"A wise and frugal government which shall restrain men
from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government."
(Thomas Jefferson)

Tuesday, August 16, 2011

Larry Kudlow: Perry's Red-Hot Bernanke Slam: A Much Needed Defense of the Dollar

Larry Kudlow says that Perry shouldn't have used the words he did but his analysis was correct.  We did find out one thing from all of this that Perry and the rest of us out here including the Dallas Fed Governor and two others from Minneapolis and Philadelphia are not the least bit happy with Bernanke while Mitt Romney thinks he is on the right track defending Ben Bernanke and dollar depreciation.

Updated in red to reflect the current status of Romney and Bain Capital according to his aides:  Guess Romney likes making lots of money with Bain Capital (Held in a blind trust for Romney and his wife) but Bain was fined  (Jun 29, 2011 ... Bain Capital's hedge fund unit has agreed to return $1.7 million it earned for buying stock it had shorted three days earlier).  We don't need more of the same that we have been seeing.  We need someone who is not afraid to make the hard cuts to spending and get this budget balanced and who is not involved with Wall Street.  (NOTE:  Romney was the founder of Bain Capital which when he headed the Olympic Committee he had to resign and then as Governor of Massachusetts he put everything in a blind trust but has continued to be surrounded by Bain Capital people for his campaign)

There was an interesting discussion on Bloomberg this afternoon with  Michael Aronstein and David Stockman about how Bernanke and the Fed keeping interest rates artificially low is helping the big guys and hedge funds grow wealthier while the individual who is trying to save is getting basically nothing on their savings.  Both believe there should be no Fed involvement in interest rates as it is harming the recovery.

Personally could care less what the financial world has to say as they are part of the reason for this mess with thinking that bigger is better in banking and taking bailouts of our tax dollars to prop up failing banks, car companies, and others holding their hands out.  Here is the money quote of the article:
So in this sense Governor Perry’s red-hot riposte at Bernanke may be shrewd politics, as well as a much needed defense of stable money. 
Kudlow details what happened after QE2 Bernanke pushed which ended up being a terrible decision but Romney thought it was the right decision.  There is an old saying 'follow the money' and we are seeing the rich get richer off the low Fed interest rates for borrowing.  Too much borrowed money and not enough investment of a companies of their own money IMHO.

Very interesting take by Kudlow:
Perry's Red-Hot Bernanke Slam:  A Much Needed Defense of the Dollarby Larry Kudlow 16 Aug 2011
Gov. Rick Perry scorched the political pot on Tuesday with a red-hot rhetorical attack on Fed-head Ben Bernanke. When asked about the Fed reopening the monetary spigots, Perry said, “If this guy prints more money between now and the election, I don’t know what y’all would do to him in Iowa, but we — we would treat him pretty ugly down in Texas.” 
And that wasn’t all. In a more controversial slam, Perry said, “Printing more money to play politics at this particular time in American history is almost treacherous — or treasonous — in my opinion.”  
Pretty rough stuff. Very aggressive language. And undoubtedly way too strong. It was poorly received in the financial world. 
No, Ben Bernanke is not a traitor. This is a policy dispute; it’s not a matter of patriotism. However, and this is an important however, the rest of Perry’s statement suggests that his analysis of Fed policy is right on target.

In other words, wrong words, right analysis. 
The Texas governor, who by some polls is the new Republican presidential frontrunner, went on to say, “We’ve already tried this. All it’s going to be doing is devaluing the dollar in your pocket. And we cannot afford that.” 
Well, to me that is exactly right. 
Let’s take a quick look at Bernanke’s QE2 record of pump-priming: The dollar fell 12 percent on foreign-exchange markets. The consumer price index jumped over 5 percent at an annual rate. And the $600 billion cheapening of the greenback led to skyrocketing commodity prices, including oil, gasoline, and food. That oil-price shock is one of the principal factors behind the 0.8 percent first-half economic stutter. As a result of the jump in inflation linked to QE2, real consumer incomes slumped badly and consumer spending fell substantially. 
Before QE2 the economy was growing about 2.5 percent, even though it was already blunted by numerous tax and regulatory obstacles. But the cheap-dollar oil shock came perilously close to pushing us into recession. 
So it turns out that Governor Perry — even with his overly strong language — is a pretty sharp economic and monetary analyst. 
In fact, Perry’s analysis actually channels recent Fed dissents by reserve-bank president’s Dick Fisher of Dallas, Charles Plosser of Philadelphia, and Narayana Kocherlakota of Minneapolis. They object to a two-year extension of the Fed’s zero-interest-rate policy, and in so doing have set down an opposition marker to a potential new shock-and-awe quantitative easing that many fear will be announced on August 26 when Bernanke speaks to the Jackson Hole Fed conference. 
What makes Governor Perry’s position even more interesting is his disagreement with former governor Mitt Romney. When I interviewed Mr. Romney this past April, he essentially defended Ben Bernanke and dollar depreciation. “Well, you know, I think Ben Bernanke is a student of monetary policy,” Romney said. “He’s doing as good a job as he thinks he can do in the Federal Reserve.” 
Meanwhile, in Tea Party circles on the campaign trail, Mr. Bernanke is a much disliked figure. Rightly or wrongly he is blamed for bailing out Wall Street. Also, many view Bernanke’s massive money-creation, along with President Obama’s massive federal-stimulus spending, as another failed big-government attempt to revive the economy. 
Tea partiers and many others fervently believe in lower spending, reduced tax burdens, and a regulatory rollback to strengthen small businesses and the private economy. They’re against Uncle Sam just throwing money at problems. 
So in this sense Governor Perry’s red-hot riposte at Bernanke may be shrewd politics, as well as a much needed defense of stable money. 
The former Air Force captain piloted C-130 missions in Central and South America, North Africa, and all over Europe. He’s a fierce devotee of American exceptionalism and greatness. My hunch is, just like Ronald Reagan, Governor Perry views a collapsing-dollar threat as more evidence of American decline. And he is very much opposed to any of that.   
Source:  Big Government

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