PETHOKOUKIS: You wouldn’t believe how many people bring
that up to me: “Ah! Rush’s ol’ buddy.” I love it.
RUSH: Thank you for making time here, I really do appreciate this.
Now, Obama has announced Janet Yellen for the Fed. I don’t know
enough about her to have an opinion on what she means for the
economy, or whether we’re looking at QE-infinite. What’s the
story on her?
PETHOKOUKIS: I think she’s basically going to continue the sort
of new direction in policy that Bernanke began. QE [“quantitative
easing”], the bond buying the Fed has done, is something it has
never really done before, to this extent — it did a little bit during
the Great Depression. They really couldn’t cut interest rates any
further; they are more or less down to zero. The economy is still
weak, so they had to try something additional; they bought bonds
to lower long-term interest rates. It’s a new thing for them, and I
imagine they’re going to continue doing that, as well as buying the
mortgage-backed securities for a while. Eventually they’ll taper off,
and maybe in 2016 they’ll actually raise interest rates.
Is she is a good pick or a bad pick? Conservatives and Republicans, people on the right, are probably not going to get a better pick
from Obama. His first choice was Tim Geithner, who didn’t want
the job. Second choice, Larry Summers, who didn’t want the job.
Obama’s not going to pick John Taylor of Stanford, or Glenn
Hubbard, or folks Romney would’ve picked. But whether you
think this is a good pick really depends on whether you think the
Fed has been doing the right thing. I’m a bit of a throwback
to Milton Friedman and the old monetarism, which has been
updated. I think frankly what the Fed’s been doing is probably
more or less what it should be doing, given the economy. A lot of
people on the right don’t agree with me on that, but I think they
have the story wrong.
RUSH: But is the Fed propping up an economy that would really
plunge? Or is it preventing an economy from really growing? I
mean, how many trillions have they digitized here?
PETHOKOUKIS: Right. They’ve been putting in about $85 billion
a month, so this latest round of QE is about $1 trillion. The way I
look at it, we have a kind of natural experiment going on. We have
the United States and Europe, two big advanced economies, both
of which came out of the financial crisis in a Great Recession. Both
have gone through this austerity, cutting some spending and raising
taxes — too much taxing in Europe in particular, and in Europe
the economy tanked. It went back into a recession. Unemployment
is going up again to 12 percent.
In the United States, things aren’t great, but the unemployment
rate has slowly been coming down. Most of that is probably the
shrinking labor force, but we’ve been creating some jobs. The econ-