Friday round up.

On Forbes, McGill’s Reuven Brenner advocates returning to a gold-backed currency system.

The WSJ editorial page suggests the FAIR tax is politically untenable.

On The Kudlow Report, James Glassman analyzes terrorism’s impact on the market:




On Bloomberg, Art Laffer explains how the wealthy respond to higher tax rates.

At Café Hayek, Don Boudreaux rebuts The NYT’s worries about the current account deficit.

On NRO, Alan Reynolds suggests banks are supplanting consumer and small business lending with government loans.

Easing through open-market operations has always been “quantitative,” since the Fed adds to bank reserves to pay for whatever securities it buys. But bank lending has not been falling since January 2009 because of any shortage of reserves; it has fallen because of a superabundance of regulations. The problem is regulatory, not monetary.

From December 2008 to October 2010, bank purchases of securities rose by $335 billion while bank lending fell by $455 billion. All of the regulatory pressures on banks from TARP, the Treasury’s stress test, the regulatory-reform bill, and the Basel capital standards have pushed banks, quite conveniently, to buy up a big chunk of the Obama administration’s soaring debt as an alternative to making more risky loans to consumers and small businesses. Since the Fed makes sure that banks pay savers next to nothing on deposits or CDs, the banks can make money even at the low rates offered on Treasury notes. That makes the Fed and other regulators happy, so why lend?

The Heritage Foundation reports on new regulations under the current administration.

At The Washington Post, Jim Hoagland assesses the global trend toward every-nation-for-itself policy.

In The Washington Times, U.S. Rep. Randy Neugebauer (R-TX) offers a thoughtful critique of Federal Reserve policy.

One of my biggest concerns is what this policy would do to the "savers" in our economy who, during their lives, have not over-consumed and thoughtfully have put away money for their retirement. Their capital accumulation is the fuel for our economy, but under this policy, the Fed forcefully drives the real rates of return for the savers (many who are retired or approaching retirement) to zero or negative. Many of the retirees in my district are facing a new financial crisis as the income on their savings has fallen as much as 70 percent over the past few years. This is a direct result of a Fed policy that rewards debtors with increasingly lower interest rates - most recently funded by a doubling of the monetary base - while punishing those who lived within their means and planned for the future. Our nation needs more saving, not less, but the Fed appears to be rewarding behavior that is not in our economic interests.

Under mounting pressure, savers, especially retirees, are confronting the difficult choice of taking on greater amounts of risk in search of increased returns or experiencing a dramatic reduction in lifestyle. It is no accident that you see more and more seniors working at places like Wal-Mart and thus crowding out employment for the young adults looking to get a start in our economy.

There is also no doubt that this policy over a long period of time will wreak havoc on our nation's already underfunded pension system. The rate-of-return assumptions made by our nation's pension funds typically range from 6 percent to 9 percent. These assumptions are no longer valid, given the price controls the Fed has placed on the cost of money. With the cost of money so low, stewards of these pensions, like retirees, are perversely incentivized to take on more risk in order to fund the retirements of their beneficiaries. This has the potential to become disastrous. The bottom line is that there is not an accountant creative enough (even in Washington) to argue that the pension system can survive long under this policy.