James Pethokoukis

Politics and policy from inside Washington

Kudlow: Enjoy the recovery while it lasts

October 15, 2009

The Great One opines thusly:

But storm clouds are gathering. And a big one is the sinking dollar. No one in the Obama administration or at the Fed seems to care about it. In fact, they are probably applauding the lower dollar as a sort of 1970s way of boosting exports and the manufacturing heartland in the Midwest. But the falling dollar is bad for consumers. And it ultimately will cause higher inflation, as signaled by the rising gold price. There also are future tax hikes and the explosion of spending and debt. All of this is why it’s hard for me to be a long-term bull.

The great market boom of 1982 to 2000 was basically characterized by low marginal tax rates and King Dollar. Unfortunately, the 21st century has seen a weak dollar and more recently rising tax rates that are coming due in 2011 (if not sooner). In other words, the prosperity-inducing Mundell-Laffer supply-side model is being reversed.

As Art Laffer put it to me, we are stealing demand and production from the future. So even as we get a V-shaped recovery now and into next year, 2011 may pay the piper for both low growth and higher inflation.

Me:  That is the whole plan here, steal growth from the future. It is the ultimate in wealth redistribution.

Comments

Interesting; thanks! Sounds as though our leaders are well in tune with the public. The public sold their own futures, taking on stupid debts, so why not sell out anything they can lay their hands on? In fairness, nobody can get consistent answers to any macroeconomic question, nor to some other important questions, leaving the pigs to care only for their daily slops, and hope that sufficiently piggish behavior will carry them through the future.

Posted by Pete Cann | Report as abusive
 

Jimmy keep harping on the fact that the govt and FED caused the crisis so how can they possibly be expected to solve anything…it all comes down to TOO BIG TO FAIL really, we need to break up the banks into smaller entities like the 1990s which both DEMs and REPUBs do not want because it it more work fundraising and less easy money for both party campaigns…K street and DC are sick and caused this together with the banks…

Posted by paul | Report as abusive
 

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