In preparation for an interview today with Kitco’s Daniela Cambone I’ve put together some notes on the Kudlow appointment.
For what it is worth:
Kudlow
His positions are well known....
+Knocks on his bombastic persona and spotty track record are also well known
+In 2007-2008 he vehemently came out saying everything was fine. And his math and logic in justifying his reasons were flawed by my count.
Here is an article excerpt Kudlow wrote November 22, 2007
+But his marketing public (ratings) persona are not who he is in private. He is level headed and professional behind the curtain so I am told by people who have known him for years. He is not a loon. He only plays one on TV.
Politics aside....
+ He is a classic supply sider. Has had a close relationship to Laffer and the Goldilocks era group for decades. +My problem with kudlow is his one dimensional approach to applying the supply side precepts.
One Ring to Rule them All...
1- even if you agree with the economic principles of supply side economics as the best tool sometimes (which I do)
2- even if you agree with supply side economics all the time.. (which I do not)
A reasonable person must see Kudlow as being very monolithic in his application of the principle. The difference between kudlow and other supply siders is on the execution of that principle.
In this way he is similar to liberal dogmatic fed governors who decide rates must go negative because “zero” just isn’t low enough. His answer to most everything is “cut taxes” and to me shows little consideration for: dynamic system equilibrium, policy marginal utility, and diminished returns of an action.
The Universal Symbol of Dogmatic Economists Everywhere: Includes Debt Monetizers on the left and Tax Avoiders on the right
The classic economic “lemonade prices in a desert” comes to mind; where the thirsty person pays $1mm for the first glass, but nothing for the 500th glass. Policies work best when they undo an extreme situation like post jfk tax rates being very high. They are not high now effectively speaking.
And frankly the “permanent individual tax cuts” the msm is crowing about are for cap gains. How does that help the wage earner who doesn’t have enough money to own equities? We need jobs. And to get jobs we will likely get inflation from deficit spending to create those jobs. Otherwise fiscal tax breaks help the 1% only. Kudlow seemingly has 1 go-to solution to every problem. And that is not the complete story on supply side economics if you like the approach.
Short Tenure Dead Ahead..
I foresee administrative problems here quickly. While Kudlow is for low taxes, he was vocally anti protectionist which is consistent with a conservative libertarian market approach. Trump is pro tariff. How long can Kudlow remain in the same camp with principles at odds with trump? I give it 6 months to a year before either trump gets annoyed b/c kudlow gets more press exposure or kudlow’s principles prevent him from staying on board.
What would make me wrong...
Would be if Kudlow makes a statement like:
“I’m anti protectionist. But the president needs tariffs in his tool kit to keep other countries honest. The end game is open markets. And sometimes you have to call bluffs to get the better outcome. If other nations know we will not use trade tariffs, then what incentive do they have to open their markets to us?”
If Kudlow says this- it’s trade war city because trump has no brakes once he gets a green light to go.
“King Dollar” is a Joke
The evidence does not support his rhetoric at all. His public cheerleading is not at all consistent with the market performance. The USD has gone from 8 Yuan to about 5.8 in the last 10 years. That is a 25 percent drop in king dollar buying power vs the rising star in the east.
See for yourself. Here is The King vs. the Yuan from 2004- 2014. Updates will not reveal significant changes in trend
And what did Gold do in that time?
Kudlow may be the right man for the wrong situation. We are not going to recreate the past with tax cuts and “pedal to the metal” and all is well delusions. But he has a megaphone and a generation of people nostalgic for Reagan years will applaud. Perception is reality. I'm breaking out my suspenders and cufflinks again. And Cannot wait until Jim Cramer is nominated for the FOMC. It is no longer crazy. Vincent Lanci
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