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Trickle Down Monetary Policy

From John Mauldin in his blog, Mauldin EconomicsWhere is the Growth?

Government is necessary to the extent that we need to maintain a level playing field and proper conduct, but with the recognition that wherever government is involved there are costs for that service that must be paid by the private market and producers. For example, almost everyone thinks that the government’s being involved in student loans is a public good. We should help young people with education, right? Except that John Burns released a report this week that shows that student loans will cost the real estate industry 414,000 home sales. Young people are so indebted they can’t afford to buy new homes. Collateral damage?

The unintended consequences of government policies and manipulation of the markets are legendary. But often unseen.

Monetary policy as it is currently constructed is only marginally helping private markets and producers. Monetary policy as it is currently practiced is an outright war on savers, which sees them as collateral damage in the Keynesian pursuit of increased consumer demand.

It is trickle-down monetary policy. It has inflated the prices of stocks and other income-producing securities and assets, enriching those who already have assets, but it has done practically nothing for Main Street. It has enabled politicians to avoid making the correct decisions to create sustainable growth and a prosperous future for our children, let alone an environment in which the Boomer generation can retire comfortably.

It is a pernicious doctrine that refuses to recognize its own multiple failures because it starts with the presupposition that its theory cannot fail. It starts with the presuppositions that final consumer demand is the end-all and be-all, that increased indebtedness and leverage enabled by lower rates are good things, and that a small room full of wise individuals can successfully direct the movement of an entire economy of 300 million-plus people.

The current economic thought leaders are not unlike the bishops of the Catholic Church of 16th-century Europe. Their world was constructed according to a theory that they held to be patently true. You did not rise to a position of authority unless you accepted the truth of that theory. Therefore Galileo was wrong. They refused to look at the clear evidence that contradicted their theory, because to do so would have undermined their power.

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In Spite of the Government

From John Mauldin in his blog, Mauldin EconomicsWhere is the Growth?

There are many economists, with Paul Krugman at their fore, who believe that Keynesian monetary policy is responsible for the United States doing better than Europe. I beg to differ. The United States is outshining Europe due to the combined fortuitous circumstances of massive new discoveries of unconventional oil and gas, new technologies, and an abundance of risk-taking entrepreneurs. Indeed, take away the oil boom and the technology boom centered in Silicon Valley, and the US would be as sclerotic as Europe is.

None of the above has anything to do with monetary policy. In fact, I would argue that current monetary, fiscal, and regulatory policy is getting in the way of that growth.

There is a divide in the United States, and indeed in the world, between those who believe (and the emphasis is on believe) that government in all its various shapes and sizes is the font of all growth and progress and those who believe that it is individual effort and free markets that “move the ball down the field” of human progress. Count me in the latter group.

 

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Economic Presuppositions

From John Mauldin in his blog, Mauldin Economics, Where is the Growth?

Our lives and our conversations are full of presuppositions. Our daily lives are based upon quite fixed views of how the world really works. Often, the answers we come to are logically predictable because of the assumptions we make prior to asking the questions. If you allow me to dictate the presuppositions for a debate, then there is a good chance I will win the debate.

The presupposition in much of academic economics is that the Keynesian, and in particular the neo-Keynesian, view of economics is how the world actually works. There has been an almost total academic capture of the bureaucracy and mechanism of the Federal Reserve and central banks around the world by this neo-Keynesian theory.

What happens when one starts with the twin presuppositions that the economy can be described correctly using a multivariable dynamic equilibrium model built up on neo-Keynesian principles and research founded on those principles? You end up with the monetary policy we have today. And what Larry Summers calls secular stagnation.

 

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Kovacevich on the Financial Crisis

Richard Kovacevich writes for Cato,  The Financial Crisis: Why The Conventional Wisdom is Wrong

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Shaming the Kennedy Legacy

from The National Review Larry Kudlow writes None Can Call it Treason

robertkennedy

excerpts:

A couple of weeks ago at New York’s Metropolitan Museum of Art, several hundred people went to their feet to applaud a speech delivered by David H. Koch. The occasion was the opening of the Met’s new façade on Fifth Avenue. It runs four city blocks, and is complete with new fountains, paving, lighting, landscaping, and seating areas for visitors. Mr. Koch contributed the entire $65 million cost of the project, which took years to complete.

And the people kept applauding. For several minutes. They wouldn’t stop in their gratitude for Koch’s generosity toward New York and one of the world’s great museums.

Now, contrast that with the arrogant, intolerant, petulant, radical-left environmentalist Robert F. Kennedy, Jr. Last week, at the People’s Climate March in New York, he accused the Kochs of polluting our atmosphere. He said, “Do I think the Koch brothers are treasonous? Yes, I do.” He added, “I think they should be enjoying three hots and a cot at The Hague with all the other war criminals.”

Let’s turn back to David Koch. His extraordinary philanthropy illustrates how America’s free-enterprise system creates massive wealth, which is then channeled to the public good by civic-minded people who have their hearts in the right place.

Koch has contributed roughly $1.3 billion to charity for medical research, education, culture, the arts, and policy studies. It’s an incredible story. Besides the Met museum, he just announced a $100 million donation to New York Presbyterian Hospital. He’s given $185 million to MIT, and another $100 million to Lincoln Center. The list goes on and on.

At the end of that speech at the Met, David Koch said he hoped his legacy would be that he “did his very best to make the world a better place.” That legacy is firmly in place.

Robert Kennedy Jr. should be ashamed of himself. Blissfully unaware of the scientific facts and existing solely in his self-centered world, he insults one of America’s great benefactors and stains the greatness of his uncle, John F. Kennedy, and his father, Robert F. Kennedy.