Today, John Cochrane comments on the significance of the Federal Reserve’s quietly stepping back from long-term Treasury bond purchases; Matthew Turpin remembers the later broken promises and coordinated shows of public support made during Xi Jinping’s last trip to DC over a decade ago; and Timothy Garton Ash outlines a playbook for Germany’s mainstream political parties to compete against the rising far right, without resorting to party bans.
Economics and Monetary Policy
Better Debt
“The Treasury is buying back long-term bonds,” explains Senior Fellow John H. Cochrane, because “to some extent, the Treasury views long-term bond prices as too low and yields too high.” What’s significant is not that the Treasury wants to raise bond prices, Cochrane says, but that “the Fed is not buying.” For years after the financial crisis and during the COVID pandemic, the Fed would make such purchases, offering “stories of illiquidity and market dysfunction.” Cochrane cheers the Fed’s stepping back from this role, seeing it as a win for central bank independence. As he explains, “The tradeoff between cost of borrowing and how much interest rate risk taxpayers shoulder should be squarely on the shoulders of the politically-accountable Treasury, not the independent Fed.” Read more here.
Confronting and Competing with China
Mr. Xi Goes to Washington
Chinese autocrat Xi Jinping will be visiting Washington, DC, this week for the first time in more than a decade. In his weekly China Articles newsletter, Visiting Fellow Matthew Turpin recalls two promises made by Xi during his last visit. The first, “that the PRC would not militarize the artificial islands [Xi] had constructed in the South China Sea,” was broken in “less than three years.” The second pledge, “to end [China’s] cyber-enabled economic espionage,” has similarly not been honored, Turpin says. Last visit, the PRC embassy apparently arranged for some Chinese citizens in the US to turn out in support “to offset the number of protesters that organized to denounce Xi’s visit.” This time around, Turpin notes, coordinated messaging from the Departments of State, Homeland Security, and Justice effectively says: “If you are a PRC national in the United States and you’ve been asked by the PRC Government or an individual connected to the CCP to attend rallies in support of Xi Jinping, it might be a good idea to stay home unless you have registered as a ‘foreign agent.’” Read more here.
German Politics & Policy
Germany Can Defend Its Democracy Without Banning the AfD
Witnessing the rise of the AfD party in Germany has given the chills to many of those familiar with the political history of that country, Senior Fellow Timothy Garton Ash writes for The Guardian. But he cautions that even though the German constitution allows for the banning of parties deemed “hostile” to its “basic liberal democratic principles,” banning the AfD would be a mistake. Garton Ash argues that it’s too late for such a move when the party often leads in nationwide polls; to deny voters the ability to support a party of their choice “would itself be an assault on democracy.” So, he suggests that Germany’s other parties “neither ban the AfD nor embrace it, but instead constrain it legally and fight it politically.” Garton Ash sees an important role for the country’s center-right Christian Democratic Union party to regain voters by defining itself not merely in opposition to left- and right-wing groups but by offering a positive agenda and answers to real problems, “from Russian aggression to US and Chinese AI.” Read more here.
Technology and Culture
The Death of Reading, with James Marriott
Given ongoing declines in reading, are we on the verge of a new Dark Ages?
The Big Idea: Joining Visiting Fellow Russ Roberts on EconTalk, London Times columnist and author James Marriott makes the case that our abandonment of reading poses a threat to democracy and could reverse many of the Enlightenment’s gains. After a discussion of the history of reading, Marriott offers some consolation: Just as fast food gave rise to the gym, informational junk food may give rise to reading as an intentional discipline. Watch or listen here.
Hoover Institution News
Hoover Institution Equips Diplomats and National Security Officials with Insights to Confront Shared Challenges at International Seminar
The Hoover Institution hosted its fifth annual International Seminar from June 20 to 26 on the Stanford University campus, bringing together 37 midcareer diplomats and national security professionals from like-minded nations for discussions about the political, economic, military, and technological challenges confronting free societies around the world. Cohosted by Senior Fellow H.R. McMaster and National Security Visiting Fellow Nadia Schadlow, the Hoover Institution International Seminar welcomed professionals from Germany, Finland, Ukraine, Ireland, France, Nigeria, Israel, Chile, Singapore, Kosovo, and other nations. “We are in the midst of a renegotiation of what the international order should look like,” Schadlow said. “Identifying common problems, assumptions—which may be different—and competing approaches to solving problems is critically important. It will not be easy, but it’s imperative that we advance an international system that is aligned with US interests and that of our allies and partners.” Read more here.