Sunday, February 6, 2011

Weekend update.

At Forbes, Nathan Lewis explains why many economists favor floating currency.

Also on Forbes, Bill Flax makes the libertarian case for a gold-backed currency.

In The WSJ, monetarist Allan Meltzer likens current Fed policy to the 1970s:

In the 1970s, despite rising inflation, members of the Federal Reserve's policy committee repeatedly chose to lower interest rates to reduce unemployment. Their Phillips Curve models, which charted an inverse relationship between unemployment and inflation, told them that inflation could wait and be addressed at a more opportune time. They were flummoxed when inflation and unemployment rose together throughout the decade.

In 1979, shortly after becoming Fed chairman, Paul Volcker told a Sunday talk-show audience that reducing inflation was the best way to reduce unemployment. He abandoned the faulty Phillips Curve thinking that unemployment was the enemy of inflation. And he told the Fed's staff that while he thought highly of their work, he did not find their inflation forecasts useful. Instead of focusing on near-term output and employment, he changed the Fed's policy to put more emphasis on the longer-term reduction of inflation. That required a persistent policy that President Reagan supported even in the severe 1982 recession.

We know the result: Inflation came down and stayed down. The Volcker disinflation ushered in two decades of low inflation and relatively steady growth, punctuated by a few short, mild recessions. And as Mr. Volcker predicted, the unemployment rate fell after the inflation rate fell. The dollar strengthened.
From RCM, Larry Kudlow suggests the economy is in better shape than the recent employment report indicates, but he worries about inflation.

In Human Events, Tony Lee recounts Jack Kemp’s role in Reagan’s success.

On Fox, Steve Forbes argues Reaganomics would fix today’s economy as well:

Cato’s Dan Mitchell posts a good video of Reagan.

The NYT quotes Art Laffer supporting Reaganomics with an unfortunate simile:

[O]ne of the most damning testimonials comes from a fan, the economist Arthur Laffer, ardent proponent of supply-side economics and father of the Laffer Curve.

“Trickle-down economics is if you feed the horse enough oats, the sparrow will survive on the highway,” he explains cheerfully.
On The Kudlow Report, Larry, Mrs. Kudlow, Stephen Moore and Craig Shirley discuss Reagan’s successes:

On Forbes, John Tamny argues Walmart boosts the economy.

At Dallas Blog, Fr. Charles McCloskey reviews Kemp-staffer John D. Mueller’s Redeeming Economics.

A Cato Institute study blames Fed monetary policy for recent market bubbles and warns of decapitalization.

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