hard heads soft hearts
Friday, June 14, 2002
Kudlow's july 27th column asserting the vital
importance of a strong dollar:
"Various short-sighted Wall Streeteconomists — along
with a bunch of whining U.S. manufacturing companies
and a flock of European Union central planners whose
sole desire is to take America down a peg — want to
see the American currency devalued. It's a terrible
vision, one that must be devoutly opposed.
Fortunately, the Bush administration has thus far
stayed with a strong-dollar policy."
Kudlow's July 24th column imploring Greenspan to
increase the money supply.
"But Greenspan's responsibility — whether or not he
admits it — remains a scarcity of true Fed liquidity
(i.e. currency and bank reserves, controlled only by
the Fed). If the central bank were really stimulative,
then commodity indexes would be rising, not
falling.The dollar-exchange rate would be falling, not
rising, and various treasury bond-rate spreads would
be widening, not narrowing (e.g. federal funds vs.
two-year Treasury notes). Tech stocks would be
rallying, not sinking. But none of what should be
happening is happening."
I remember reading an NY Times editorial similarly
full of howlers alongside your Sunday column.
(something like, "Greenspan shouldn't lower rates, as
that might result in a liquidity trap") Have you
basically given up critiquing journalists commenting
on the business cycle?
Concerning Social Security, Michael Kinsley largely
wrote the column I asked you to write, though his
column was only qualitative, with no numbers. The
essential question, which I have not really seen
addressed, is that if an individual were saving for
retirement with Treasury bonds, they would likely be
advised they were being too conservative. Why is what
is true for an individual untrue for a nation?
or to put it another way, putting aside the issue of
individual accounts, what is the appropriate model for
thinking about the optimal asset-allocation of the
Soc. Sec. Trust Fund?