TCS Daily


Save the Greenback, Mr. President

By Larry Kudlow - October 9, 2009 12:00 AM

We know that gold is soaring. And we know the dollar is slumping. But, did you know that year-to-date, while the S&P 500 is up 18 percent—a great showing no doubt—gold is up even more. The precious metal is up 21 percent. In other words, measured in true, gold-backed purchasing power, stocks have really done nothing this year. Zip. It is most disappointing.

I try to be optimistic about better earnings, a stock market rally and economic recovery. And I'm sticking to my guns. But what we're seeing right now is pretty darn close to what we witnessed in the 1970s—the rise in gold and inflation really cuts into the stock market.

So what's the way out?

Well for starters, we need a stable dollar to stop inflationary pressures. And we also need lower tax rates to spur the economy, help it grow, and reduce unemployment. I've been calling this the Mundell-Laffer supply-side solution, after Nobel Prize winning economist Robert Mundell and my mentor, former Reagan advisor Arthur Laffer. It was put to work with great success nearly thirty years ago to stop stagflation. It also launched a twenty year bull market recovery.

Put simply, the Mundell-Laffer model exercises monetary restraint to save the dollar—and low marginal tax rates for economic growth incentives that benefit investors, risk takers, small businesses and workers. Right now, for therapy, the Fed should begin moving excess cash from the economy and they should raise their target rate. Take a page from the Reserve Bank of Australia's playbook and move rates higher.

In addition, the Treasury ought to get out there and buy these unwanted dollars in the marketplace. Just go out there and bid for them. And they need to stop printing so much debt from Congress. All this massive spending and borrowing is killing us. We need to be slashing tax rates on large and small businesses. There's just no better place to begin job creation. And leave the Bush tax cuts in place for heaven's sake.

This supply-side shock therapy would save the dollar. And it would put real long-term torque into the recovery.

We're supposed to be in an era of post-partisanship. So in this spirit, I'd like to respectfully ask President Obama and his economic team to give this plan a try. It worked for JFK. It also worked for Bill Clinton and Ronald Reagan. It can work for you as well.

The time has come to save the greenback and grow the economy sir.


This article first appeared on Kudlow's Money Politic$.
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32 Comments

Get with reality, Mr Kudlow
This 'president' is just a commie 'community organizer' barely able to get his own Democrats in line.

He can care less about the dollar or incentives for people to produce more. Why should he? He gets all the votes he needs from buying them with 'ObamaMoney'.

Mr. Kudlow, you and I are nothing but sheep covered in wool made of said ObamaMoney. We are supposed to just sit there and let ourselves get fleeced. And if we make noise like the occasional sheep do, we are likewise ignored.

Get a grip, Mr. Kudlow. A grip with the true reality of this situation we find ourselves in. You're wasting everyone's time and TCP/IP packets on the internet, quite frankly.

You've been listening to Glenn Beck too much
When the president abandons free market principals and declares war on the bourgeoisie, then we can talk about communism.

Mr. Kudlow is right though about the need for fiscal discipline. However the notion of "supply side shock therapy" being a way to stimulate the economy strikes me as an utter mis-assessment. Our tax rates are astoundingly low. Rather than generally lowering tax rates for the high income bracket, we should simplify it and reduce the number of exemptions.

The US's best hope for a strong dollar, however, lies in integrating itself economically with other western nations, not isolating itself.

What free market principals (sic)? please cite one
..

I mean, cite ONE free market principle that the current POTUS upholds
..

Let's start talking communism.
He has taken over two companies and is trying to take over the medical industry.

The USA has been integrating itself with other economies.
How has the USA economically isolated itself?

No, I just watch the news...like in Detroit
Ken Rogulski reporting on WJR in Michigan, two people here in line for Obama cash:

ROGULSKI: Why are you here?

WOMAN #1: To get some money.

ROGULSKI: What kind of money?

WOMAN #1: Obama money.

ROGULSKI: Where's it coming from?

WOMAN #1: Obama.

ROGULSKI: And where did Obama get it?

WOMAN #1: I don't know, his stash. I don't know. (laughter) I don't know where he got it from, but he givin' it to us, to help us.

WOMAN #2: And we love him.

WOMAN #1: We love him. That's why we voted for him!

WOMEN: (chanting) Obama! Obama! Obama! (laughing)

ROGULSKI: Did you get an application to fill out yet?

WOMAN: I sure did. And I filled it out, and I am waiting to see what the results are going to be.

ROGULSKI: Will you know today how much money you're getting?

WOMAN: No, I won't, but I'm waiting for a phone call.

ROGULSKI: Where's the money coming from?

WOMAN: I believe it's coming from the City of Detroit or the state.

ROGULSKI: Where did they get it from?

WOMAN: Some funds that was forgiven (sic) by Obama.

ROGULSKI: And where did Obama get the funds?

WOMAN: Obama getting the funds from... Ummm, I have no idea, to tell you the truth. He's the president.

ROGULSKI: In downtown Detroit, Ken Rogulski, WJR News.

As for the Dollar, I'm not so worried now that Nobel Peace Prizes are devaluing faster than dollars.

Is gold really that high?
In '79 gold was over $800/oz.

What is that price in '09 dollars?

What is the current price of gold in '79 dollars?
I suspect it is much less than its peak in '79.

"$1.00 in 1979 had about the same buying power as $3.11 in 2009."
http://www.dollartimes.com/calculators/inflation.htm

So if gold was $800 in '79, that price today is 3.11 x 800 = ~$2400.

Gold is still much lower than in '79.

And what is really sad, my salary has grown only slightly above the rate of inflation in spite of experience and increased productivity.
That's government for you, stealing from the people.

BHO supports socialist tyrants:
"America's Founding Fathers—like the framers of Honduras's own constitution—believed strong institutions were necessary to defend freedom and democracy from the ambitions of would-be tyrants and dictators. Faced by Mr. Zelaya's attempted usurpations, the institutions of Honduran democracy performed as designed, and as our own Founding Fathers would have hoped.

Hondurans are therefore left scratching their heads. They know why Hugo Chávez, Daniel Ortega and the Castro brothers oppose free elections and the removal of would-be dictators, but they can't understand why the Obama administration does."

http://online.wsj.com/article/SB10001424052748703298004574459762462353766.html

And you would be right in thinking so, Joanie
Obama HAS to destroy the middle class, in order to push his Commie agenda along:

"The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation."

-Vladimir Lenin

Lenin on taxes and inflation
"“The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.”"
http://thinkexist.com/quotation/the-way-to-crush-the-bourgeoisie-is-to-grind-them/350096.html

Thanks to Z for the reference.

BHO wants to raise taxes and doesn't care about inflation. He also lectured we all must lower our expectations and learn to accept less. Sounds like BHO is trying to destroy the middle class just as the communist Lenin described.

And here I thought it was because of...
...that report that shows -- with hard data -- that the stimulus doesn't work (again). A Keynesian dud.

Which he vociferously supported.

Again.

Or, he could just be embarrassed about the Olympics business. Or the Peace Prize business.

But he checked out of here long before either of those two 'accomplishments' of the Glorious Obama Regime.

So, I dunno.

WGR
If its good enough for NAZI sympathizer Father Coughlin, I guess its good enough for you.

Wow, I'd hate to live in NY then
I can't claim to be an expert, but I only pay a little over 30%. But the middle class should not be expected to pay more. I'm talking about the upper class.

nice red herring
...but it doesn't change the fact that those Obama Money grubbers said what they said -- and exposed the real agenda behind ObamaSocialism.

BTW, Joe Kennedy was a Nazi sympathizer too. When he heard of the Holocaust he said, "Too bad we stopped him [Hitler], then."

I guess the father of the famous Kennedy bros is good enough for you, too.

Save your crying to Pelosi, then...
...because she's jumping on the VAT bandwagon. So much for not increasing taxes on the little guy.

You obviously do not know what VAT means
Things will not be more expensive for consumers. VAT merely means the tax is pre-paid by the seller, hence it is already "added" to the product. The only person who will pay more in taxes is the seller who is unable to sell all products.

Clearly not
Is not the presidency an "Instution of Honduran democracy. According to your argument it must not be, because you say that the president was trying to usurp power, which is clearly not "performing as designed"

Argument by analogy
Textbook example. Total BS.

You and I both know that Obama is not Leninist and is not trying to destroy the middle class. If you are right, Obama is the worst Leninist ever, however.

What a moron. Consumers pay ALL taxes.
VAT is just another way of hiding taxes.

What?
The Honduran president was violating the law. BHO supports the president who violated the law.

If the US president violates the Constitution, he deserves to be removed according to the Constitution.

I know no such thing.
He is doing his best to destroy the middle class by raising taxes and trying to take over much of the economy.

Taxes force businesses to close
States like MA add a sales tax on top of a federal excise tax on alcohol sending people to NH to buy liquor. Cigarette taxes are high in MA as well so they stock up on cigs, too.
Stores on the MA side of the border can't compete and close.

Fight organized crime, the government hates the competition.
My dad used to have that saying as bumper sticker.

That has been the war since the the Constitution was written, federalism or nationalism.

"tyranny exercised for the good of its victims may be the most oppressive"
" If we are to be mothered, mother must know best. . . . In every age the men who want us under their thumb, if they have any sense, will put forward the particular pretension which the hopes and fears of that age render most potent. They ‘cash in.’ It has been magic, it has been Christianity. Now it will certainly be science. . . . Let us not be deceived by phrases about ‘Man taking charge of his own destiny.’ All that can really happen is that some men will take charge of the destiny of others. . . . The more completely we are planned the more powerful they will be.
. . . .

Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience. They may be more likely to go to Heaven yet at the same time likelier to make a Hell of earth. Their very kindness stings with intolerable insult. To be ‘cured’ against one’s will and cured of states which we may not regard as disease is to be put on a level of those who have not yet reached the age of reason or those who never will; to be classed with infants, imbeciles, and domestic animals.
—C. S. Lewis, God in the Dock'

http://www.independent.org/blog/?p=1089

I heard this quote from Mark Levin.

What those who love liberty need to keep in mind is that the war against those who would oppress us is never over.

And for those who condemn God for such oppression, recall His warning about what a king will do in 1 Samuel 8:10-21. God has never forced anyone to follow Him. Men have.

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