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

Kudlow: A Pro-Growth Plan from the Gang of Six

Larry Kudlow has some sound advice for conservatives to hold back from trashing the plan which was the first words out of the mouths of some Senators who didn't bother to listen because they had their minds closed when they went into the briefing.

This plan lowers the tax rate for all.  It does raise capital gains by 5% which is more than offset by the lower tax rates for not only individuals but for business.  It simplifies the tax code plugging up loopholes which some emails are tax increases.  Personally think all loopholes should be closed.  The fact that loopholes have been  put in the Tax Code should be stopped.  It was a way to pay back the big donors and the Democrats especially Franks and Dodd became experts at loopholes for donors.  If closing loopholes is considered a tax increase by some then bring it on -- I consider it a tax revenue increase which is what it really is.

Every plan has its drawbacks but frankly this pro-growth plan is much more than I would have thought the Republicans could get out of Senate Democrats.  This is not a win for Obama, Democrats, or Republicans but it is a win for the American taxpayers.  With this plan, Obama is willing to sign an extension to work out all the details and stop default in its tracks which is the right thing to do.  He has been backed into a corner by a group of six who worked to get the best deal possible and actually have a budget for this year and a framework for following years.   Not having a budget in place for two years has been weighing on the financial markets and investment because they didn't have a clue where all this was going. 

That balanced budget amendment which this Country needs and was passed by the House doesn't have a chance to pass this year or next but it sure does in January 2013 and will be sitting waiting for the new Republican President to be sworn into office.  Oklahoma Legislature including one Democrat has already signed on with a letter to the Speaker say they will be glad to vote for the amendment as soon as it hits the states.  Many states have balanced budget amendments that show it works. 

This is a start to get an actual budget in place that has not happened for two years.  With Sen Conrad retiring from the Senate in 2012, he seems to be more in tune with actually getting the job done.  The fear that some Democrats had of Obama when he was sworn in seems to be much less today after they have seen him operate for over two years.  In fact, as the support for Obama among the voters has been decreasing so has the support for him by some members of Congress.  That fear he had of retaliation towards members who didn't vote the way he wanted is probably now sitting in the Office of the Mayor in Chicago.  Rahm Emanuel seemed to be the real intimidator as Obama's attack dog and now with him along with Axelrod gone from the White House, a few more centrist Dems are spreading their wings and going against this President who now has more bark than bite. 

Larry Kudlow
July 20, 2011 5:00 P.M.

A Pro-Growth Plan from the Gang of Six
It’s a stunning reversal of the Obama Democrats’ class-warfare campaign.

There are a lot of known unknowns about the new “Gang of Six” budget proposal. But conservatives should hold back from trashing it. Why? There’s a large, pro-growth tax-reform piece in the plan that would lower tax rates across-the-board. This is a stunning reversal of the Obama Democrats’ soak-the-rich, class-warfare campaign.

The best part of the Gang of Six plan is a reduction in the top personal tax rate from 35 percent to a range of 23 to 29 percent. For businesses, the rate would drop in the same manner. And the corporate tax would be territorial rather than global, thereby avoiding the double tax on foreign earnings of U.S. companies. Finally, the plan would abolish the $1.7 trillion alternative minimum tax. That’s huge. It’s another pro-growth tax reform.

In a more perfect world, the Congressional Budget Office would score the pro-growth incentives of lower marginal tax rates in terms of a tax-revenue increase. That’s the history stretching back to JFK, Reagan, and George W. Bush circa 2003.

And right now, the Gang of Six package is the first real pro-growth tax reform of all the debt-ceiling plans. It acknowledges the need for a growth element in order to solve our budget bankruptcy and limit spending, deficits, and debt. It would boost the economy and broaden the base (by reforming or limiting numerous deductions). As a result, more income would be taxed at lower rates in a rising economy, throwing off a hell of a lot more revenues than we’re getting today. Rising revenues from lower tax rates are a good thing.

Now, there are glitches in this plan that cannot be overlooked. The biggest is the harsher treatment of capital gains. In a CNBC interview on Tuesday, Sen. Tom Coburn (R., Okla.) told me that the investment tax rate would rise to 20 percent from 15 percent. This is a black mark. It’s anti-growth. Coburn, however, also told me that the tax treatment of IRAs and 401(k)s would not change in this plan. That’s good.

Excerpt: Read more at IBD