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Kudlow’s Money Politics

Larry Kudlow’s daily web log of matters political and financial.

Yellen’s Low-flation Nonsense



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Will somebody please explain to me how rising inflation is somehow going to extricate us from the tepid economic recovery? I don’t get it.

It used to be hypothesized that low inflation was the key to high economic growth. For everybody in the economy, low inflation was a tax cut. Conversely, rapidly rising prices were thought to penalize the economy by placing a tax-hike effect on investors, businesses, and families. It was this logic that spurred Paul Volcker (especially) and then Alan Greenspan to labor mightily in the 1980s and 1990s to bring inflation down.

The Fed’s favorite inflation measure — the personal consumption deflator — has risen about 1 percent over the past year, as has the consumer price index. When I grew up professionally in the 1970s, first as a New York Fed staffer and then as a Wall Street economist, no one — and I mean no one in their right mind — would ever have dreamed that double-digit inflation could be brought down to 1 percent. But Janet Yellen is now telling us that low inflation is a sign, and perhaps even a cause, of the weak economy.

Read my full column here

Tags: Monetary Policy

Charles Koch Fights Back



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Is it too farfetched to connect the dots between a brilliant Wall Street Journal op-ed by Charles Koch, the chairman and CEO of Koch Industries, and the continued sluggish recovery in jobs, business investment, and the overall economy? I don’t think so.

In his piece, Mr. Koch seems to make a plea for a big dose of free-market capitalism. He argues, “The central belief and fatal conceit of the current administration is that you are incapable of running your own life, but those in power are capable of running it for you. This is the essence of big government and collectivism.”

Charles Koch and his brother David have been vilified by the left for fighting hard to get political candidates with free-market points of view elected. Protected by U.S. Senate rules against libel, Democratic Majority Leader Harry Reid has called the Kochs virtually every name in the book — including “un-American.” But now the Kochs are fighting back. And I hope they do more of it. 

Read my full column here

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Thanks and Gratitude



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The following is an excerpt from the final episode of The Kudlow Report, which aired last Friday. It’s a thank-you note to a great network, wonderful colleagues, and the best audience a person could ask for. I truly am blessed:

Let me just take a moment and say a few words of thanks and gratitude and humility. To all the viewers and well wishers who have e-mailed and tweeted so beautifully and wonderfully, I am humbled . . .

It’s been my honor to host this show for the past nine years; before that with my great pal Jim Cramer for three years. And let me say how wonderful Jimmy was when he came on last night.

Now you know my credo: Free-market capitalism is the best path to prosperity. And let me add to that from our Founding Fathers: Our Creator endowed us with the inalienable rights to life, liberty, and the pursuit of happiness. In other words, freedom. Freedom to work, invest, and take risks, and the freedom to get rewards and incentives that motivate us all. It is freedom that makes this the greatest country in the world. And it is freedom that so frequently keeps me on the optimistic side of life.

Down through the years we’ve always tried to represent all points of view on this show. Left, right, and center. And in what I hope was a civil and respectful way, I have tried to listen and learn and debate both my liberal and my conservative friends. Civil discourse on the issues of the day is what we always tried to do — and salted with some financial-market advice, which I sometimes got right and sometimes got wrong.

I’m also proud to have recruited some of the best minds to be our expert guests. Many of them had never been seen on television before. Now they are going on to their own bright careers, and it makes me proud.

And finally, I want to thank this network — not only for the privilege of hosting this show, but for giving me a second chance in life that resulted in a new career. This from a guy who nearly 20 years ago was completely shipwrecked on a sea of hopeless alcohol and drug abuse. I went away for a long time. And with the help of many people I learned to replace addiction with faith. And it is that faith that guides me every day.

Again, let me thank all the viewers who have stayed with me down through the years, and all who have wished me well. I am truly grateful. And I will be beginning a new chapter as a senior contributor here at CNBC. It is the place where I call home.

And to all of you out there, as always, thank you, and God bless you. . . . I am a blessed person.

Deflating Russia Can Be Done



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President Obama has ramped up his second round of economic and financial sanctions on Russia, and on Vladimir Putin in particular. Some of this is already working. But if anybody believes it will be easy to financially deflate Russia, they better think again. 

Read my full column here

Republicans Hammer Away on the Growth Theme



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Sizing up last week’s unexpected congressional win by Florida Republican David Jolly, Kim Strassel of the Wall Street Journal wrote, “The Republicans who win this fall will be those who have serious answers to the attacks leveled on them — about Obamacare, the economy, women’s and seniors’ issues.” Sound advice.

A few weeks earlier, pollsters John and Jim McLaughlin argued that to win big in November, the GOP cannot rely on Obamacare alone, unpopular as it is. More sound advice.

In particular, there must be a growth platform, aimed especially at the middle class, which continues to suffer in the fifth year of the so-called recovery with real median income dropping by 4 percent and broad-based unemployment measured at roughly 12.5 percent. Believe it or not, a new Wall Street Journal poll shows that a large majority of Americans still think we’re in a recession.

So the challenge for the GOP is to drill home the old Ronald Reagan point that Republicans can increase take-home pay, or after-tax income. 

Read my full column here.

Tags: The Economy , 2014 Midterms

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Bitcoin Is Not Real Money



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Just before the bankruptcy of the Mt. Gox bitcoin digital-money (or virtual-currency) exchange, Japanese finance minister Taro Aso predicted the inevitable failure. “No one recognizes them as a real currency,” he told reporters. “I expected such a thing to collapse.”

I totally agree with Mr. Aso. For weeks and weeks I have been tweeting and broadcasting that bitcoin is not real money. It is not a reliable medium of exchange, nor is it a reliable store of value. It has no central-bank regulation, network operations, or even centralized issuance. And because of its wild price fluctuations, bitcoin can never be a reliable payment system. 

Read my full column here

Tags: Economics

A Three-Year Obamacare Moratorium



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Slowly but surely President Obama is unwinding, rolling back, and even cancelling his very own Obamacare. A couple of years ago he told Republicans not to mess with his plan. He said he’d veto any changes. But now, in substantial ways, he’s messing with his own plan.

By various counts, the president has made 25 to 30 key changes to the Affordable Care Act. They all violate the legislation passed in 2010. Many believe Obama’s executive actions are unlawful or unconstitutional. Whatever the case, at this rate, there may not be much if any Obamacare in the next couple of years.

So why don’t the Republicans make this official?

Read my full column here

Janet Yellen’s Problem



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Stock markets cheered Janet Yellen’s maiden congressional testimony this past week, as the new Fed chair emphasized the word “continuity” and offered no boat-rocking surprises. Continuity? I assume she means a steady diet of tapered bond purchases that will lead to the end of QE3 this autumn. In other words, investors seemed to think QE has run its course, probably overstayed its welcome, and that it’s time the Fed got out of the bond-buying business, since that policy isn’t doing much good and may be doing harm.

Ever the Keynesian who subscribes to the non-existent, long-term trade-off between employment and inflation, Ms. Yellen did express worries about long-term layoffs and the shrinking size of the labor-participation rate. She’s right about that. The labor situation is subpar.

The employment-to-population ratio is only 58.5 percent, way below its year-2000 peak of 65 percent. The participation rate is a low 62.8 percent, way below its modern average. The Joint Economic Committee estimates that jobs are 4.5 million below the employment trend line since 1960, and 7 million below Ronald Reagan’s recovery rate. And average monthly private-payroll increases are only 178,000 in Obama’s recovery. Compare that with the Reagan monthly rate of 330,000.

So Yellen is right to be worried about jobs. But she’s wrong to think the Fed can do much about this. 

Read my full column here

Obama’s Work Trap



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So let me get this right. Team Obama taxes millionaires who create jobs, while Obamacare creates incentives not to work at those jobs. No wonder recovery is so anemic. The policy here is to create fewer jobs and induce people to work less at those jobs. If my logic is correct, this runs counter to the most basic principles of our economy and our country.   

I thought the American Idea (see Jack Kemp and Paul Ryan) had at least something to do with the virtues of work, family, and opportunity. But what I see from the Obama administration is policies that undermine these ideals.

Here’s a contrasting vision . . .

Read my full column here.

Tags: The Economy

Left Turn in the Emerging Markets



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There’s a new cynical perception among international investors that Brazil is becoming Argentina and Argentina is becoming Venezuela. But these investors are starting to boycott all the so-called emerging markets, since nearly all them are moving to the left, abandoning free-market principles, reverting to the bad old days of higher spending and taxing, inflating the money supply, accumulating large trade deficits, and letting their currencies go to hell in a hand basket.  

In other words, the emerging-market investment paradigm, or the BRIC model, may be over.

Toward the end of last week, the U.S. stock market sold off nearly 500 points. Much of the blame has been placed on the collapse of the emerging-market currencies. Correct. The emerging-market tail was wagging the U.S. stock market dog. 

Read my full column here

Business Wants Growth, Growth, Growth



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Growth, growth, growth is the new mantra of the venerable Business Roundtable, whose member companies generate annual revenues of more than $7 trillion while employing 16 million workers. In past years, the BRT has put out lengthy pamphlets proposing intricate solutions for budgets, entitlements, the environment, regulations, health care, and more. But this year, the BRT has gone back to basic economic blocking and tackling by bluntly saying, “If we want to control the deficit, preserve key entitlement programs, educate our children, and offer upward economic mobility for everyone, we have to get our economy growing faster.”

Sounds like JFK. Or Ronald Reagan. Or Jack Kemp. A rising tide lifts all boats.

Read my full column here.

Tags: The Economy

Fort Lee Mayor Says Christie’s Story Lacks Credibility



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Fort Lee, N.J., mayor Mark Sokolich told me on last night’s Kudlow Report that New Jersey governor Chris Christie’s statement regarding the politically motivated closure incident at the George Washington Bridge lacks credibility. Here’s the video of my conversation with Sokolich, as well as a report on the interview by CNBC’s Ross LeClair.

Fort Lee Mayor: Holes in Christie’s Story

New Jersey Gov. Chris Christie says he was unaware of the decision to close lanes on the George Washington Bridge in September that gridlocked traffic in a town run by a Democratic mayor.

The governor, who is contemplating a run for the Republican presidential nomination, made the statement after the release Wednesday of communications that provide more evidence that his office planned the closures, apparently because Fort Lee’s mayor did not endorse Christie’s re-election bid.

Fort Lee Mayor Mark Sokolich told CNBC’s Larry Kudlow that Christie’s statement issued after the release of the emails lacks credibility.

“There’s definitely, I think, some holes in that statement,” Sokolich said. “The governor had convened a meeting with his top staff not too long ago, and promptly after the meeting proclaimed that no one on his staff knew about it.”

Sokolich added that he was personally making phone calls after the traffic jam in an attempt to get answers from the Port Authority as to when and why the closures were planned.

“I think we’re documented 20 calls during that four-day period, I can assure you it was a lot more than that,” Sokolich said. “You may rest assured that the excuse that ‘Yeah I missed your call, sorry about that’ isn’t plausible.”

Despite his anger, Sokolich does not want the governor to apologize to him. He says the apology is better directed at the people who were impacted by the traffic jam.

“If calls are going to be made, call the families that waited two to three times longer for an ambulance to arrive while their loved one was clutching their chest because of chest pains,” Sokolich said. “Call the thousands of parents that couldn’t get their kids to school on time on the first day of school and the three or four days thereafter.”

In his statement Wednesday, Christie said: “What I’ve seen today for the first time is unacceptable. I am outraged and deeply saddened to learn that not only was I misled by a member of my staff, but this completely inappropriate and unsanctioned conduct was made without my knowledge.”

Ultimately, Sokolich says his job is to protect the people of Fort Lee, not to speculate about Christie.

“I’m not rooting for him to have known about it,” he said. “My job is to worry about Fort Lee.”

Tags: Chris Christie

Enough Pot Happy Talk



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There was way too much giddiness in the media about the first day of legal pot selling in Colorado. Instead of all the happy talk, I think it’s time for some sober discussion and a strong dose of education about the addiction risks of smoking marijuana — particularly among young people. It may start out as a party, but it often ends up as something much, much worse.

With the grace of God, I’ve been clean and sober for over 18 years — a recovery experience that still has me going to a lot of 12-step meetings. And I hear time and again from young people coming into the rooms to get sober how pot smoking led to harder drugs such as cocaine and heroin. Now, this is anecdotal, and I am not an expert. And I will say that many people can control alcohol or pot or other drugs. But I am not one of them. And I am not alone.

Read my full column here

Tags: marijuana

Bernanke Gets Taper Call Right



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So Fed chairman Ben Bernanke finally pulled the taper trigger this week. And it was the right thing to do.

Stocks soared. And even with some backing-and-forthing, gold, commodity indexes, and the dollar were basically stable. In other words, financial markets approved — especially stocks, where investors believe Bernanke is telling them the economy is strong enough to weather a pullback in Fed bond buying. Actually, if the Fed shaves $10 billion in bond purchases at each of its next seven meetings, QE3 will end in October 2014 — or perhaps sooner if the economy holds up.

In truth, this bond-buying business has outlived its usefulness. The Fed’s balance sheet under QE3 (and earlier QEs) ballooned to $4 trillion, with about $2.3 trillion in excess reserves. The best that can be said of all this Fed activism is that the central bank supplied — even over-supplied — enough liquidity to meet the voracious demand for money by banks, consumer households, and others who are still deleveraging and remembering the financial crash in 2008. The worst that can be said is that the Fed dug itself into a hole that will be hard to exit in the years ahead. 

Read my full column here

Ryan Saves GOP from Itself



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Did Paul Ryan’s budget deal save the Republican party from itself? I think it did.

Everyone acknowledges that Ryan-Murray is not a great deal. But the fact is, its passage will avoid a government shutdown. That’s crucial.

If the GOP wants to retake the Senate and hold the House in 2014, the key issues must be the catastrophic pitfalls of Obamacare and better economic growth. A shutdown would be a distraction. It would take the heat off Obama and Obamacare, and all the Democrats who falsely promised that if you like your insurance and doctor, you can keep them.

Read my full column here

Tags: Budget

The Challenge is Growth, Not Inequality



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Either President Obama needs a new speech writer, or he needs a new set of economic policies. Actually, he needs both.

Can anyone think of a more boring, banal, irrelevant, or stale speech than the one he gave this Thursday in Washington D.C.? The speech was allegedly on the economy, but more likely it was to divert attention from the Obamacare catastrophe. Whatever the motive, his idea that the defining challenge of our time is to reduce income inequality is completely wrong. In truth, the defining challenge is to restore more rapid economic growth, create substantially more jobs, and significantly reduce unemployment. 

Read my full column here

Tags: The Economy

Yellen Needs Rules



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The greatest central banker in my professional lifetime was Paul Volcker. His signal achievement was bringing down the inflation rate from roughly 15 percent to about 3 percent more than three decades ago. The simplest way to look at the economic evils of runaway prices is to think of inflation as a tax hike — on consumers, savers, investors, corporate profits, capital gains, and so on. One humongous tax hike. And it was the myriad tax-hike effects of high inflation that wrecked the American economy in the 1970s.

But Volcker turned that around, and he did so using a rules-based approach to slaying price hikes. He was an old fashioned central banker who still believed the dollar should be as good as gold. And he carefully watched market-based signals like gold, commodities, and the exchange value of the dollar to let him know if he was going down the right road. 

I reflect on this as Janet Yellen gets ready to take over at the Federal Reserve.

Read my full column here.

An Interview with Scott Walker



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Following is the video and transcript of my Tuesday night interview with Wisconsin governor Scott Walker. In addition to discussing Walker’s new book, Unintimidated, and his heroic stand against the unions in Wisconsin, we talk Obamacare, Obama’s polls, and prospects for the 2016 presidential race:

LARRY KUDLOW: We’re honored to be joined now by Wisconsin governor Scott Walker. He’s out with a new book, Unintimidated: A Governor’s Story and a Nation’s Challenge. I wanna talk about everything and– and including your heroic stand against the unions in Wisconsin. But let me just start. The polls are crashing and Obama is caught in essentially his third falsehood on this subject. What’s your take on this?

GOV. SCOTT WALKER: Well, I think that’s part of the problem of you have someone who didn’t have executive experience and they let p– the political shop in the White House run everything. Political shops, as you know– you and I know in White House, is Republican/Democrat alike have major impact on policy but they’re not the sole force of policy here.

And I think that’s part of the problem is, they made a promise that nobody could actually deliver on– not just in terms of a website but on the overall policy of ObamaCare, which is an abysmal failure. And you and I’ve talked about it on this show. It’s not only a fail for ObamaCare, it is continuing to be– a wet blanket on the recovery and the nation’s economy.

LARRY KUDLOW: Right. It’s anti-growth. But it just– it just– it sort of blows my mind, okay? This guy’s a lawyer. I– I’ve never had any personal criticism to him. I don’t deal in that currency. But my point is, he’s a well-trained lawyer who taught law. He’s making these assertions which are blatantly false, we fi– does he not think in the age of information and– and Facebook and tweeters and electronic– this is gonna come out?

GOV. SCOTT WALKER: Oh, it’s shocking. I mean, to me, the fact–

LARRY KUDLOW: And I think people– and — I think people are just as angry at his falsehoods–

GOV. SCOTT WALKER: Uh-huh.

LARRY KUDLOW: –as they are at the breakdown of ObamaCare. I really do.

GOV. SCOTT WALKER: Oh, and I think it– it only gets worse as day b– by day goes by and more and more of these promises, we find out, you know, were not only not right– it’d be one thing if they were wrong and you were told they’re wrong– and you actually believe that people believed that. But the more we find out that– that that were– business– or as you said, firm after firm actually telling the White House and the Administration this wasn’t gonna work, it– it’s either one of those things where they’re not listening to the facts or they’re not being informed. In either case, it’s rather troubling.

Keep reading this post . . .

Attack Obamacare, but Talk Growth Too



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There’s no question that the catastrophic debut of Obamacare — including the website breakdown and the millions of pink-slip cancellations — will be a great card for Republicans to play on the way to the 2014 midterm elections. No question.

The president lied about his lies about keeping your health plans and doctors. And when he did finally apologize, he didn’t really say he was sorry. It’s also possible that we’ll see 10 million more insurance cancellations, leading to much higher premiums, bigger deductibilities, and more cutoffs between patients and their doctors. And employer-based cancellations will compound this disaster, with the whole process stretching across most of next year. It will be a killer for the Obama Democrats.

But while my conservative-pundit colleagues are out thrashing Obamacare, I want to raise a critical point: Don’t forget economic growth.

Read my full column here

Tags: Health Care , The Economy

The Liberal Entitlement-State Dream Is Crumbling



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May I ask this question? Why is it that Americans don’t have the freedom to choose their own health insurance? I just don’t get it. Why must the liberal nanny state make decisions for us? We can make them ourselves, thank you very much. It’s like choosing a car, buying a home, or investing in a stock. We can handle it.

So why must the government tell me and everyone else what we can and cannot buy?

Charles Krauthammer and the Wall Street Journal’s Dan Henninger noted in excellent recent columns that this whole Obamacare business represents the greatest-ever expansion of the liberal entitlement-state dream. But I don’t want that dream. And you shouldn’t either.

Here’s what else I don’t want: As a 60-something, relatively healthy person, I don’t want lactation and maternity services, abortion services, speech therapy, mammograms, fertility treatments, or Viagra. I don’t want it. So why should I have to tear up my existing health-care plan, and then buy a plan with far more expensive premiums and deductibilities and with services I don’t need or want?

Why? Because Team Obama says I have to. And that’s not much of a reason. It’s not freedom.

Read my full column here.

Tags: Health Care

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