Word: lindseyism
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...According to his guru on economic matters, ex-Fed man Lawrence Lindsey, Bush is going to tell America that what it needs is more oil. More oil from OPEC, more oil from Mexico, more oil from Alaska. And who better to get you more oil than the two guys who really know...
...first time in its history, observed David Wyss, chief economist of Standard & Poor, the U.S. is in its 10th straight year of economic growth. "In dog years this expansion is about 70," he quipped, "but it is still behaving like a puppy!" Lawrence Lindsey, a resident scholar at the American Enterprise Institute and former member of the Federal Reserve Board, remarked that though economics is supposed to be "the dismal science," he and his colleagues on TIME's board were sounding full of "Panglossian optimism." No, the economists did not contend that this is the best of all possible worlds...
...possible even a few years ago. Today's Fed, he proposed, is engaged in an experiment to see if the unemployment rate can be held permanently at around today's low 4.1% without triggering rapid inflation. The test may or may not work, says Blinder--but if he or Lindsey had suggested that the idea was even worth an experiment when they were both on the Fed, they would have been politely escorted out of the room...
...does Dr. Pangloss rule unchallenged? Not quite. Lindsey sights two potential clouds on the long-range horizon. The more hazy threat, in an expansion still heavily dependent on business investment, is a decline in the yield on marginal investments--the last and most speculative dollars sunk into a venture. Lindsey's scenario: "The marginal investment yields a rate of return which is below the rate demanded by the markets. All of a sudden these investments don't look so good. A few bond issues fail. The economy can be going along just fine, and all of a sudden this hits...
...effect, importing about $400 billion in net investment this year, says Lindsey, the U.S. has become more dependent on foreign capital than at any time since 1896--or, says Wyss, since the 1860s. And if those overseas centimillionaires change their mind about the best place to invest, the U.S. would get hit with a double whammy. It would lose some of the investment that has been keeping the boom going, and the dollar's value would fall, raising the cost of imports and the many U.S. products that are assembled partly from imported components. Feldstein figures a 15% drop...