The Age of Creative Ambiguity

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Tyler Cowen writes,

File under “The End of Creative Ambiguity.” That file is growing larger all the time.

What is Creative Ambiguity? I would define it as the attempt by policy makers to ignore trade-offs and to deny the need to make hard choices. Consider the Fed’s balance sheet. One hard choice might be to sell its gigantic portfolio of bonds and mortgage-backed securities. That would depress the prices of those assets and make it harder for the government to borrow and to provide mortgage loans. The other hard choice might be to provide whatever support is necessary to enable the government to borrow and to provide mortgage loans, even if it means printing enough money to risk hyperinflation. Creative ambiguity means convincing investors that neither hard choice will be necessary. Perhaps that is even true.

However, if the Fed’s hard choices are to be avoided, then at some point the government must get its fiscal house in order. That is where the real creative ambiguity comes in. See Lenders and Spenders.

4 thoughts on “The Age of Creative Ambiguity”

  1. “Charismatic” politicians are ones who are able to get away with making ambiguous statements. These are messages with multiple interpretations. This peculiar ability helps them to assemble a coalition of constituencies that might otherwise be at odds — and thereby get themselves elected. Another way to say it is that audiences who fall in love with the speaker give him or her a lot of slack. I think that Joseph Epstein mentioned that falling in love means agreeing to over-estimate the love object.

  3. The Fed has been “printing money” like mad, amidst continuous warnings of hyperinflation and the end of the dollar as an international currency. So why, then, is the dollar on a rampage, approaching parity with the Euro? An additional mystery is why the politicians don’t prevail upon the Fed to fully fund their government-spending wish lists. Perhaps this would get the economy to the Fed’s mythical 2% inflation target.

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