Editor’s note: this week’s postings have been infrequent due to vacation. Sorry for any inconvenience.
In The WSJ, David Malpass cites worries of both inflation and deflation in the economy, but leaves exchange rates out of his analysis:
Former Fed Chairman Paul Volcker thought of high gold prices as his enemy and repeatedly said so as a way to build confidence in the central bank. In the 1970s, high gold prices reflected Fed incompetence that had produced inflation, stagnation and malaise. Jimmy Carter named Mr. Volcker to replace G. William Miller as Fed chairman in 1979, a rare moment of Washington accountability. Gold then fell in the 1980s and ’90s in what was called affectionately “The Great Moderation.” Inflation and oil prices followed gold prices down, tax rates were cut, and jobs became plentiful. Foreign capital beat a path to America’s door, the mirror image of the exodus of growth capital the Fed’s weak dollar is fueling.
Equally harmful in our current environment, low bond yields (negative yields in some cases) signal fear of deflation and a collapse in the financial system. Investing on these fears hurts growth—investors buy billions in gold to protect from inflation and billions in government bonds to protect from deflation. It’s like a farmer plagued by both floods and droughts and having to buy insurance against both extremes.
On Forbes, Brian Domitrovic links the housing and financial crises to the 2001 failure to enact a robust supply-side tax cut.
From RCM, John Tamny chastises Ben Bernanke for passing the buck on the weak economy.
On The Kudlow Report, Art Laffer discusses the economy and stocks:
In last week’s Forbes, Charles Kadlec explains the negative economic consequences of floating the dollar 40-years ago.
From Cato, Steve Hanke challenges IMF head Christine Lagarde’s call to recapitalize European banks.
At Pajamas Media, David Goldman bemoans the President’s new CEA pick.
In The WSJ, Stephen Moore notes a Laffer Associates study on the Reagan recovery versus today’s.
On Kudlow, former Vice President Dick Cheney defends TARP but skirts discussing the Bush weak dollar policy:
At Lew Rockwell, Pat Buchanan applauds Gov. Rick Perry (TX) for taking on the Federal Reserve (h/t: Bretton Woods Research).
From Forbes, Charles Kadlec contrasts New York’s budget and tax policies with Illinois’s.
On TNR, Jonathan Chait challenges Stephen Moore on Keynesian policy.