October 06, 2003

Why Oh Why Can't We Have a Better Press Corps? Part CCCCLXXI

Further degrading National Review's near-laughable reputation, Larry Kudlow writes that:

Larry Kudlow on the Dollar & Exhange Rates on NRO Financial: Manipulating the dollar so that it is worth less and buys less seems like a foolish way to manage a nation's currency or economy. Doing so today, at worst, could derail the fledgling bull-market recovery, just as an overly cheap dollar ended the 1980's boom...

God knows that I am no fan of George W. Bush's sorry half-excuse for an economic policy, and God knows that I think that the right way to talk down the dollar is through promises of looser monetary policy (rather than attempts to increase the perceived risk of holding dollar-denominated assets), but this claim of Larry Kudlow's is simply whacko.

The boom of the 1980s ended because the Federal Reserve's attempt to reduce inflation a little bit through higher interest rates collided with the oil price spike of 1990 and Saddam Hussein's invasion of Kuwait. The decline in the dollar from 1985-1987 had very, very little to do with the rise in inflation that concerned the Federal Reserve.

Posted by DeLong at October 6, 2003 08:03 PM | TrackBack


Promises of looser monetary policy is just an indirect way of talking down the dollar. In one case it's loose money first, weak dollar second; in the other it's weak dollar first, loose money second. The difference is a split hair.

Promises of even looser money have already increased the risk of holding dollar-denominated assets. If you think it's possible - just possible, not even probable - that the Fed may keep its easy money policy into the indefinite future, the most rational thing you can do is to run for the dollar exit now. Which is what investors are doing.

It's all well and good to pretend that the loose-money policy is for a worthy cause - a stronger U.S. economy - but so is the direct policy of hoping for a weaker dollar. Anyway in both cases it's just Tinkerbell wishing.

This seems to be a case of being careful of what you wish for, because you just might get it (because then you have to pretend you hadn't wished *exactly* for that!).

Posted by: Andrew Boucher on October 7, 2003 04:45 AM

Besides Kudlow's odd economics here, he has flip flopped again. Read his pieces - the FED should run easier monetary policy if it's Tuesday and if it's Thursday, the FED is increasing the money suppply too much. I sometimes wonder what motivates Kudlow's writing. Maybe on Tuesday, he got an email from Karl Rove. And then by Thursday, he's backing some gold bug spin of Victor Canto.

Posted by: Harold McClure on October 7, 2003 06:17 AM

I prefer to think of Kudlow as an entertainer, perhaps along the lines of a Dave Barry, not a serious scholar.

Posted by: bakho on October 7, 2003 08:51 AM

Larry Kudlow is yet another Republican values type who found hypocrisy a perfect cover for media analysis. Look up whence the cat comes.

Posted by: AJ on October 7, 2003 11:25 AM
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