Friday items: Woodhill discounts the Dow for gold; Lehrman and Grant testify on monetary policy; Geithner supports a world reserve currency.

From The Weekly Standard, Lewis Lehrman argues for a gold-backed dollar.

At Forbes, Louis Woodhill measures the Dow against the gold price.

U.S. Rep. Ron Paul (TX) held hearings yesterday on Federal Reserve policy and rising prices, featuring Lewis Lehrman and James Grant:



(Parts 2-8 of the hearing, here, here, here, here, here, here and here.)

(Lehrman’s written submission here, Grant’s here. H/t: Ralph Benko, Rich Danker.)

The Telegraph (UK) reports world markets were stunned by Treasury Secretary Tim Geithner’s suggestion that the U.S. supports a global reserve currency.

From last week, The WSJ recounts a hapless Fed official’s explanation to working people that price inflation is under control.

So Mr. Dudley tried to explain that other prices are falling. "Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful," he said. "You have to look at the prices of all things."

Reuters reports that this "prompted guffaws and widespread murmuring from the audience," with someone quipping, "I can't eat an iPad." Another attendee asked, "When was the last time, sir, that you went grocery shopping?"

At RCM, Cato’s Kevin Dowd and Martin Hutchison tie dollar volatility to the recent boom/bust cycles and suggest investors are pulling out of the U.S. as a result.

From Future of Capitalism, Ira Stoll notes the Ways and Means Committee Chairman wants a top tax rate of 25 percent.

At Democracy Journal, supply-side critic Jonathan Chait laments the GOP’s refusal to raise tax rates.

We can identify three phases of supply-side craziness in Republican Party history. In phase one, the Republican establishment greeted supply-side economics with incredulity. The messianism and insouciant disregard for sound fiscal principles sounded more like a nutty left-wing scheme than anything a Dwight Eisenhower or even a Barry Goldwater might recognize. George H.W. Bush called it “voodoo economics.” A great blaze of tax cutting at the outset of the Reagan presidency quickly produced massive deficits, and the Reagan Administration — still dominated by an older generation of Republicans — quickly retrenched. It quietly raised taxes in 1982 and 1983, and then in 1986—aghast at the massive corporate tax loopholes that had grown out of its initial tax cuts—agreed to a tax reform that, even in the course of lowering nominal rates, shifted a larger share of the tax burden onto the rich by sweeping the tax code of subsidies for the wealthy.

Through the next decade, in phase two, the Republican Party stayed committed to anti-tax absolutism in rhetoric, but it remained largely tethered to fiscal reality in practice. In 1990, George H.W. Bush agreed to a major deficit-reduction package, including substantial spending cuts, in return for a small hike in the top marginal income tax rate, from 28 to 31 percent….

Which brings us to phase three. Over the last 20 years, the penetration of taxophobia within the Republican Party has been total. Reducing taxes, especially taxes on the rich, has been enshrined as the party’s unquestioned central policy goal. Virtually all Republicans at the national level have signed a pledge concocted by anti-tax fanatic Grover Norquist pledging never, under any circumstances, to support higher taxes. No such pledge exists for spending.

On Forbes, Peter Ferrara suggests Social Security accounts are still a viable option.

From Fiscal Times, Bruce Bartlett argues Tea Party Republicans are blowing it by focusing on small, unpopular budget cuts.

Tuesday update.

Sorry for the recent site trouble. Google/Blogger had some kind of problem. Thanks for your patience.
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In Forbes, Reuven Brenner examines the ideas that lead to prosperity.

At RCM, John Tamny analyzes the factors behind the Clinton boom.

On The Kudlow Report, Stephen Moore debates the President’s turn toward growth economics:




At Forbes, Ralph Benko argues Tea Party populism stems from relative world peace.

On The Washington Times, Richard Rahn debunks tax-the-rich rhetoric.

In three parts on Forbes, Charles Kadlec opposes tax-the-rich arguments, here, here, and here.

On Kudlow, David Goldman analyzes the economy:




On Bloomberg, Amity Schlaes sees the payroll tax cut as a significant flaw.

On Lew Rockwell, Bob Murphy comments on David Frum’s analysis that Chicago school economics have lost ground to Austrian economics.

Monday update.

On Forbes, John Tamny explains rising commodity prices indicate a falling dollar, not economic strength.

The WSJ critiques the Treasury’s trade balancing proposal as a recipe for further decline.

In any event, how do the world's would-be central planners know what is the ideal trade surplus or deficit? Many factors determine the competitiveness of a country's exports, including productivity, wage flexibility and more. Should nations like Germany that have run prudent fiscal policies, reformed their labor markets and raised productivity be chastised for exporting more goods than they import? Should countries like Australia be penalized for selling natural resources to a developing China that needs those imports to fuel growth? Should China be punished for exporting cheap goods to willing U.S. consumers?...

There was a time when U.S. officials understood that focusing so much attention on trade deficits and surpluses was counterproductive. In 1976, an advisory committee to the Treasury that studied the international economic accounts concluded: "The words 'surplus' and 'deficit' should be avoided insofar as possible . . . These words are
frequently taken to mean that the developments are 'good' or 'bad' respectively. Since that interpretation is often incorrect, the terms may be widely misunderstood and used in lieu of analysis." The world could use such wisdom today.

On The Kudlow Report, Art Laffer worries about the dollar’s future:



On The Daily Caller, Jared Whitley (a friend) argues the Tea Party should focus on growth, including a sound dollar, rather than budget cuts.

At The NYT, former Obama advisor Christina Romer recommends against austerity.

In The WSJ, Keynesian (and cash for clunkers advocate) Alan Blinder advocates short-term rebates and credits, plus increased government spending.

From July, Alan Reynolds analyzes the flaws in Blinder’s model.

Also on Kudlow, Dan Mitchell debates the impact of lower tax rates on the budget deficit:



In The LA Times, Nicole Gelinas suggests letting bad banks fail is necessary for recovery.

On NRO, Reihan Salam recommends streamlining government to reduce debt, but makes no reference to increasing the rate of growth.

Thursday round up.

At The WSJ, Daniel Henninger advocates a resurgence of the Republican Party’s growth wing.

The growth issue has defaulted to the Republican Party. That's the pity. Hardly anyone in the party remembers how to give economic growth the starring role it deserves.

The last Republicans able to talk about growth as a crucial, creative, essential force, a driver of American prosperity and primacy (think the China threat) were Ronald Reagan, Jack Kemp and Steve Forbes. The current crop of Republican leaders and presidential contenders, about to be handed the opportunity of a generation, are in danger of reverting to the party's austerity-only obsessions. Austerity-only policies are producing Europe's riots.

Reducing spending, controlling entitlements, reforming public pensions—all of that matters. It's important. But any population being asked to "sacrifice" needs to be able to believe something better is possible. That's the challenge of political leadership.

On Forbes, Brian Wesbury and Robert Stein argue that quantitative easing by the Fed is no longer justified.

At Barron’s, Michael Kahn explains stock prices are depressed when measured against gold.

At CNBC, Steve Forbes echoes John Tamny's recent prediction of a return to a gold-linked dollar:



On The Future of Capitalism, Ira Stoll reports on David Malpass’s recent comments on the Fed.

On Asia Times, David Goldman advocates buying guns and ammo before physical gold.

Also in The Journal, Craig Barrett and James B. Moore Jr. argue high corporate tax rates push companies offshore.

On The Kudlow Report, Jerry Bowyer opposes dollar devaluation:



In USA Today, President Carter inadvertently makes a good point: that anti-establishment revolts arise during weak dollar eras.

The Denver Post’s Mike Rosen claims calls for tax hikes are based on envy, not economics.

A brief YouTube video explains the Laffer Curve.

Long weekend update.

In The Washington Examiner, Timothy P. Carney has an important piece on the financial interests behind the China currency debate.

At New World Economics, Nathan Lewis explains why stable money is vital.

At the Kudlow Report, Stephen Moore and Robert Reich debate demand vs. supply-side policies:

At Forbes, Robert Lenzner sees President Obama as more Carter than Reagan.

At Zero Hedge, madhedgefundtrader wonders if Steve Forbes will run for president as a Tea Party candidate.

Also on Kudlow, John Rutledge analyzes the market:

Thursday round up.

On The Kudlow Report, David Stockman wants full-fledged fiscal austerity (spending cuts + tax cuts).

Kudlow comments further on the discussion.

John Tamny analyzes Paul Krugman's solutions to the recession.

From last week, Alan Reynolds responds to Ezra Klein on stimulus.

In The WSJ, Seth Lipsky explains how much salaries have declined in terms of gold.

In an April interview, George Gilder hopes Tea Parties will stress tax cuts not spending cuts.

David Wessell reports free trade's comeback.

CEO Ziad K. Abelnour argues we need the rich.

National Review's Kevin D. Williamson regrets extension of the homebuyer's tax credit.

U.S. Rep. Scott Garrett (R-NJ) suggests Fannie Mae and Freddie Mac is the root cause of the subprime crisis.

Liberal economist Josh Bivens makes the case for growth over deficit phobia.

Former Treasury official John B. Taylor opposes the financial reform bill.

Gold and the supply – and demand – side (Domitrovic post).

(Thanks to Econoclasts author and historian Brian Domitrovic for being the first to submit original content to this blog.)

A comment on last week’s piece in the Wall Street Journal, where supply-side pioneer Jeffrey Bell and colleague Sean Fieler’s op-ed suggests that the planets are aligning for a return to the gold standard. They see a major sign in the Tea Party movement, with its strong favor for gold, and which is getting too big and resonant not to have practical impact. As for the economics, the authors point out that if the US (let alone the world) went back to gold, it would become passing difficult to run budget deficits. Given gold, the Fed would be incapable of creating money to buy up Treasuries not demanded by the market, in that the new currency would have to be backed with gold already on hand. It would be impossible to supply government debt.

It would also be the case that demand for government debt would dry up. The major reason that the market for debt exploded in the 1980s was that inflation got low but still existed. Low inflation can be covered by a bond coupon dunned by low taxation. In the low inflation/tax years from then till now, demand for debt soared. But with gold, inflation scenarios are nil, and investors are pleased to hold cash in that portion of their portfolios they wish not to risk to depreciation and default. Gold cuts out the reason for government debt coming and going. It renders its supply impossible, and dries up the reason for its demand. In the offing, virtually all money out there is devoted to the real economy, with remarkable consequences for growth and opportunity.