Thursday items.

David Malpass’s Growpac initiates a petition against the Fed’s quantitative easing.

At First Things, David Goldman responds to NRO’s Ramesh Ponnuru on QE2.

On The Kudlow Report, Malpass assesses the market:




On Louisiana radio, John Tamny discusses government barriers to economic recovery.

At Politico, David Boaz recommends Republican emphasize not raising taxes in a recession.

On The NYT, David Leonhardt illustrates that growth was sub-par in the GW Bush years and suggests tax cuts don’t lead to growth:




Dallas’s D Magazine reports Steve Forbes blames the weak dollar for the financial meltdown.

At Commentary, John Steele Gordon mocks Leonhardt for discovering that strong growth would help solve the deficit.

On NRO, Stephen Spruiell argues Keynesian stimulus spending as deficit reduction is a bad idea.

Our friends at Bankrupting America summarize the non-monetary uncertainties government is creating for businesses:

Thursday items.

On Forbes, historian and Econoclasts author Brian Domitrovic explains that dollar instability led to Social Security’s creation.

In The WSJ, Charles W. Kadlec suggests that after four decades of evidence, the floating dollar experiment can be ruled a failure.

From 1947 through 1967, the year before the U.S. began to weasel out of its commitment to dollar-gold convertibility, unemployment averaged only 4.7% and never rose above 7%. Real growth averaged 4% a year. Low unemployment and high growth coincided with low inflation. During the 21 years ending in 1967, consumer-price inflation averaged just 1.9% a year. Interest rates, too, were low and stable—the yield on triple-A corporate bonds averaged less than 4% and never rose above 6%.

What's happened since 1971, when President Nixon formally broke the link between the dollar and gold? Higher average unemployment, slower growth, greater instability and a decline in the economy's resilience. For the period 1971 through 2009, unemployment averaged 6.2%, a full 1.5 percentage points above the 1947-67 average, and real growth rates averaged less than 3%. We have since experienced the three worst recessions since the end of World War II, with the unemployment rate averaging 8.5% in 1975, 9.7% in 1982, and above 9.5% for the past 14 months. During these 39 years in which the Fed was free to manipulate the value of the dollar, the consumer-price index rose, on average, 4.4% a year. That means that a dollar today buys only about one-sixth of the consumer goods it purchased in 1971.

Interest rates, too, have been high and highly volatile, with the yield on triple-A corporate bonds averaging more than 8% and, until 2003, never falling below 6%. High and highly volatile interest rates are symptomatic of the monetary uncertainty that has reduced the economy's ability to recover from external shocks and led directly to one financial crisis after another. During these four decades of discretionary monetary policies, the world suffered no fewer than 10 major financial crises, beginning with the oil crisis of 1973 and culminating in the financial crisis of 2008-09, and now the sovereign debt crisis and potential currency war of 2010. There were no world-wide financial crises of similar magnitude between 1947 and 1971.

Concerning quatitative easing, WSJ columnist David Wessell asks, What Would Milton Do?




On NRO, Larry Kudlow reports the Federal Reserve may be backing off its plans for aggressive easing.

At Forbes, Steve Forbes predicts new technologies will make energy plentiful for decades to come.

Also on Kudlow, Stephen Spruiell and Robert Reich debate how to cut the deficit:




At Bloomberg, Amity Schlaes relates the death tax to the story of Secretariat.

On Forbes, AEI’s Alex Brill and Chad Hill analyze tax policy’s impact on growth.

Tuesday round up.

At RCM, John Tamny criticizes Treasury Secretary Geithner’s plan to manipulate trade balances through continued dollar weakness.

In The WSJ, University of Chicago’s John H. Cochrane analyzes Geithner’s trade balance argument.

Since when is every trade surplus or deficit an "external imbalance" in need of correction? It makes sense for a country that has good investment prospects to import a lot of goods, run trade deficits, and borrow money. Years later, the country puts the resulting products on boats to pay the lenders back. The U.S. borrowed abroad to finance our railroads in the 19th century and ran surpluses when Europe was rebuilding after World War II. Were these "imbalances"?

Or consider a country (say, China) with a lot of middle-aged workers who need to save for retirement. It makes perfect sense for them to put stuff on boats and send it to a second country (say, the United States) whose people want to consume the goods. The people in the first country invest their earnings, say, by buying the bonds issued by the second country. And as they retire, they cash in the bonds and buy goods flowing the other way.

Do these and similar stories exactly account for current trade patterns? I don't know. But nobody else does, either. In particular, the army of economists in the basements of the International Monetary Fund (IMF) has no clue exactly how much each country should be saving, or where the best untapped global investment opportunities are around the world—including whether trade patterns are "normal" or "imbalanced."

On CNBC, Keynesian Stephen Roach lashes China currency bashers:




Cato’s Steve Hanke recounts the history of US efforts to destabilize China’s currency.

Investor’s Business Daily offers non-monetary ways to increase exports.

At NRO, Stephen Spruiell comments on Paul Krugman’s claim that lower revenue due to contraction, not abnormally high spending, accounts for the budget deficit:




On The Washington Times, Richard Rahn argues taxes already have been increased by $352 billion.

At Alhambra Investments, Joseph Y. Calhoun, III assesses the economy.

On The Kudlow Report, Steve Forbes suggests the budget deficit can be reduced with strong growth:




Reprinted from First Things, David Goldman and Reuven Brenner analyze the Keynesian roots of the current crisis. (H/T: Dick Fox at Supply-Side Forum.)

Monday update.

On Forbes, John Tamny wonders if a new Reagan will arise to combat the economy’s “new normal.”

From 2006, Paul Craig Roberts summarizes the supply-side economics model.

On The Kudlow Report, Larry analyzes the weak dollar:



Business Insider reports the European Central Bank intends to weaken the euro to keep pace with the dollar.

At Tiger Droppings, Doc Fenton argues Milton Friedman was right and Robert Mundell is wrong about exchange rates.

On CNBC, Greg Mankiw discusses tax rates:



At New World Economics, Nathan Lewis challenges the scarcity mentality.

In a National Review cover article, Stephen Spruiell dissects Paul Krugman’s writing.

On The Weekly Standard, Seth Forman skewers Krugman’s recent claims on government spending.

Wednesday items.

Housekeeping notes:

The American Principles Project has initiated the Gold Standard 2012 project, now added under Links.

Thanks to Bob Landry for suggesting Lewis Lehrman’s 1980 paper, “Monetary Policy, the Federal Reserve System, and Gold,” now in the Classic Articles section.
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In The WSJ, Sen. Jon Kyl (R-AZ) outlines a growth agenda focused on tax reform, lighter regulation, and spending cuts. Sound money doesn’t rate a mention.

On Smart Money, Don Luskin explains the impact of recent jobs numbers on markets.
At NRO, Larry Kudlow suggests the President is off message on the economy.

On Kudlow, National Review’s Stephen Spruiell debates government's role in the current malaise:



At Forbes, Brian Wesbury advocates patience rather than short term fiscal and monetary stimuli.

On The American Spectator, Peter Ferrara critiques the President’s economic policy.

At Café Hayek, Don Boudreaux challenges Paul Krugman’s claim that the recent Keynesian spending surge didn’t happen.

On The Kudlow Report, Stephen Moore debates free trade’s impact on jobs:



Investor’s Business Daily applauds Fed Vice Chairman Yellen for her skepticism on quantitative easing.

The Atlas Sound Money Project reposts Reuven Brenner’s 2003 article, “Alan Goldspan.”

The Washington Post’s Ruth Marcus hopes Republicans will follow Britain’s Tories with deep spending cuts and tax rate increases.

Tuesday updates.

At The WSJ, Art Laffer counters calls to create a high income tax in Washington state.

On Foxnews.com, Ralph Benko argues a 21st-century gold standard is vital to fixing the economy.

Also at The Journal, editor Paul Gigot discusses last week’s anti-trade vote against China in the House:



On RCM, John Tamny doubts congressional Republicans understand how to repair the economy.

At NRO’s Corner, Stephen Spruiell critiques Paul Krugman’s claim that Keynesians are vindicated and classical economists repudiated by continued low inflation and interest rates.

On The Kudlow Report, Don Luskin suggests U.S. stock market trends are eerily similar to those during the Great Depression:



At Café Hayek, GMU’s Don Boudreaux challenges U.S. Sen. Sherrod Brown (OH) to a public debate on trade.

In The Washington Times, Richard Rahn warns Republicans not to raise taxes as part of a deficit reduction compromise.

Larry Kudlow highlights Dan Mitchell’s recent video on how to balance the budget based on spending cuts rather than tax increases.

Friday update.

In a must-read editorial, The WSJ connects the world economic crisis to dollar instability.

Since the financial panic began in 2008, global leaders have been at pains to stress their "cooperation" on numerous issues—stimulus spending, new bank rules, trade. Yet they still insist on going their own parochial, self-interested way on monetary policy and exchange rates. It's as if world leaders had consciously decided to deal with every economic issue except the most important one—the price of the global medium of economic exchange.

The result has been a world of monetary disruption and growing commercial and political disputes. Brazil has had to cope with surging capital inflows and a rising real, with government bond yields hitting double-digits. The rising yen has roiled Japanese politics and led its central bank to intervene. Other Asian nations—part of what is, or was, the dollar bloc—have taken to devaluation or interest rate adjustments to stop their currency shifts against the dollar.

Meanwhile, what Nobel economist Robert Mundell calls the world's single most important price—the euro-dollar rate—continues to fluctuate wildly. The nearby chart shows that the swings have become more frequent and severe since 2005, from 1.2 euros to the dollar to 1.6, then down to 1.25, back to 1.5 in a matter of months, down again to 1.2 and now back above
1.36.


Mr. Mundell—the father of the euro and the world's foremost expert on currency systems—recently said on Bloomberg TV that this "is a terrible thing for the world economy" and that "We've never been in this unstable position in the entire currency history of 3,000 years."

Such sharp currency moves lead to huge swings in prices, especially for commodities like oil. They disrupt business planning, as companies find it difficult to know what their real costs and return on investment will be. And they lead to the misallocation of resources, with investment decisions pegged as much to exchange-rate movements as to long-run productivity gains or potential breakthroughs in technology. Some $4 trillion now turns over daily in global currency markets.

The growing danger today is currency protectionism—what students of the 1930s will remember as competitive devaluation or "beggar-thy-neighbor" policies. As economic historian Charles Kindleberger describes in his classic "The World in Depression," nations under domestic political pressure sought economic advantage by devaluing their national currency to improve their terms of trade.

But that advantage came at the expense of everyone else. "As with exchange depreciation to raise domestic prices, the gain for one country was a loss for all," Kindleberger writes. "With tariff retaliation and competitive depreciation, mutual losses were certain."

We can see signs of similar behavior today, especially in the global economy's main potential flash point of U.S.-China relations. This week, the U.S. House of Representatives voted 348 to 79 to impose tariffs on Chinese goods if Beijing does not revalue its currency. Ominously, the vote was bipartisan. While the Senate has so far restrained itself, a similar rout in that body can't be ruled out after the elections—especially in the absence of Presidential leadership.

On The Kudlow Report, Larry analyzes the plunging dollar’s impact on the stock market:



At NRO, Stephen Spruiell predicts a trade war with China will lead to rising interest rates, a weaker dollar and more costly imports.

In The NYT, David Brooks notes (with approval) the rise of the GOP’s austerity caucus.

Former U.S. Sen. Phil Gramm (TX) suggests hostile treatment of business contributes to the weak economy.

On Kudlow, Stephen Moore debates the work habits of the wealthy.

Wednesday articles.

Bret Swanson analyzes China's internet development.

David Goldman explains why he is bearish on bank stocks.

Stephen Spruiell interviews Allan Meltzer on inflation.

Amity Schlaes suggests expansive government threatens prosperity.

In Forbes, Brian Wesbury and Robert Stein argue trade deficits aren't a threat.

At The Freeman, Mark W. Hendrickson opposes protectionism.

Washington Post blogger Ezra Klein comments on Sen. McConnell's view that the Bush tax cuts didn't diminish revenue.

At Newsweek, Daniel Gross claims growth will help solve the deficit.