Thursday items: Wesbury rebuts pessimists; Woodhill assesses Ted Cruz; Shelton talks sound money.

From First Trust, Brian Wesbury rebuts market bears.

On Forbes, Louis Woodhill assesses the economic plan of Senate candidate and “Great Conservative Hope” Ted Cruz (TX).

From Atlas Foundation, Judy Shelton discusses sound money, Bretton Woods, her idea for Treasury Trust Bonds, and Robert Mundell's euro:



In The WSJ, Joseph Sternberg predicts rare-earth elements will be cheap and plentiful in future.

From Bloomberg, Amity Shlaes doubts the Fed’s idea of controlled, modest inflation.

TGSN features CPAC video of John Mueller, Jeffrey Bell and James Grant discussing the gold standard:



On NPR, supply-sider Jeff Bell highlights the importance of social issues to key segments of the electorate.

Monday update: Shelton advocates the gold standard and Kristol affirms; Lewis on the capital-to-labor ratio; Kudlow: Reid's proposal a victory.

From The Weekly Standard, Judy Shelton makes the case for returning to the gold standard.

At The Standard’s blog, Bill Kristol extends Shelton’s argument:

So when we get through the debt ceiling negotiations, and as Republicans continue to focus on the big changes that need to happen in fiscal and tax policy, some of them might want to turn their attention to the third leg of the economic stool—monetary policy.

On New World Economics, Nathan Lewis explains the importance of raising the capital-to-labor ratio.

At NRO, Larry Kudlow sees the Reid debt proposal as a victory for conservatives.

On The Kudlow Report, James Pethokoukis debates the debt ceiling:




In The WSJ, Stephen Moore chides Democrats for their newfound fondness for President Reagan.

At Forbes, John Tamny gives a positive review to William R. Rhodes’ Banker to the World.

On TGSN, Ralph Benko notes the Swiss Parliament’s interest in relinking its currency to gold.

Kudlow reports Mitt Romney’s front-runner status:




At NRO, Ramesh Ponnuru calls Romney’s rise “a marriage of convenience.”

On Forbes, libertarian Timothy Lee doubts the inflation warnings of many free-market economists, but omits supply-side guru Robert Mundell from his list of prominent inflation doves.

In The Economist, Will Wilkinson notes Lee’s skepticism and remembers Milton Friedman’s deflationary analysis of the Great Depression.

At COAL, Paul Krugman also cites Lee and argues John Hicks’ Keynesianism has predicted correctly the current crisis.

On Forbes, Ralph Benko scolds the President for scare tactics and a proposed tax increase as part of the debt ceiling negotiation.

At Forbes, Rich Danker reports the legislative beginning of a modern gold standard.

Thursday summary: Shelton says the IMF should lead on gold; Kudlow on federal spending; Moore on the budget fight.

In a WSJ must-read, Judy Shelton advocates that new IMF chief Christine Lagarde use gold to stabilize the world monetary system (h/t: Ralph Benko).

On NRO, Larry Kudlow explains that federal spending is hard to cut.

At Forbes, Louis Woodhill satirizes Keynesianism.

On The Kudlow Report, Stephen Moore discusses the federal budget showdown:




TGSN notes that large, chronic trade deficits are impossible under the gold standard.

In The WSJ, Stephen Moore explains the 14th Amendment solution to a federal debt default.

At Capital Gains and Games, Bruce Bartlett argues a debt default is unconstitutional.

In The Washington Times, Richard Rahn suggests regulation is causing bank failures.

Weekend update: NY Sun reports on NYC gold standard debate; Shelton suggests gold to stabilize the financial system; Kudlow doubts GOP growth agenda.

The NY Sun reports on two extraordinary NYC debates on gold and the gold standard, including one attended by almost 1,000 people.

In Forbes, Nathan Lewis explains that a gold standard doesn’t require a 100% gold reserves.

Euronews reports on a Kazakhstan conference that featured Judy Shelton and Robert Mundell:

What is needed most is global financial stability. Many worry that the dollar-centred monetary system is sick, leaving some to present radical proposals. Judy Shelton from Atlas Economic Research Foundation, a US think tank is one of these people: “We can’t have a sound monetary policy until we have sound finances. I hope the future is to restore soundness to the dollar and even possibly link it to gold, which even though that is discussed as somewhat of an extreme measure, it’s fairly radical. But you’re getting a strong movement in the United States, and I think around the world. There is plenty of interest in gold as a possible unit of account and maybe the basis of a modern global gold standard.”

After a decade of dollar decline, The Washington Post reports monetary authorities may not be serious about their strong dollar policy.

At NRO, Larry Kudlow doesn’t see a clear growth message from the GOP presidential candidates.

From Forbes, Peter Ferrara notes the performance differences between Reaganomics and Obamanomics.

The NYT reports congressional Republicans backing down on their bid to reform Medicare.

In The Telegraph (UK), Andrew Lilico explains the Federal Reserve’s role in triggering revolts the Arab spring revolutions:




On NRO, Douglas Holtz-Eakin opposes raising taxes on the wealthy.

At The Washington Post, Jennifer Rubin suggests the U.S. can’t tax the wealthy much more.

Cato’s Alan Reynolds explains that fewer people pay more of the taxes.

On The WSJ, Stephen Moore notes wealthy advocates of higher tax rates don’t voluntarily pay more.

In Forbes, Reuven Brenner assesses different methods of taxation.

Wednesday items.

From Forbes, Brian Domitrovic recalls Robert Lucas’s role in challenging 1970s Keynesianism.

The Hill reprints a Judy Shelton memo to members of Congress on potential questions for Federal Reserve Chairman Ben Bernanke.

On The Kudlow Report, U.S. Rep. Ron Paul (TX) explains why he asked Bernanke to define a dollar:



At The Atlantic, Daniel Indiviglio comments on the Paul/Bernanke exchange.

Cato’s Dan Mitchell notes Bernanke’s embrace of Keynesian spending analysis.

From The WSJ, Mary Anastasia O’Grady notes Fed Chairman Bernanke is “out on a limb” with his inflation prediction:



At RCM, John Tamny defends insider trading.

In The WSJ, Seth Lipsky suggests Sarah Palin’s outreach to labor is similar to Reagan’s.

From the archive, the late-Robert Bartley and Amity Schlaes explain the supply-side revolution.

Tuesday round up.

On Forbes, Charles Kadlec predicts price inflation.

Also at Forbes, Brian Domitrovic notes that 19th century tariffs were limited by consideration of diminishing returns.

From The Kudlow Report last week, David Goldman suggests the dollar is falling which means inflation:



At The Heartland Institute, Matt Warner interviews Judy Shelton on the dollar.

On TGSN, Kelly Hannon notes gold-backed currency’s role in restraining government debt.

At Alhambra Investments, Joe Calhoun wonders if the dollar has lost its safe haven status.



From the archive, USA Gold runs an interesting summary of supply-side guru Robert Mundell’s views.

McKinsey Quarterly explains that China exports less than some data suggest.

Courtesy of RCP, Chris Matthews is annoyed that Americans revere President Reagan most.

Wednesday update.

On Forbes, Steve Forbes suggests budget deficits create an opportunity to downsize and reform government.

RCM reprints David Malpass’s statement to the U.S. Senate Budget Committee.

On The Kudlow Report, Larry suggests CPI statistics are unreliable:




At Business Insider, Jack Barnes advocates a new Louvre Accord to end competitive devaluations.

On Fox Business News, U.S. Rep. Ron Paul (TX) argues for less intervention in the economy.

At Conscience of a Liberal, Paul Krugman dismisses concerns about commodity prices, while unwittingly confirming that the Great Depression and the current malaise featured highly unstable dollars:




From last month at Just Facts Radio, Judy Shelton provides a superb overview of the dollar and gold.

At The American, Scott Shane explains that small businesses oppose Obamacare because it doesn’t make health coverage cheaper.

Heritage’s Ed Feulner recalls Reagan’s economic legacy.

The fable of the Left (the hard Left, anyway -- many others are coming around) is that this was all smoke and mirrors. But the facts tell a different story. Starting from the "stagflation" mess his predecessor handed him, Reagan created a genuine economic miracle. After a three-stage tax cut and a reduction in government growth, our economy began to expand -- by 31 percent from 1983 to 1989 in real terms. Americans of every class -- rich, middle-class and poor -- saw their wealth increase.

It was our nation's longest peacetime expansion in a long and prosperous history. By decade's end, we had added the economic equivalent of a new Germany to our gross national product. Inflation was cut by two-thirds, interest rates by half. Unemployment dropped to the lowest level in 15 years.

At The NYT, David Leonhardt makes the case for corporate tax reform.

On Cafe Hayek, Don Boudreaux refutes a manufacturing doomsayer.

Wednesday items.

Note: Sorry to miss yesterday. Was hit by a 24-hour flu.
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In The WSJ, Judy Shelton explains that devaluation is the wrong way to promote exports. (Full text here from The Atlas Sound Money Project.)

On Forbes, Charles Kadlec makes a strong case that pushing China to raise the yuan will only increase that nation’s financial power.

At The Kudlow Report, Larry analyzes the President’s plan for taxes and spending:



Also on Forbes, Brian Domitrovic explains the folly of government investment projects.

Seeking Alpha quotes David Malpass on the State of the Union speech.

At NRO, Larry Kudlow touts Gov. Chris Christie’s (NJ) desire for deeper spending and entitlement cuts.

The WSJ editorializes that poor federal monetary and spending policy misallocates scarce resources and damages the productive economy:

The third way [to encourage economic growth] is through the more efficient use of capital, both human and monetary. These resources are scarce in any economy, and growth will be fastest if they are allowed to find their highest return. If resources are allocated to less productive uses or create asset bubbles due to bad policy, then overall growth will be slower than it should be.

In our view, this third point has been the largest but least appreciated problem in the U.S. economy in recent years. First the Federal Reserve's subsidy for credit and other policies pushed resources into the financial industry, and especially into real estate. When that bubble burst, triggering the 2008 financial panic and recession, the U.S. responded over two years with a huge expansion of the federal government.

Both periods were marked by the misallocation of trillions of dollars into wasted investments. One reason the current recovery has been so lackluster is that it takes time for an economy to retool from these mistakes. Money that went to build now-empty condos on the Vegas Strip—or to government transfer payments—can't be reclaimed to rebuild American manufacturing and technology.

On Financial Sense, Michael Kosares recounts the rising support for a gold-backed dollar.

Naples News reports on Steve Forbes’ three ingredients for economic growth.

At The Washington Times, Cato's Richard Rahn challenges the President to enact serious regulatory reform.

In The Journal, Dartmouth’s Matthew Slaughter highlights the benefits of comparative advantage in world trade.

On Rayedio Lounge, Wayne Jett discusses China’s role in the world economy.

Thursday update.

Ransquawk.com reports that, “Nobel Economics laureate Robert Mundell says Spain and Portugal need substantial support, adding that QE2 in the US won't cause inflation.”

At Forbes, Steve Forbes notes the absurdity of Ben Bernanke's view that sound money is bad for the economy.

On Fox News, Judy Shelton discusses her new sound money pamphlet:




The Works of Robert A. Mundell website has been upgraded. And here’s the interesting introduction to Monetary Theory.

At The FrumForum, Noah Kristula-Green reports that U.S. Rep. Paul Ryan (WI) favors sound money but not a gold standard.

In The WSJ, John F. Cogan and John B. Taylor suggest federal stimulus was offset by lower state funding:




From The Mises Institute, John P. Cochran advocates a decentralized monetary system.

At NPR’s Diane Rehm Show, Dan Mitchell debates tax cuts. (Hat tip: DM)

On The Kudlow Report, Stephen Moore discusses Larry Summers’s statement that failure to pass the tax bill could cause a double-dip recession:




At The American Spectator, Peter Ferrara inveighs against Obamanomics (presumably pre-tax deal).

In The Washington Post, George Will explains why deficit hawks and social conservatives like U.S. Rep. Mike Pence (IN), but omits that supply-siders like him for advocating sound money.

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 update.

At Forbes, Lawrence A. Hunter provides a terrific supply-side history and strategy for stabilizing the euro/dollar exchange rate.

The WSJ editorializes that China’s financial system is increasingly strained by its peg to the dollar:

But on its central bank bills and repos, it [China] is borrowing at short-term rates of about 1.5% to 2%. On the asset side of its balance sheet it is earning less than 1.5% on five-year U.S. Treasurys. If the Fed succeeds in pushing down U.S. borrowing costs further, and inflation in China forces more interest rate increases, the spread on $2 trillion of foreign reserves is going to become costly. Not to mention that the yuan is appreciating against the dollar….

In the near term, tightening credit could also expose the weaknesses in China's corporations and put the banks under strain. As long as the lending spree keeps going, companies appear healthy, banks' margins are fat and nonperforming loan ratios are low. The PBoC recently raised borrowing rates by 25 basis points, and the markets expect another rise before the end of the year. Lending quotas, China's main tool for controlling credit growth, could also be cut. For many companies, this could come as a rude shock.

For a long time, the question put to China bears has been what would spark a crisis. Capital controls mean that there is little possibility of capital flight, and the government stands behind the state-run banks so there seems to be no systemic risk. While we wouldn't be so bold as to predict a crash, inflation is one way in which China's goldilocks economy could come to an end and the bears be proven right.

Bloomberg reports the weak dollar is, as predicted, sending investment funds out of the U.S.

On The Kudlow Report, Sen. Judd Gregg (NH) discusses the Fed’s actions:




Caroline Baum points out the illogic of devaluing the dollar to improve the trade deficit.

Also in The Journal, an editorial warns against forcing an EU bailout of Ireland:

Ireland, at least, is taking the overspending problem seriously. It would be in much better shape if not for that open-ended guarantee to bank creditors. Repeating Ireland's mistake on a continental scale won't save the euro, and could harm it. This week, German Chancellor Angela Merkel said that "if the euro fails, then Europe fails." But the euro is a currency union, not a debt union—at least it wasn't until last May.

Mrs. Merkel has it backwards. If the euro zone, in violation of the treaty that created it, effectively assumes the debts of all its members, it would do more damage to the credibility of the currency bloc than a haircut for its lenders. If Ireland, like Greece, cannot pay its debts, it needs to restructure them, and the sooner the better.

The Atlas Foundation Sound Money Project releases Judy Shelton’s Guide to Sound Money.

In The WSJ, Seth Lipsky anticipates Ron Paul’s ascendency to chairman of the House subcommittee that oversees the Fed:

Most exciting is the prospect that Dr. Paul will be able to bring into the national conversation such figures as, say, Edwin Vieira Jr., the visionary lawyer who has become the sage of the idea of constitutional money. That's a reference to the unit of account to which the Founders were referring when they twice used the word "dollars" in the Constitution, and which they codified in the Coinage Act of 1792 as 371¼ grains of pure silver, the same as in a then-ubiquitous coin known as the Spanish Milled Dollar, or its free-market equivalent in gold.

If Dr. Paul does accede to the chairmanship of the monetary subcommittee, he will, in but a few months, gavel it to order on the 40th anniversary of the summer in which President Nixon closed the gold window and brought an end to Bretton Woods. Yet a few weeks ago, former Fed Chairman Alan Greenspan himself, speaking at the Council on Foreign Relations, warned that "fiat money has no place to go but gold." Even the president of the World Bank, Robert Zoellick, has just called for restoring a role for gold in the monetary system.

The great debate is finally starting up again. Who better to host it in Congress than the diminutive doctor who, more faithfully than anyone else on the Hill, has for more than a generation stood for the idea of sound money?

The NY Sun echoes Lipsky’s op-ed.

Also on Kudlow, Stephen Moore worries that tax rate extensions may fall through:

Weekend round up.

In a must-read WSJ piece, Judy Shelton interviews supply-side founder Robert Mundell. The Atlas Sound Money Project features the full text:

“Are you thinking,” I venture, “that maybe it’s time to start figuring out the design for a new international monetary order? Should the U.S. offer new proposals regarding exchange rates and monetary policy?”

Mr. Mundell, who is Canadian, looks troubled. “I don’t think the U.S. has any ideas, they don’t have strong leadership on the international economic side,” he replies. “There hasn’t been anyone in the administration for a long time who really knows much about the international monetary system.”…

“The U.S. berates China for its exchange rate policy, which Washington doesn’t like,” Mr. Mundell says, noting that discriminatory tariffs against China might not be legal under the treaty provisions of the World Trade Organization. “But one-sided pressure on China to change its exchange rate is misplaced.”

Shaking his head, Mr. Mundell asserts: “The issue should not be treated as a bilateral dispute between the U.S. and China. It’s a multilateral issue because the U.S. deficit itself is a multilateral issue that is connected with the international role of the dollar.”

He goes on to explain that the dollar bloc includes China and other Asian countries—except Japan—but that the euro now constitutes the rest of the world.

“The euro today is the counter-dollar,” he says. “The most important initiative you could take to improve the world economy would be to stabilize the dollar-euro rate.”

The WSJ editorializes on Fed Chairman Bernanke’s lack of attention to the falling dollar.

We were more struck by what Mr. Bernanke didn't say. In a nearly 4,000-word speech about inflation, the Fed chief never once mentioned the value of the dollar. He never mentioned exchange rates, despite the turmoil in world currency markets as the dollar has fallen in anticipation of further Fed easing. He never mentioned rising commodity prices or soaring gold, and his only reference to the recent increase in the price of oil was by way of dismissing it in the context of overall low inflation.

On Fox, Steve Forbes suggests the mortgage market has been nationalized:



At Bloomberg TV, David Malpass calls the U.S. a currency manipulator and says the current administration is following GW Bush’s weak dollar policy. Interestingly, he suggests the weak dollar since 2004 has driven investment capital overseas, contributing to a rising trade deficit, the opposite of the mainstream view. He also predicts the Bush tax cuts will not be extended.

Seeking Alpha summarizes a recent presentation on the economy by Dr. Victor Canto.

On CNN, Stephen Moore debates economic policy:



Foreign Policy analyzes the power struggle among China’s rulers.

Cato’s Dan Mitchell suggests Calvin Coolidge was the best President of the last 100 years.

Monday update.

In the Cato Journal, Jude Shelton calls for a new global institution to promote currency stability.

On RCM, Louis Woodhill critiques CBO's Keynesian economic model.

At Commentary, Jennifer Rubin advocates revival of the GOP’s pro-growth wing.

But modern conservatism’s success, both in policy and electorally, did not come from being the green-eye-shade party. It stemmed from an enthusiasm and celebration of free markets and from policies that sought to unleash the potential of individuals, investors, and employers. And it was Reagan whose embrace of supply-side economics, free trade, and modest regulation unleashed an economic boom — and launched a conservative political vision that was inclusive and successful.

At Asia Times, David Goldman supports an export-led recovery.

In Forbes, John Tamny sees high government pay weakening the private sector.

At Business Insider, Gregory White explains that debt-to-revenue is more important than debt-to-GDP.

In The WSJ, Harvard's Robert Barro argues unemployment benefits contribute to high unemployment.

U.S. Rep. Paul Ryan (WI) focuses on fiscal deficits in assessing the weak economy.

Keynesian Robert Samuelson diagnoses the demand-side of the economic malaise.

Bloomberg’s Caroline Baum defends Milton Friedman's monetarism.

The WSJ reports on Japan's effort to weaken its currency:

AEI’s Kevin Hassett says Gov. Chris Christie (NJ) is popular because he has cut spending and refused to raise taxes.

Regarding the

10-Year Treasury rate

chart from yesterday's NYT, a longer-term chart makes clear today's rates are close to their pre-Great Inflation level. Also note the lag: rates stayed high well into the 1980s even though gold and CPI had fallen to low-inflation levels.

Wednesday round up.

From earlier this year, David Goldman explains how to get China to save less and buy more imports.

Peter Schiff sees a stronger yuan as bad for America.

Newt Gingrich offers good pro-growth ideas but leaves out stabilizing the dollar.

Larry Kudlow predicts a soft economy, not a double dip recession.

Scott Sumner discusses growth since the 1980s.

From 2009, Judy Shelton explains her policy views on C-SPAN.

Don Boudreaux responds to the claim that “Americans don’t make things anymore.”

England's conservative government is cutting spending and raising taxes.

Germany's conservative government advocates austerity.

Progressive Kevin Drum worries about austerity.

From 1999, Jack Kemp rejects austerity in favor of growth.

The House Majority Leader attacks supply-side economics, citing National Review's Kevin D. Williamson.

“The second political factor we have to struggle with is the legacy of the supply-side dogma. Conservative economics used to be in touch with fiscal reality—remember that even President Reagan raised taxes in 1982, 1983, and 1984. Today, Ronald Reagan would be kicked out of the Republican party. Conservatives abandoned the first President Bush after the successful 1990 budget agreement. For the same reason, anti-tax crusader Grover Norquist said this about the possibility of a budget compromise today: ‘At some point conversations about unicorns are tedious, because they don’t exist in the real world. Budget deals where they actually restrain spending and raise taxes are unicorns.’

“I’ll only say that a budget agreement is entirely possible between two parties that look at reality as it is, not through the prism of 30-year-old ideologies that lead to defeatist falsehoods like ‘budget deals don’t exist.’

“The good news is that, after three decades, some on the right are realizing what supply-side has accomplished in reality. The administrations most committed to regressive tax cuts—Reagan and Bush II—left conservatives with bigger government, and left all of us deeper in red ink. As Kevin D. Williamson wrote in an influential April article in National Review, ‘Tax cuts don’t get us out of the spending pickle, and growth isn’t going to make the debt irrelevant…You can’t starve the beast if the Chinese and the bond markets keep lending him bon-bons by the ton.’ Even Alan Greenspan—who during the Bush Administration advocated for huge tax cuts to avoid the supposed danger of paying down the debt too quickly—acknowledged in the Wall Street Journal this month that that policy helped wipe out the surplus and led to higher interest rates.

“That’s the kind of honesty we all need to show if we want to head off a crisis. And slowly but surely, that honesty is spreading to Congress. This month, Senator George Voinovich candidly said that Republicans can’t sign Norquist’s anti-tax pledge and take on the debt at the same time: ‘What [my colleagues] have to understand is that that pledge is inconsistent with the oath of office that they took when they became members of the United States Senate.’"