Weekend update.

At NRO, Larry Kudlow suggests the dollar’s decline is causing Egypt’s food riots and destabilizing the developing world.

From 1998, Jude Wanniski recounts how the 1970s weak collar caused revolutions in Iran and Iraq.

On The Kudlow Report, Don Luskin assesses the world inflation situation and how it will impact the U.S.:




At Asia Times, David Goldman recommends buying oil stocks.

On Fox Business News, David Malpass discusses Egypt.

Steve Forbes delivers a superb address at the Reagan Library, including a substantial discussion of the dollar and gold:



At Forbes, Nathan Lewis explains that gold-backed currency is the most stable and reliable.

The NY Sun editorializes on the recent decline in gold.

At Asia Times, David Goldman notes that U.S. exports to China are one of the economy’s few bright spots:



From AEI, John Makin examines the prospects of the yuan becoming a world currency.

The Asian Financial Forum releases a summary of Robert Mundell’s recent speech.

On Alhurra TV, Steve Forbes discusses how to create more jobs (the opening is in Arabic but the interview is in English):



In Forbes, Reuven Brenner reports on Federal Reserve bookkeeping.

From City Journal, Nicole Gelinas makes a strong argument for a 21st century Reaganomics.

The WSJ analyzes the Financial Crisis Inquiry Report:

The questions to which Americans need answers are: Why did the pursuit of riches lead to catastrophe in 2008, and why was the crisis concentrated in housing and the mortgage-securities markets?

Democrats on the commission mention the role of Federal Reserve monetary policy in creating a credit bubble, but they spend far more time arguing that the Fed should have prevented the consequences of this subsidy for financial products with heavier regulation of lending. But when have regulators ever in history had the wit or will to stop a credit-fueled financial mania? Read your Kindleberger, guys.

Also in The Journal, Stephen Moore recounts conservative disappointment at Mike Pence’s decision not to run for president.

Cato’s Dan Mitchell notes the Laffer Curve effect of tax changes in France.

Thursday round up.

On RCM, John Tamny advocates legalizing insider trading.

In The WSJ, Stephen Moore suggests government spending supplants higher yield private investment.

On The Kudlow Report, David Goldman discusses Japan’s debt crisis, slow growth and demographics:



At Forbes, Bret Swanson mentions sound money in a review of Tyler Cowen’s new book on technology.

The Washington Post reports sound dollar advocate U.S. Rep. Mike Pence (IN) won’t run for president.

On Kudlow, John Rutledge sounds optimistic on economic growth:



At Forbes, Jerry Bowyer sees a divide between economic elites of both parties and average workers.

The WSJ reports Mexico’s president opposes currency manipulation.

Tuesday summary.

MarketWatch reports on Nobel laureate Robert Mundell’s speech today. From The Jakarta Post, more here.

At The Weekly Standard, Bill Kristol aligns with calls for monetary reform.

In The WSJ, Ronald McKinnon explains that weak dollar periods destabilize the world.

So what lessons can we draw from these episodes of U.S. easy money and a weak dollar for the stability of the American economy itself?

First, sharp general price increases in auction-market goods such as primary commodities or foreign exchange (i.e., a weakening dollar) is an early warning sign that the Fed is being too easy—a warning that the Fed is again ignoring as we enter 2011.

Second, beyond the rise in primary commodity prices, general price inflation in the U.S. only comes with long and variable lags. After the U.S. monetary shock, hot money flows into countries on the dollar standard's periphery cause a loss of monetary control and general inflation to show up there more quickly than in the U.S.

In 2010, consumer price indexes shot up more than 5% in major emerging markets such as China, Brazil and Indonesia, while the consumer price index in the U.S. itself rose only 1.2%. Similarly, after the Nixon shock of 1971, there was much more explosive inflation in Japan in 1972-73 than in the U.S. But by December 1979, inflation in America's producer and consumer price indexes was more than 13%.

At RCM, Louis Woodhill argues that the European Central Bank, not deficit nations such as Greece, will determine the euro’s success.

In The Journal, President Obama outlines his new executive order to reduce anti-competitive regulations.

At The Kudlow Report, Larry discusses the President’s move:



The WSJ editorializes that if China wants to be treated like a major power it needs to behave accordingly.

Also at The Journal, Aaron Friedberg sees China flexing its muscles because it perceives the U.S. as in decline.

In The NYT, Harvard’s Mark Wu argues China’s exchange rate has far less impact than yuan revaluationists claim.

These claims, however, are more wishful thinking than actual truths. Consider the first idea, that a strengthened Chinese currency would increase the growth rate of American exports to China. From 2005 to 2008, the renminbi appreciated nearly 20 percent against the dollar. Yet, American exports to China over those three years grew at a slightly slower pace than in the previous three-year period when the renminbi did not appreciate at all (71 percent versus 89 percent)....

Second, I recently did an analysis of the top American exports to our 20 leading foreign markets, and found little evidence that an undervalued Chinese currency hurts American exports to third countries. This is mostly because there is little head-to-head competition between America and China. In less than 15 percent of top export products — for example, network routers and solar panels — are American and Chinese corporations competing directly against one another. By and large, we are going after entirely different product markets; we market things like airplanes and pharmaceuticals while China sells electronics and textiles.

Finally, it is unlikely that a stronger renminbi would bring many jobs back home. Instead, companies would most likely shift labor-intensive production to Vietnam, Indonesia and other low-wage countries. And in any case many high-skilled jobs will continue to flow overseas, as long as cheaper talent can be found in India and elsewhere. Only in a few industries, like biomedical devices, would a stronger Chinese currency combined with quality issues tempt American companies to keep more manufacturing at home.

At NRO, Larry Kudlow suggests the best way for the U.S. to respond to China is with strong economic growth.

In The WSJ, Stephen Moore reports on the Mike Pence for President movement.

Monday items.

Bloomberg reports on Robert Mundell’s continued call for a stable yuan.

The WSJ quotes President Hu Jintao, ahead of this week's visit, calling the U.S. dollar-dominated currency system a "product of the past" and highlighting moves to turn the yuan into a global currency.

From last week’s Kudlow Report, Larry Kudlow supports getting tough on China:



The NY Sun responds to claims that the Arizona gunman damaged the case for the gold standard.

A new website encourages U.S. Rep. Mike Pence (IN) to run for president (hat tip: Ralph Benko).

The NY Sun suggests Pence is superior due to his sound money advocacy.

From earlier this month, U.S. Rep. Paul Ryan (WI) discusses his agenda for spending cuts but includes sound money as crucial to restoring prosperity:



On The NY Sun, Larry Kudlow worries inflation may undermine the recovery.

At New World Economics, Nathan Lewis explains what goes into base money.

The Atlantic’s Daniel Indiviglio makes a weak case for the Federal Reserve.

Tuesday summary.

At Alhambra Investments, Joseph Calhoun suggests quantitative easing might succeed if accompanied by a big spending cut.

Cato’s Dan Mitchell highlights worries for 2011 including loose Fed policy and a VAT tax deal.

On The Kudlow Report, Larry Kudlow debates President Obama’s recent feint to the supply side:



The NY Sun editorializes that the U.S. has defaulted on its debt previously through dollar devaluation.

Bloomberg’s Amity Shlaes explains why labor mobility is vital to capitalism.

On NRO, Katrina Trinko reports U.S. Rep. Mike Pence (IN) is likely to run for governor rather than president.

Tuesday summary.

On C-SPAN, a panel including Judy Shelton, U.S. Rep. Mike Pence (IN), Jack Kemp Jr., and U.S. Rep. Paul Ryan (WI) discusses the need for sound money.

At Forbes, historian and Econoclasts author Brian Domitrovic explains the Great Inflation’s role in Reagan’s fiscal deficits and Clinton’s surpluses.

On The Kudlow Report, Art Laffer and Brian Wesbury are optimistic about the President’s change of economic policy direction, while David Goldman is more skeptical:




At Alhambra Investments, Joseph Calhoun doubts the tax cut deal will be a major boost to markets.

Also from Alhambra Investments, Calhoun assesses the economy in light of quantitative easing, Europe’s troubles, and the budget commission’s proposal.

In The Washington Times, Richard Rahn critiques the Federal Reserve.

If you are skeptical about abolishing the Fed, just consider the following question: "Would those who voted for the Fed in 1913 have done so if they had known that:

1. After having a 125-year period of relatively stable money when the dollar was still close to its value in 1790, the dollar would be worth less than 5 cents at the end of the century?

2. The longest and severest depression the country had ever experienced would occur a mere 20 years after the creation of the Fed and that the Fed had a major responsibility for the disaster?

3. And the number of bank failures would increase and not decrease?"

The answer clearly would have been "no." Why are we keeping a failed institution?

On RCM, John Tamny sees the fiscal commission moving the debate in a positive direction.

At Forbes, Charles Kadlec bemoans excessive government spending.

On NPR, Alan Reynolds responds to the Fed's QE2 plan.

The DBS Research Group explains that Singapore’s currency management risks violating Robert Mundell’s impossible trinity.

Wednesday items.

On Forbes, Ralph Benko skewers Fed Chairman Ben Bernanke’s quantitative easing plan.

At The WSJ, Michael Boskin explains the data that support tax rate cuts over spending stimulus.

On The Kudlow Report, Jerry Bowyer defends the eurozone and calls for sound money and lower taxes:




The WSJ editorial board notes the harm higher top tax rates do to job creators.

On NRO’s Corner, Cato’s Mark Calabria rebuts David Beckworth’s “conservative case for QE2.”

The WSJ reports U.S. Rep. Mike Pence’s (IN) superb recent Detroit Economic Club speech calling for a supply-side reform agenda.

After criticizing the excessive money creation under Federal Reserve Chairman Ben Bernanke, Mr. Pence called for eliminating the Fed's dual mandate to pursue both price stability and full employment. He wants the Fed to focus exclusively on price stability and thinks the U.S. should consider returning to gold in setting the value of the dollar. President Reagan understood that inflation is the thief of the middle class and that investor confidence is destroyed when governments debase the value of their currencies. Mr. Pence apparently understands this, too.

A brief video clip is here.

In The Washington Times, Richard Rahn examines insider trading.

In City Journal, Nicole Gelinas advocates tax reform:

Moreover, cutting tax breaks would be in the best supply-side tradition. Supply-side economists, after all, have long counseled lower tax rates for a reason: they figured that regular people could spend and invest their money more wisely than the government could. But rate reductions can’t work if the government continues to run people’s lives through the rest of the tax code.

Right now, we may have supply-side tax rates, but thanks to tax breaks, we’ve got a thoroughly demand-side tax code. That’s a toxic combination, considering that we need healthy economic growth to help us confront our national debt. The economy can’t grow optimally if Washington encourages Americans to pour more borrowed money into their houses at the expense of more productive investments. Nor can the economy fight its way out of stagnation if state and local governments keep pushing up their own taxes, with an assist from Capitol Hill and the White House.

At Lew Rockwell, Gary North obsesses over deficits and omits economic growth from his critique of the Laffer Curve.

Monday round up.

In Canada’s Globe and Mail, Neil Reynolds notes Nobel laureate Robert Mundell’s prediction of a return to gold-backed money.

At Forbes, Steve Forbes sees sound money making a political comeback.

On The Kudlow Report, U.S. Rep. Mike Pence (IN) discusses tax policy:




At Asia Times, David Goldman suggests gold’s direction is difficult to read.

On RCM, Louis Woodhill explains that pro-growth tax rate cuts are key to balancing the budget.

The PVIH (present value to the infinite horizon) methodology suggests a more promising deficit reduction plan: eliminate the corporate income tax, the capital gains tax, and the death tax. If these huge pro-growth tax cuts, which would cut the Federal tax take by three percentage points, increased the GDP growth rate by just 0.21 percentage points, they would not only "pay for themselves", but also (on a PVIH basis) achieve the Federal revenue objectives contained in the CCP.

At Forbes, John Tamny examines unemployment benefits’ impact on economic decisions.

On YouTube, Hiwa Alaghebandian rebuts Keynesian economics:
(Hat tip: Dan Mitchell.)




At NRO’s Corner, Daniel Hannan blames the euro – and by extension, supply-side economics founder Robert Mundell – for Ireland’s troubles.

In The NYT, Paul Krugman blames the euro for Spain’s troubles.

Also on YouTube, a British comedy satirizes central banking:
(Hat tip: Ralph Benko via his gold standard Facebook page.)




On his Times blog, Krugman argues currency devaluations have helped some economies.

Tuesday round up.

What Would Kemp Do?

An important factoid: The President’s fiscal commission based its recent deficit report (p. 10) – and its alarming diagnosis of “fiscal cancer” – on CBO's budget analysis (p. 28), which, according to Louis Woodhill, assumes annual GDP growth of 2.16% for the next 75 years.

Yet, as Woodhill notes, average growth over the past 75 years was 3.73% per annum. If the U.S. grew at that rate going forward, CBO's more pessimistic budget scenario balances in 2052 with no spending cuts or tax increases.

This isn't to say we shouldn’t cut government waste and bloat. We should.

But, in the middle of painfully high unemployment, shouldn’t conservatives be ringing alarm bells mainly over slow long-run growth? Restoring rapid growth through the proven formula (sound money + lower tax rates) would help the jobless and improve the budget – a win/win – and would move the right beyond the zero-sum austerity debate.


Update: This item has been reworked for clarity.
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At RCM, Joseph Calhoun argues the malaise is rooted in bad economic policy.

In The WSJ, likely presidential candidate U.S. Rep. Mike Pence (IN) proposes to repeal the Fed’s full employment mandate.

On The Kudlow Report, Pence explains his plan:




IBD notes that after tax rates were cut in 2003, the wealthy paid a higher percentage of taxes.

At The Washington Times, Richard Rahn suggests government caused the financial crisis, though he omits the falling dollar.

On Kudlow, David Goldman assesses the market’s decline:




On Charlie Rose, U.S. Rep. Paul Ryan (WI) repeatedly mentions sound money.

At the Peterson Institute, lead currency warrior C. Fred Bergsten insists China must revalue the yuan.

From YouTube, a viral video mocks the Fed’s QE2: