Today's Required Reading is Paul Krugman. Yes, Paul Krugman:
Alan Greenspan is expected to retire next year. The Bush administration, because of its nature, will have a hard time finding a successor.
One Fed chairman famously described his job as being to "take away the punch bowl just when the party gets going." Bond and currency markets want monetary policy in the hands of someone who will say no to politicians. When a country's central banker is suspected of having insufficient spine, the result is higher interest rates and a weaker currency.
Today it's even more crucial than usual that the Fed chairman have the markets' trust. The United States is running record budget and trade deficits, and the foreigners we depend on to cover those deficits are losing faith. According to yesterday's Financial Times, central banks around the world have already started shifting into euros. If Mr. Greenspan is replaced with someone who looks like a partisan hack, capital will rush to the exits, the dollar will plunge, and interest rates will soar.
Forget the partisan sniping about Bush's personality, and ask yourself: Who replaces Greenspan?
Fact of the matter is, thanks to this spendthrift Republican Congress (and its non-veto-pen-wielding Enabler-in-Chief in the Oval Office), Bush might just be painted into a corner. He'll need a Fed Chairman who will publicly back his spending policies