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: Woodhill, The NY Sun, and Taylor on Pawlenty; Tamny sees the euro continuing; Goldman on zombinomics.

From RCM, Louis Woodhill explains why Tim Pawlenty is right about five percent annual growth.

The NY Sun congratulates Pawlenty for his pro-growth message but stresses a deeper emphasis on the dollar.

Conservative Keynesian John Taylor supports Pawlenty’s call for growth.

You can see how the types of pro-growth policies in the Pawlenty plan would work toward the goal by reducing spending growth enough to balance the budget without tax increases and thereby remove threats of a debt crisis; by lowering marginal tax rates to spur hiring and job growth; by scaling back unnecessary new regulations which impede private investment and higher productivity, and by restoring sound monetary policy to remove uncertainty about inflation or another financial crisis.

On Forbes, John Tamny suggests the euro will remain in place.

At Asia Times, David Goldman assesses the “zombie” economy.

On NRO, Don Luskin reports Paul Krugman’s poor record predicting the economy.

From Forbes, David Malpass discusses the debt ceiling, the dollar and the economy.

On International Liberty, Dan Mitchell advocates cutting government to boost growth.

From The Daily Progress, James Philbin suggests a gold standard is key to recovery.

In The Washington Post, Larry Summers opposes reducing demand-side stimulus from the economy.

On Forbes, Richard Salsman blames demand-side economics for the current malaise.

At COAL, Paul Krugman cites Laffer to make the Keynesian case for growth economics.

Monday round up: Benko argues for the gold standard; Goldman discusses the dollar; Politico on GOP tax reform plans.

On C-SPAN’s Morning Journal, Ralph Benko provides a terrific argument for the gold standard.

At TGSN, Benko recounts the history of the Continental Congress’s disastrous experiment with paper money.

Politico summarizes Republican candidates’ “unorthodox” tax plans.

On The Kudlow Report, David Goldman discusses the dollar and Fed policy:




SNL features a surprisingly substantive parody of the European debt crisis and the euro. (Warning: some rough language.)

From The Washington Post, George Will recounts California’s tax and spending debate.

On Kudlow, Fed Governor Thomas Hoenig foresees inflation despite recent commodity declines and a rising dollar:




At NRO, Kevin Williamson critiques Keynesian economists.

From the Mises Institute, James E. Miller remembers Paul Krugman’s positive writings on trade.

Weekend update: Lewis on the euro; Calhoun on the post-QE2 dollar; Rutledge on inflation.

From Forbes, Nathan Lewis explains why Europe is better off with a single currency.

On RCM, Joe Calhoun suggests the dollar’s post-QE2 rise will lead to stronger U.S. growth.

At The WSJ, Art Laffer and Stephen Moore report the population shift from forced union states to right-to-work states.

On The Kudlow Report, John Rutledge sees inflation picking up:




From Forbes, Peter Ferrara continues his comparison of Reaganomics with Obamanomics.

On Forbes, Rich Karlgaard explains the importance of economic growth.

At Forbes, Reuven Brenner links the mortgage crisis to government’s interference in credit markets.

On Kudlow, James Pethokoukis and Deroy Murdock discuss the debt limit:




At The Washington Post, Karen Hube recounts the benefits to average families of tax expenditures (h/t: Vlad Signorelli).

The NY Daily News reports that young New Yorkers say they will leave the city due to high taxes and unemployment.

Wednesday round up: Tamny and The Sun on gold; Kudlow is pessimistic on a budget deal; Wesbury on the end of QE2.

On RCM, John Tamny notes that $1,500 gold signals a major problem.

The NY Sun urges the President to address the falling dollar.

At NRO, Larry Kudlow suggests Treasury Sec. Tim Geithner is overly optimistic about a budget deal.

On The Kudlow Report, Brian Westbury discusses the end of QE2:




From Bloomberg, Amity Schlaes notes that lower tax rates often boost government revenues.

From Hoover, Richard Epstein argues against income redistribution.

Smart Money Europe explains that the euro is strong because the dollar is weak.

The WSJ reports Vladimir Putin calling U.S. monetary policy “hooliganism.”

“Look at their trade balance, their debt, and budget. They turn on the printing press and flood the entire dollar zone — in other words, the whole world — with government bonds. There is no way we will act this way anytime soon. We don’t have the luxury of such hooliganism,” he said.

Even as Putin blamed the U.S. for printing money — something for which Russia was criticized during periods of hyperinflation in the 1990s — other Russian officials said there is no alternative to the U.S. dollar and declined to discuss cutting the country’s dollar holdings.

On TGSN, Daniel Ryan suggests the gold standard empowers the people.

At the Atlanta Federal Reserve’s Macroblog, Dave Altig cites this Robert Mundell paper to suggest Mundell is not a critic of Keynesianism (h/t: COAL).

On COAL, Paul Krugman challenges the notion that inflation is expansion of money and credit.

Think Progress reports U.S. Rep. Paul Ryan (WI) got booed at a constituent meeting for opposing raising tax rates on the wealthy to address the deficit.

Wednesday round up: Lindsey on growth; Woodhill on different gold standards; Rapoza on the government shut down.

From Forbes, Brink Lindsey explains low long-term growth's profound impact.

Also at Forbes, Louis Woodhill examines four versions of the gold standard.

On The Kudlow Report, Stephen Moore discusses the dip in consumer confidence:



At Forbes, Kenneth Rapoza cites Paul Hoffmeister saying a government shutdown probably won’t be bad for markets, but may be bad for Republicans.

Already, public opinion polls indicate that Americans believe that President Obama’s plan for the economy is better than the Republican’s plan. This is due to the GOP’s almost singular focus on spending cuts compared to Obama’s approach to managing costs of the social safety net like jobless benefits. Usually during times of sub-optimal growth, Republicans perform better politically by emphasizing a pro-growth economic platform.

At TGSN, Kelly Hanlon reports on gold production rates.

From Asia Times, David Goldman explains that the real estate decline is hammering municipal government revenues.

On International Liberty, Dan Mitchell notes that taxes paid as a percentage of GDP has risen even as tax rates have fallen.



At Der Speigel, Michael Sauga quotes Robert Mundell on the euro.

On NRO, Cato’s Mike Tanner suggests conservatives are waiting for an advocate of deeper spending cuts.

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.

Tuesday round up.

On Forbes, Jeff Bell and Rich Danker make a strong case for the economic and political viability of a gold-backed dollar.

Yet most sympathetic politicians, policymakers and academics shy away from embracing gold. A common refrain is lack of voter knowledge, and there is some truth to this. In focus groups of Democrats and Republicans that we observed over the summer in Cincinnati, most participants had come of age after Bretton Woods and therefore had no living memory of gold playing a central role in monetary policy. But they did comprehend the gold standard when it was explained to them (a third session in Cincinnati with Tea Party activists elicited surprising levels of historical knowledge and support).

Even if they have never heard of the price-specie-flow mechanism, voters have an increasing sense of how the gold standard works because there is an intuitive association of gold with money. A system that last fully operated before World War I is more transparent and understandable than the monetary regime we live under today, dictated by central bankers making policy according to their macroeconomic preoccupations. The monetary authorities themselves do not understand the impact of their decisions on the wider world, where foreign central banks recycle excess reserves into U.S. dollar-denominated debt that artificially boosts asset prices and generates recurring bubbles below the radar of inflation.

At Alhambra Investments, Joe Calhoun sees economic negatives outweighing positives, unless spending and the tax system are reformed.

On The Kudlow Report, former Atlanta Fed President William Ford explains that rising interest rates could render the U.S. central bank insolvent:



Apropos my recent article, The Washington Times reports on President Obama’s meeting with President Sarkozy of France to discuss the dollar and the euro.

Mr. Sarkozy repeatedly has warned of the dangers to international firms posed by disparities between the euro and the dollar, and has suggested that reliance on the dollar as the world's sole reserve currency exacerbated the financial crisis.

The French leader has called for "updating" the global monetary order — something he's now pursuing as he holds the revolving presidencies of the Group of Eight and the Group of 20 nations. But, at least in his public comments alongside Mr. Obama, he avoided pointed rhetoric challenging the dollar's status.

"I've always been a great friend, a tremendous friend of the United States, and I know how important a role the Unites States plays in the world, how important the U.S. dollar is as the world's No. 1 currency," Mr. Sarkozy told reporters following an Oval Office meeting with Mr. Obama.

At the International Economic Law and Policy blog, Simon Lester reports on papers by John Williamson of the Peterson Institute, and conservative Keynesian Martin Feldstein of Harvard, on how to deal with trade imbalances (here and here).

The WSJ editorializes on a new study illustrating why trade deficit fears are overblown.

From The WSJ, former Fed Chairman Alan Greenspan advocates higher taxes and denies any mistakes in monetary policy during his tenure:



Cato’s Dan Mitchell suggests taxpayers will flee tax Illinois’s tax increases.

At Foreign Affairs, Columbia’s Robert C. Lieberman argues government policy favors the rich getting richer.

Mundell on the Continued Malaise in Europe and the U.S.

Like E.F. Hutton in the old commercials, when Columbia University’s Robert Mundell speaks, supply-siders listen. The Nobel laureate, 78, is the most consequential living economist, having recommended policies that helped President Kennedy defeat recession for a burst of strong growth in the 1960s, enabled President Reagan to overcome stagflation in the 1980s, established the euro in the 1990s, and helped China enact a stable currency in the 2000s as part of its hyper-growth plan. In short, for half a century Mundell’s ideas have shaped the world. Therefore, his surprising diagnosis of what ails today’s economy – exchange rate volatility between the dollar and the euro – is worth considering.

Despite the commentariat’s tendency to define supply-side economics as “tax cuts,” the framework first propounded by Mundell in the early 1960s actually centers on monetary rather than fiscal policy. He recognized early in his career that the world was moving away from the gold-anchored, fixed-exchange rate currency system of the previous 150 years, so he focused his scholarship on how fixed versus floating exchange rate systems work in an open world economy.

In Mundell’s view, an increasingly interdependent global trading system cannot function optimally with scores of national currencies floating relative to one another, subject to governments’ discretionary monetary policies. Volatile exchange rates discourage trade and international investment, requiring complex and costly financial arrangements such as derivatives to reduce the risk. Mundell’s theory of Optimum Currency Areas aimed to reduce regional exchange rate static by uniting geographic areas under single currencies, assuming conditions such as labor and capital mobility and similar business cycles. These areas, in turn, may harmonize exchange rates with other major currency blocks to reduce turbulence further.

Mundell’s theory rests on three assumptions. First, discretionary national monetary policy yields fewer advantages than stable exchange rates, and is often the source of major crises such as the Great Depression and the 1970s stagflation, to say nothing of our two recent boom/busts. Second, nations cannot change their terms of trade through currency manipulation – a currency devalued by 50 percent will cause import prices, and eventually all prices, to rise by a similar amount, cancelling any initial advantage. Third, floating currency is not needed to balance payments among nations. In an open global economy, current account deficits are balanced by capital account surpluses. Moreover, such deficits are rooted primarily in long-term factors such as demographics and relative economic development, not currency prices.

If monetary policy is to be non-discretionary and internationally-focused, how would Mundell improve domestic economic growth?

This is where Mundell turned to fiscal policy. Recognizing the ineffectiveness of Keynesian spending in an open economy model – because much of the stimulus simply flows offshore – and the intrinsic flaw of focusing on consumption (demand) rather than production (supply), Mundell highlighted marginal tax rate cuts as a means to attract new foreign capital while incentivizing additional domestic work and investment.

Regarding today’s economy, Mundell believes the euro, despite European debt problems, remains the correct policy. He points out that the U.S. – an Optimum Currency Area in its own right – has member states near default on their debts, e.g. California, yet no one suggests the Golden State withdraw from the dollar zone. Moreover, he explains, such a move would be futile, as the withdrawing state’s obvious goal would be to issue its own currency and then promptly devalue it. Under such conditions, markets would not accept the new currency.

Most importantly, Mundell believes Europe’s recurring debt crises and the U.S. pattern of recession and recovery are linked to what he calls the most important price in the world – the euro/dollar exchange rate. This rate links the world’s #1 and #2 economies, accounting for 40 percent of world GDP.

Mundell believes the U.S. subprime meltdown was caused in large part by the dollar’s steady decline against the euro and gold from 2002-08, which drove capital into hard assets, particularly real estate. Mundell argues the crisis became a disaster when the weak dollar suddenly reversed, shooting up 30 percent against the euro and gold in summer 2008. The dollar’s sharp appreciation, he argues, broke the economy’s back, triggering the financial disaster and recession. The crisis abated when the dollar declined against the euro that fall.



As Mundell explained in a December 2010 Bloomberg interview, in the three years since the crisis first began the two currencies have traded places annually, with the dollar soaring versus the euro for months at a time, damaging U.S. trade and slowing recovery while Europe rallies, followed by a reversal where the euro spikes, plunging Europe back into recession and debt crisis while the U.S. expands. Stabilize the euro/dollar exchange rate at a healthy level, say $1.35, and the cycle will end and both economies will recover.

Mundell’s current view is the Fed’s lower dollar strategy – which he supports – will be undermined, leading to another dollar rise against the euro and another stalled recovery. He predicts a paltry 2011 growth rate of 2 percent, far below the level needed to generate new jobs.

Supply-siders who watch the dollar price of gold may be surprised to hear Mundell talk of a soaring dollar. Mundell’s argument seems to be that in terms of current recessionary pressures, the relative swings between the two mega-currencies has more immediate impact than the dollar’s absolute value against the stable barometer that is gold. Later this month, Mundell will clarify the issue in Hong Kong, with a speech entitled, “Is Gold the Answer to Currency Wars and Unstable Exchange Rates?”

Mundell’s perspective, unconventional but thought provoking as always, may be the key to global recovery. The man who in decades past reshaped the economies of the U.S., Europe and China strongly advocates an agreement to fix exchange rates between the euro and the dollar. With such an arrangement, complimented by a pro-growth cut to the U.S. corporate tax rate, he foresees a new era of jobs and prosperity.

Tuesday round up.

On Bloomberg, supply-side guru Robert Mundell suggests the dollar soaring against the euro in 2009 and 2010 is responsible for the weak US economy, and predicts 2011 growth at two percent. He recommends a euro floor of $1.30. He also explains China’s interest rate hikes attract increased hot money flows but does nothing to raise its exchange rate value versus the dollar.

At Gold Seek Radio, Chris Waltzek interviews Steve Forbes on gold (play button towards the bottom).

On The Kudlow Report, Kellyanne Conway debates the President’s change of economic direction:




Pro-growth advocate and former-Godfather Pizza CEO Herman Cain is considering a run for President.

Rebelyid recounts the Mundellian policy mix, and the recent deviations from it.

On The Weekly Standard, Irwin Stelzer notes the rise of interest in sound money (hat tip: Ralph Benko):

All of which explains two important developments—the rise in the price of gold, and the sweeping gains by Republicans in the congressional elections. Gold opened the year at under $1,100 per ounce and is closing it at close to $1,400 per ounce. Despite substantial slack in production capacity, inflation expectations rose, and investors became worried about the long-term value of the dollar. Indeed, some economists are talking about the end of the era of fiat money and a return to the gold standard. The Federal Reserve Board is again printing money, and promises to print more if needed. With unemployment high, and the printing presses running at a rate that just might result in inflation down the road, talk of a return to the bad old days of Jimmy Carter and stagflation, or of a double dip recession, was heard in some boardrooms.

In The WSJ, Pete DuPont proposes spending cuts, reduced regulation, and improving Obamacare as Republican priorities.

From earlier this month, Cato’s Alan Reynolds notes the US is the world’s largest manufacturer.

On NRO, Heritage’s Michael G. Franc sees a loss of faith by entrepreneurs in the federal government.

From the archive, Milton Friedman analyzes the rise of capitalism in Dickensian England on NRO.

On C-SPAN, U.S. Rep. Ron Paul (TX) discusses his agenda, including Federal Reserve oversight.

At Forbes, Dean Zarras anticipates Paul’s tenure.

Weekend round up.

At RCM, Larry Kudlow sees Reaganomics making a comeback.

On Supply-Side Economics Today, Brian Domitrovic responds to Scott Sumner’s criticism of John Tamny.

At CNBC, Don Luskin predicts investment will shift towards stocks away from gold and treasuries:




The WSJ editorial board is optimistic about Washington's policy direction.

At NRO, Amity Schlaes argues the tax deal doesn’t provide significant stimulus and weakens Social Security’s viability.

Also in The Journal, France’s Finance Minister outlines measures to defend the euro.

On Fox News, Charles Krauthammer offers a demand-side analysis of the tax deal by suggesting its $1 trillion deficit will create a “sugar high”:




A Heritage Foundation report suggests pro-growth tax code changes.

Jon Shure of the liberal Center on Budget and Policy Priorities disputes Art Laffer’s analysis of state tax rates.

A blog fact checks Media Matters for America's dismissal of supply-side economics.

Weekend round up.

On RCM, John Tamny argues lower housing prices are good for the economy.

Also on RCM, Larry Kudlow advocates pro-growth tactics to improve the employment picture.

From The Heritage Foundation, Steve Forbes makes the moral case for capitalism:





The NY Sun advocates an audit of Federal Reserve bail outs.

In The WSJ, John Fund reports the Americans prefer spending cuts to tax increases by 59% to 30%.

The Huffington Post reports just how grim the unemployment data really is:



At The San Francisco Chronicle, Lisa Smith summarizes the Laffer Curve.

From AEI’s The American, Donald Losman rejects deflation predictions, citing rising gold.

Also in The Journal, Holman Jenkins notes weakening support for the euro among former supporters.

Even faced with maximal turmoil, Europeans are still trying to have it both ways. The bailout to-ing and fro-ing by European authorities is conditioned largely on their unwillingness to choose between conflicting goals—on one hand, a continent of competitive and open economies; on the other hand, a "social model" that cushions established interest groups and voting blocs from the stress of competition.

A very different approach to managing the current crisis is imaginable. Put the European Central Bank in charge of printing liquidity to prop up the continent's banks. (Right now it's printing liquidity to prop up governments, which are propping up the banks.) Let badly indebted governments go into default and negotiate more manageable terms with their creditors (mostly banks). Let politicians in these countries invest their limited political capital in promoting growth rather than austerity. Let them cut taxes and deregulate their labor markets.

This would certainly sound preferable to voters than job-killing tax hikes and spending cuts to appease far-off German taxpayers who are being dragooned into refinancing their insupportable debts. The most encompassing description of Europe's problem, after all, is the one not mentioned enough: a shortage of growth.

Tuesday summary.

On NRO, Larry Kudlow explains that continued volatility between the dollar and euro is damaging the world economy.

At Forbes, Brian Domitrovic recounts how Sen. George Mitchell derailed George H.W. Bush’s drive for a capital gains tax cut in favor of higher taxes, dooming Bush’s presidency.

On The Kudlow Report, Heritage’s Curtis Dubay debates tax rates:




In The WSJ, Seth Lipsky reviews Nixon Fed chairman Arthur Burns’ diary.

At Alhambra Investments, Joseph Calhoun expresses cautious optimism on the economy.

Also on Kudlow, Brian Wesbury discusses the stock market’s weakness:




In Forbes, Wesbury and Robert Stein see the economy improving.

On NRO, Reihan Salam explains the negative budget impact of raising upper income tax rates.

NRO’s editors cite Art Laffer in opposing Sen. McCaskill’s (MO) millionaire tax rate increase.

The economic facts are a good deal more complicated. As the always-sensible Reihan Salam reports in the current edition of National Review, economists expect that raising taxes at the top end would reduce economic growth significantly. Democrats will call that a Republican talking point, but it is consistent with the findings of the nonpartisan Congressional Budget Office, currently under the management of Douglas Elmendorf, a Democratic appointee. The CBO numbers suggest that a partial preservation of the Bush tax rates — meaning a compromise that raises taxes on “the rich,” in this instance defined as those earning $250,000 or more — would reduce real GNP by 1.2 percent, as lower revenue necessitates more government borrowing, slowing down long-term economic growth. But an across-the-board extension would reduce real GNP by only 0.6 percent, cutting the economic losses in half. Another way of saying that is that the growth effects of extending the tax cuts at the affluent end of the scale would make up half of the forgone real GNP associated with the tax cuts. That isn’t Arthur Laffer’s analysis, it’s the Democratic-led CBO’s.

From the Mises Institute, Frank Shostak rebuts Nouriel Roubini on the gold standard. (Hat tip: Ralph Benko.)

At Capital Gains and Games, Bruce Bartlett continues to drift from classical economics by endorsing floating currencies.

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.

Weekend update.

At The Daily Reckoning, Nathan Lewis explains gold’s rise is due to the dollar’s collapse.

On NRO, Larry Kudlow predicts low growth and rising inflation will hurt Democrats on Election Day.

CNBC reports that the European Central Bank and the Federal Reserve are pursuing different strategies:




In Fortune, Nin-Hai Tseng chides China bashers for scapegoating an important trade partner.

At Super-Economy, Tino rebuts Paul Krugman’s claim that reduced revenue, not surging spending, accounts for the deficit:



At RCM, Harvard’s Jeffrey Miron explains why Keynesian stimulus is ineffective.

The WSJ editorial page analyzes the on-going malaise.

This [poor recovery] contrasts with all other recent recoveries, which climbed out of recession much faster to reach a new peak. Nearby we update our table contrasting the recovery of the early 1980s with the current one. We cite the 1980s because that contraction was comparably deep and the jobless rate reached an even higher peak of 10.8%. Yet after five quarters of recovery in the 1980s, the economy was roaring ahead at a greater than 8% annual pace. This time the rebound reached 5% for one quarter before decelerating to today's non-cruising speed.

The neo-Keynesians who designed the 2009 stimulus reject this comparison, saying that the recent recession was uniquely awful because it was rooted in financial distress. Whatever truth there is in this financial diagnosis, it also conveniently absolves Democrats from responsibility for the damage done by their policies. Never mind the uncertainty and costs imposed by ObamaCare, onerous new federal regulations on banks and other industries, record spending and deficits and the threat of cap and tax, union card check, and the huge tax increase looming on January 1. We are supposed to believe that none of this matters because a lousy recovery was foreordained by the financial crisis.

If the midterm election polls are right, the American public isn't buying this economic determinism. They don't like 2% growth and 9.6% unemployment, and on Tuesday they'll get a chance to declare what they really think about what we would call the new abnormal.

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.

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 items.

In The Weekly Standard, Jeffrey Bell and Sean Feiler argue the GOP doesn’t understand the monetary roots of the economic crisis.

At the moment, Republican leaders and policy elites are advancing exclusively fiscal solutions that address only the government response to the economic crisis and not the crisis itself. Fiscal deficits did not create the crisis, and reducing deficits won’t put our economy on a stable footing. From its inception in 2007 right up to the present, the crisis derived from the interaction between excessive investment leverage and dysfunctional interest-rate policy—in other words, a predominantly monetary phenomenon, albeit one that has had grave fiscal consequences.

As long as the GOP enjoys the luxury of being the only alternative to Barack Obama and the Democrats, the party is understandably reluctant to delve into the murky depths of monetary policy. But after November 2, the Republicans’ role will change. They could do worse than pay attention to the only public official, elected or unelected, who is speaking out against current monetary policy, telling anyone who will listen—including an increasingly impatient Tea Party movement—that the root of the crisis is monetary.

On Forbes, John Tamny suggests the President’s best chance for a comeback requires rejecting devaluationist ideas.

At CNBC, Peter Morici and former GW Bush official Tony Fratto discuss China’s currency:



At Classic Capital, Wayne Jett explains the role U.S. monetary authorities have played in destabilizing the world financial system.

Monetary inflation is an accomplished fact, and product prices will adjust accordingly as an added variant of supply-demand signals. So far, the CPI has adjusted only 16.6% since 2003, leaving nearly 60% in price rises still to be realized. This means price inflation of 6-12% annually over the next five to ten years is already built into the dollar. Talk of “deflation” is either ignorant or deceptive, because any downward pressure on prices comes not from monetary policy but from falling demand in relation to supplies of goods and services.

China pegs its currency to the dollar to avoid loss of U. S. markets. Duplicating the Fed’s money creation causes worse inflation in China than the Fed creates in the U. S. Congress was set to make matters worse in September by voting on a bill to allow penalties to be imposed on Chinese producers to compensate U. S. producers for China’s “weak” currency, but adjourned to avoid voting on extension of the Bush tax cuts.

The world’s best monetary theorist, Robert A. Mundell, declared such U. S. penalties would create a “disaster” which would create even greater instability in international relations. He further warned that the China penalty bill distracts from attention to the primary source of monetary instability, which is devaluation of the dollar relative to the euro. The recent dollar/euro ratio, Mundell declared, “is a terrible thing for the world economy. We’ve never been in this unstable position in the entire currency history of 3,000 years.” Since Mundell spoke in September, the dollar/euro ratio has worsened to $1.40, provoking European retaliation. Japan, too, is being priced out of the U. S. market, with the dollar now worth only 82 yen.

From last month, The NY Sun recounts a prominent investor’s warning on the dollar and gold.

On Forbes, Steve Forbes interviews Albania’s prime minister about the flat tax.

At The Money Illusion, Scott Sumner discusses tax rates and incentives.

Also on The Weekly Standard, Matthew Continetti warns Republicans not to emphasize austerity over growth.

In The American Spectator, Stephen Moore debunks Green Jobs.

World Net Daily reports on financial industry calls for a single world currency.

On The NY Times, the Heritage Foundation’s Derek Scissors opposes Chinese devaluation.