 billion a year. But what concerns me is that in the absence of drug advertising, what will be the source of information about the drugs? Will it be the government? Another concern is that if safety is purported to be the reason for curtailing the ads, then what about any other product – automobiles anyone?