Weekend update: Lewis and Moore on the flat tax; McKinnon, Weisenthal and Bowyeron interest rates; Woodhill on sound money and America's enemies.

From Forbes, Nathan Lewis notes the success of flat tax reforms around the world.

In The WSJ, Ronald McKinnon suggests the Fed’s loose money policies have blocked bond market vigilantes bidding up interest on the debt.

At Business Insider, Joe Weisenthal counters McKinnon, noting that bond rates rise and fall with economic growth. (H/t: Vlad Signorelli.)

From Forbes, Jerry Bowyer argues interest rates are unreliable indicators but gold suggests inflation.

On The Kudlow Report, Stephen Moore debates the flat tax:


On NRO, Larry Kudlow sees Gov. Chris Christie (NJ) as the antidote to the President’s demoralizing message.

In The WSJ, Stephen Moore argues the President’s tax fairness arguments bolster the case for a flat tax.

The NY Sun suggests US Rep. Ron Paul (TX) would be a strong running mate for Gov. Mitt Romney (MA).

At Asia Times, Reuven Brenner critiques Keynesian economics.

In Forbes, Louis Woodhill suggests a sound dollar would undermine America’s adversaries.

Columnist George Will bashes US Rep. Barney Frank’s proposal to strip regional bank presidents of their Federal Open Market Committee voting rights.

TSGN’s Ralph Benko discusses the gold standard on the Larry Parks radio show.

At CNBC, Jeff Bell argues embrace of sound money will help the GOP presidential candidates (h/t: TGSN).

In The NYT, C. Fred Bergsten of the Peterson Institute for International Economics claims a weaker dollar will lower US unemployment.

From the archive, Jude Wanniski discusses Bergsten’s background.

Wednesday summary: Domitrovic on the Fed's dual mandate; Malpass on Operation Twist 2011; Forbes predicts Perry will beat Obama.

From Forbes, Brian Domitrovic notes the Federal Reserve’s dual mandate isn’t contradictory as a weak dollar coincides with higher unemployment.

In The WSJ, David Malpass critiques the Fed’s updated Operation Twist:

The modern version [of the Twist] would probably be even less effective since markets are expecting it. The Fed's idea is that the private sector will go looking for riskier and longer duration assets to make up for the bonds the Fed bought. But the evidence is clear that this isn't working: The Fed's near-zero interest rate policy and its huge overhang of bonds create uncertainty. This hurts small-business confidence and discourages job growth.

The twist from the second round of quantitative easing (QE2) contributed to the sharp economic slowdown in the first half of 2011 when the Fed was buying $70 billion in bonds per month. The more it bought, the slower the economy grew as the twist sucked capital from savers and small businesses to the government.
The Fed has conducted a controversial experiment with near-zero interest rates and massive bond purchases. These policies have hurt growth and added to unemployment by distorting financial markets.

At CNN, President Clinton argues Republican policies do not create prosperity:



The NYT reports the Republican congressional leadership opposing additional Federal Reserve stimulus.

On The Daily Ticker, Steve Forbes predicts Rick Perry will beat President Obama.

From Alhambra Partners, Joe Calhoun dissects public opinion on taxes and spending.

In The WSJ, Jonathan Anderson explains why China is still a financial midget despite its fast growth:

The bigger problem is that China can't open its capital regime, at least not fast enough to matter. For more than two decades, China's philosophy of monetary management and financial development has been based on a closed-economy system: maintaining low and stable interest rates without having to worry about external arbitrage, breezily adopting economic stimulus when needed without concern about the banking system's asset quality, propping up banks with historically high nonperforming loan ratios and fixed-cost pricing, and keeping iron-clad control over the exchange rate. All of these only work when foreign portfolio funds cannot influence asset prices, and when locals have nowhere else to go.

While China's GDP may be 10 times larger than it was in 1995, its external capital controls are still similar to what they were back then. China has opened a few windows at the margin, but it has never seriously opened the doors. If anything, the financial crises of 1997-98 and 2008-09 have taught the authorities to be as slow as possible in making adjustments.

Even if China were to remove external controls, this still leaves the lack of deep domestic markets. Put simply, there's nothing to invest in. You need a local bond market, and China doesn't have one. Relative to its size, China has a much less mature fixed-income market than most of its major emerging-market peers.

On The Street, Phil Streible notes the correlation between rising gold prices and the President’s declining poll numbers:



Bloomberg reports Robert Mundell advocates Serbia fix to the euro in preparation to entering the eurozone.

At Fox Business News, conservative Keynesian Martin Feldstein discounts the President’s economic plan.

The WSJ criticizes US Rep. Barney Frank’s (MA) proposal to reduce Fed independence.

From 1980, candidate Reagan debates President Carter on the economy and inflation.

At COAL, Paul Krugman amplifies his argument that the economy is in a liquidity trap.

Monday update: Benko chides Frank on the gold standard; Kudlow sees a possible debt deal; Salsman blames Bernanke for the Great Recession.

From Forbes, Ralph Benko chides progressive writer Thomas Frank for dismissing the gold standard.

On NRO, Larry Kudlow sees a grand debt bargain including tax cuts as possible.

At Forbes, Richard Salsman argues Fed Chairman Bernanke caused the Great Recession by allowing the yield curve to invert in 2007.

On The Kudlow Report, John Harwood profiles Republican presidential candidate Tim Pawlenty:



The NY Sun notes the irony that Bernard von NotHaus will go to jail for minting silver coins that are worth more today than when he made them, while the Federal Reserve prints dollars that continue to lose value.

In The WSJ, Stephen Moore reports that after a two-week government shutdown, Minnesota’s Democratic governor has agreed to deep spending cuts without tax increases.

In the goofball analysis of the week, Newsweek’s Daniel Altman suggests today’s American “narcissism” stems from supply-side economics.

This rhetoric—that Americans can have everything without having to pay for it—dates back to the Reagan era, when an economist named Arthur Laffer suggested that lowering tax rates would result in more revenue by spurring spending among businesses and consumers. He was wrong, but it’s clear from the budget debate in Washington that people still believe him.

In The WSJ, Michael Boskin finds that without spending cuts, taxes will need to rise substantially on all tax payers.

Thursday round up.

At his blog, historian Brian Domitrovic offers a great explanation of how floating currencies caused Japan's Lost Decade, and today threatens China.

Cato's Dan Mitchell responds to Ezra Klein's recent discussion of the Laffer Curve.

On The Kudlow Report, U.S. Rep. Barney Frank supports ending Fannie Mae and Freddie Mac.

David Frum's website interviews Art Laffer regarding tax increases for the rich.

Art Laffer disputes the President’s view that Social Security does not face a crisis.

In The WSJ, the Council on Foreign Relation's Benn Steil and Paul Swartz suggest current monetary tactics will force the Federal Reserve to float interest rates (full text here).

From the archive, Jude Wanniski advocates the Fed float interest rates in favor of a dollar price rule versus gold.

Robert Reich opposes Mitt Romney's supply-side proposals, saying low demand is the problem.

Swiss America Trading’s CEO explains why businesses and investors are sitting on their money.

Say what you will about Reich’s economics, he does have a good sense of humor:

At AEI's The American, Mark J. Perry explains why trade deficit statistics are unreliable.

At Cafe Hayek, Don Boudreaux rebuts The NYT's claim that a rising trade deficit is harmful.