Bartlett v. Kudlow

TW: This conversation ultimately goes nowhere, it is CNBC after all. But it accomplishes much. We see a moderate Republican, Bartlett, seek to have a real conversation on fiscal policy; whilst being interviewed by an ideologue, Kudlow, who regardless of Bartlett's answers spouts cliches, tired slogans and punchlines. Overlying this is the 2nd interviewer, Trish Regan, who mostly appears clueless but occasionally interjects the standard slanted BS (i.e. "obamanomics caused the housing bubble", Reagan was a god) of those of her generation who drank supply side kool-aid through the 80's and 90's rather than studied.

Bartlett's point is that neither Reaganesque/Laffernomics, Keynes or anyone else has a monopoly on good policy, one must adjust one's policies to the realities of the situation. Unlike Kudlow whose answer to all challenges is "tax cut (preferably for the wealthy and corporations)", all the while while alleging that he Kudlow is stating "universal truths".

I also link a Krugman response to the Barro tangent Kudlow threw out. Kudlow also mentioned the quack Amity Schlaes. Bartlett's reponse- "she is wrong" sums up her value.

From Paul Krugman at NYT:
"...Barro makes a great deal of the fact that private spending fell during World War II, rather than rising the way it should in a classical Keynesian (oxymoron?) story.

What I and others immediately pointed out was that this tells us very little about what would happen under current conditions: during World War II there, um, was a war on: consumption goods were rationed, construction required special permits, and so on. The government was, in other words, deliberately suppressing private spending, through direct controls. So WWII is not a useful data point for determining what the multiplier is under other conditions.

Barro’s response to this, as far as I can tell, was … nothing. I don’t think he even acknowledged the nature of the complaint..."

Do Not Listen To These Folks!! (cont.)

TW: Here we have the same cast of characters from yesterday's post, recall this video is from May 14, 2008. The inimitable Pat Buchanan joins them. What struck me with this video beyond the pomposity and inaccuracy, were the obvious cynacism of Kudlow and the looming problem McCain had at the time as evidenced by the Luskin character. Recall btw a year ago we were in that weird period when Obama was almost mathmatically a certainty but Clinton insisted on hanging on until the final primaries were over.

Buchanan and Kudlow try to assert Obama would never win the general election since he could not get the Bubba vote (Buchanan extrapolating the West Virgina primary results to show that Obama would lose Ohio, Michigan, Pennsylvania and Virginia). But even though Kudlow delivers all of his pro-McCain stuff with a straight face he slips and saying "and crows could fly" when Buchanan makes his prediction.

This playacting by Kudlow destroys any intellectual credibility he might have. We are all biased but he apparently views himself as a Republican PR conduit. PR reps are meant to spout the company line regardless of facts. When a guy like Kudlow becomes a pure PR conduit yet is meant to be dispensing investment advice, be VERY afraid.

Finally Luskin starts to voice what became a problem for McCain, "he was not a real conservative". This problem led to a real conservative of sorts, Ms. Palin. This attitude continues to infect the Republican party which cannot yet accept any but the most doctrinaire as their leaders.

Do Not Listen To These Folks!!

TW: This video is priceless, it is from May 14, 2008. The "expert" forecasting is shockingly bad enough. But the manner in which they deliver their ignorance is the true joy. Patronizing, smug, testosterony and almost 100% wrong. Kudlow starts with how Obama was headed toward defeat, then most of them proceed to gang up on the one guy predicting a recession. Treating him like a pathetic pariah while they all make ridiculously pompous forecasts of how the economy was NOT in recession and would not go into a recession etc.

The point is these guys not only have not been laughed off TV they are still on TV, regularly. Generally they are the ones bitching about Obama, touting supply-side economics and whining about how Wall Street is being humped by the "government". They were frightfully wrong in May 2008. Why would you possibly listen to them in May 2009.

Keep an eye out for this Don Luskin guy, his pomposity and inaccuracy exceeded all others. Not surprisingly as you will see on tomorrow's installment when they shifted their focus to politics his hitting streak continued.

Economists At War: The Kudlow Chronicles (cont.)

TW: There is never enough humor on the blog but there is always LarBear to bring a sigh...this guy makes a ton of money spewing ignorance daily on CNBC.

From Larry Kudlow's blog Friday JULY 25, 2008
"If Things Are So Bad . . .
If the economy is in recession, why are business durable-goods orders and shipments booming? Non-defense capital goods (capex) excluding aircraft rose 1.4 percent in June, or 19 percent at an annual rate over the last three months. Capex shipments rose 0.7 percent in June, or 8 percent annualized over the last three months. Business looks pretty healthy to me. And non-financial profits in the second quarter are rising 12 percent. Even including depressed bank earnings, positive surprises for profits are well outstripping negative surprises.

And if we are in a housing depression, why have existing home sales in the hard-hit West (think California, Arizona, and Nevada) increased four straight months (plus 12 percent)?
And why are they up 17 percent from the low in October? More important, nationwide median existing home prices have increased four straight months, from $196,000 to $215,000. That’s a 10 percent gain.

And if the humongous Freddie, Fannie, and FHA ($300 billion) housing-bailout bills are so important, why did bank, thrift, and other financial stocks register their worst losses in eight years yesterday?

Maybe the answers to these questions are a bit different from what the mainstream media are telling us. To wit, Phil Gramm was right: We are in a mental recession, not an actual recession. And the low-tax, free-trade, free-market, capitalist economy is a whole lot more resilient and durable than the pessimistas and declinists would have us believe."

We Have Him Where We Want Him!!!

TW: The Republicans smell blood in the water with the Daschle kerfuffle and the stimulus negotiations getting bogged down. My buddy Larry Kudlow is calling for Geithner (in sympathy with Daschle) to resign, Pethokoukis (right wing blogger for US News World Report) is suggesting Obama will be a one-termer, and a right wing nut blogger-Ed Morrisey suggests we have a train wreck:

"Now Obama looks weak and inexperienced, flailing at his first executive position in government — just as many of us predicted he would do during the campaign. The media never bothered to ask the tough questions about his lack of experience and instead extolled his coolness and his competence. Maybe now they’ll at least drop the Greatest Transition Ever meme and start reporting on what a train wreck it became."

TW: The Republicans are seeking to cut off Obama at the knees before he gets started. In addition, they are teeing up their 2010 and 2012 election memes. Tax cuts, tax cuts, tax cuts (not temporary but permanent) and if Obama does not enact tax cuts, tax cuts, tax cuts and the economy does not recover immediately then it will be because he did not cut taxes enough.

From Pethoukoukis
"This [the stimulus plan] isn't that hard: a) cut payroll taxes; b) cut corporate taxes or put in an investment tax credit; c)suspend mark-to-market accounting; d) a capital gains tax holiday; e) loans to states and cities; f) targeted infrastructure spending."

TW: This happy horse dung (am sure he throws in e and f to appear balanced but there would not be any money left after a,b,d and how you reform the banks without mark to market would be interesting) is why Obama needs to step up his communication and education. He has done it before and will do it again. Consider this Republican premature umm...euphoria.

The Two Best Arguments Yet For Stimulus

Number One: Warren Buffett speaks the truth as in we don't know what will really work but doing nothing almost certainly will not

From Nightly Business Report:
"[interviewer]: But there is debate about whether there should be fiscal stimulus, whether tax cuts work or not. There is all of this academic debate among economists. What do you think? Is that the right way to go with stimulus and tax cuts?

Buffet: The answer is nobody knows. The economists don’t know. All you know is you throw everything at it and whether it’s more effective if you’re fighting a fire to be concentrating the water flow on this part or that part. You’re going to use every weapon you have in fighting it. And people, they do not know exactly what the effects are. Economists like to talk about it, but in the end they’ve been very, very wrong and most of them in recent years on this. We don’t know the perfect answers on it. What we do know is to stand by and do nothing is a terrible mistake or to follow Hoover-like policies would be a mistake and we don’t know how effective in the short run we don’t know how effective this will be and how quickly things will right themselves. We do know over time the American machine works wonderfully and it will work wonderfully again."

Number Two: Larry Kudlow is unalterably and vociferously opposed to the stimulus, when fools oppose then I support.

From Larry "Goldilocks Economy" Kudlow's blog:
"It really is time for the congressional Republicans to come up with a tax-cutting alternative that includes slashing the marginal tax rate for large and small businesses and individuals, and brings the investor class back into play. Not only with a cap-gains tax holiday, but also with a much larger capital loss deduction. Add to this immediate cash expensing for all businesses.

Right now capital is on strike. So are investors. Supply-side incentives will bring them back. This is where the GOP must go."

I Guess He Is Charming

Larry Kudlow's impression from the Obama/right-wing pundit dinner the other night via Kudlow's blog:
"HE IS CHARMING, HE IS TERRIBLY SMART, BRIGHT, WELL-INFORMED, HE HAS A GREAT SENSE OF HUMOR...HE IS SO WELL-INFORMED, AND HE LOVES TO DEAL WITH BOTH SIDES OF AN ISSUE...HE ENJOYS THE BACK AND FORTH, AND HE IS NOT, YOU KNOW, TOUGH, MEAN, INSULTING, SNARLING, NONE OF THAT STUFF, AND WE WEREN'T EITHER...HE IS A VERY IMPRESSIVE MAN"

Echo Chamber: If Only....

"It's sad to say, but we really went nowhere for almost ten years, after you extract the boost provided by the housing and mortgage boom. It's almost a lost economic decade."
--Mark Zandi, chief economist of Moody's Economy.com

TW: Below is a blog post from US News & World Report journalist Jim Pethokoukis. He is a supply side conservative acolyte of Larry Kudlow and Art Laffer. His post demonstrates the delusional behavior of someone glued to a defunct ideology. He just will not let go of cut taxes, cut taxes, cut taxes. How do they rationalize their views? by assuming away the facts.

From Pethokoukis at USNWR:
"Before the recession, we were headed toward a surplus. A useful reminder of economic reality from Jim Glassman of JP Morgan Chase:

The US response to the economic crisis at the beginning of this decade is an affirmative lesson on how to address economic crises. The combined actions of the Bush Administration, the 2001 tax cut agreement, together with two major rounds of economic stimulus measures, including investment incentives and a reduction in the capital gains and dividend taxes, added up to about 5% of GDP all told. This was the biggest fiscal response in memory, since World War II, up to that point. At first the budget deficit deteriorated, as budget hawks at the time were quick to point out. By 2004 the surplus of 2000 and turned into a budget deficit of about 4% of nominal GDP. But the bold fiscal response hastened the recovery and by 2007 the deficit had declined to 1% of GDP. The government’s books would have recorded a small surplus in 2007 had it not been for the $200 billion tab for the commitments in the Middle East and the aid to the New Orleans area that is recovering from the damage from Hurricane Katrina in the fall of 2005."

TW: So just a couple of small assumptions and voila a surplus:
1) If we had not had the current recession, the worst in at least 25 year along with the related credit crisis the worst since GD 1.0. Life would be so much simpler without those pesky recessions which of course had nothing to do with financial bubbles perpetuated during the W Administration.
2) Lets assume away that little skirmish in Iraq and the ubiquitous GWOT and Katrina (it takes some cojones to use Katrina as an excuse for W. Bush)

And oh btw, W. Bush inherited a $200+ billion annual surplus. These people should not be in government or compensated to spread their ignorance.

At Least He Is an Honest Fool

TW: I will give Kudlow credit for baring the truth about himself and his supply side cronies. They firmly believe in trickle down economics and are not shy about it pushing the theory amidst a severe contraction. Some how, some way cutting taxes on the wealthy (even beyond the Bush cuts of 2001 and 2003) will magically resuscitate the economy. No mind that the Bush cuts obviously did not get the job done, no mind the synchronized global contraction that has little to do with Larry Kudlow's personal tax rate.

Kudlow comes right out and says it, middle class tax cuts do not get it done, we need to supply the wealthy with more money so that their native, capitalist instincts can mystically reverse the demand contraction. As he says, "they are the ones that buy the yachts built by blue collar workers". There u have it.

I also enjoy his head fake allusion to the risk of "national debt" just before proposing measures to massively INCREASE national debt. He wants to cut just about all tax rates which would reduce government revenues by TRILLIONs over the next five years.

And btw this BS about corporate tax rates in the US being so high is just that BS. Our system rightly or wrongly is based on a relatively high marginal rate with massive deductions for all kinds of expenses. I strongly doubt you could find many European or Asian companies that would prefer to pay net taxes based on their corporate tax structure as opposed to the US structure.

From Kudlow's blog:
"The GOP must bolster its argument for spending discipline with a loud case for tax cuts.

Republican Senate leader Mitch McConnell is absolutely right to warn against Obama’s gigantic stimulus-spending package. McConnell says it “will be the largest spending bill in the history of our country at a time when our national debt is already the largest in history.”

As a result, he says the bill “will require tough scrutiny and oversight.”According to McConnell, scrutiny should include this simple test: “Will the yet unwritten, reportedly trillion-dollar spending bill really create jobs and grow the economy — or will it simply create more government spending, more bureaucrats, and deeper deficits?”

The Republican leader is drawing a clear line in the sand. Okay, good. But the GOP has got to do more. It must start talking about tax cuts to grow the economy. And it must get back to the supply-side by talking about lower marginal tax rates on individuals, businesses, and investors.We don’t need bailout nation. Nor do we need the government picking winners and losers in a massive, Keynesian, new-New Deal spending extravaganza. And it’s not Obama’s middle-class tax cut that’s going to get us out of this economic jam.

At best his vision is incomplete. But at worst his aversion to successful earners and investors is a real obstacle to full economic recovery. Social historian and early supply-side activist Irving Kristol taught us three decades ago that the top earners are the economic activists. They’re the ones with the highest propensity to consume and invest. They’re the ones who buy the yachts, which are built by blue-collar workers. And they’re the ones who run the small businesses and provide the capital for the new entrepreneurial start-ups that are the lifeblood of the economy. It is they who energize free-market capitalism.

If we had an economy without rich people we wouldn’t have much of an economy. That’s why lower tax rates to reward the economic activists — the most prominent capitalists — are so essential. In fact, the GOP has a great opportunity to challenge Obama’s Keynesian pump-priming by insisting there be a major tax-cut component in any new fiscal package. Republicans shouldn’t merely push for somewhat less government spending. They have to make a bold case that tax rates matter for economic growth and job creation. They must insist that any recovery package includes this key element. Shift the debate. Say clearly that a reenergized economy cannot occur without lower marginal tax rates.

In particular, the GOP position should include lower tax rates on large and small businesses. Right now the top federal tax rate for C-corps is 35 percent. Small businesses, which pay the individual rate, also are taxed at 35 percent. These rates should be 20 percent for both C-corps and S-corps (including LLCs). This would make a huge difference. It would be a boon for our global competitiveness, since companies in the U.S. (as well as Japan) are taxed way above the rates of other advanced countries. It also would attract job-creating investment flows to the U.S. at a time when capital is on strike in our financial markets and economy. And while businesses collect corporate taxes, it’s really consumers who pay the final cost.Republicans also could promote a middle-class tax cut that would reduce the 28 percent and 25 percent brackets down to 15 percent.

And of course, the GOP should work hard to maintain the Bush tax cuts on capital gains, dividends, inheritance, and top individual rates. Senior Obama advisor David Axelrod recently told the Sunday talk-show hosts that the Bush tax-cut package of 2003 is “something we plainly can’t afford moving forward.” Well, in static terms, the sum-total of the 2003 tax cuts comes to somewhere between $25 billion and $40 billion. Compare that to a trillion-dollar spending plan.In fact, lower capital-gains tax rates will raise revenues, since this is the single most sensitive tax on the Laffer curve. Indeed, many economists — including Alan Reynolds at the Cato Institute — argue that the growth and simplification effects of reducing the corporate tax rate would be revenue positive.

But the congressional Republicans have to step up to the plate right now. Me-too-ism on spending is a big mistake in both political and economic terms. Instead, the GOP should argue that fiscal policy needs a choice — not an echo (to paraphrase the late conservative stalwart Barry Goldwater).The whole debate in Washington is heavily skewed toward government spending on infrastructure. It’s all spending and virtually no tax cuts. For a more balanced and effective recovery policy, the GOP has to bolster its argument for spending discipline with a loud case for tax cuts.

It truly is time for a choice, not an echo."
http://kudlowsmoneypolitics.blogspot.com/2008/12/time-for-choice-not-echo.html

Economists At War: The Kudlow Chronicles (cont.)

TW: Part 2 of the Kudlow Chronicles, this time he was off on his "goldilocks economy" theme. Due to the mystical power of tax cuts for the wealthy, the housing market was going to keep going up forever etc. Anyone who invests by listening to ideologues or flag wavers is foolish.

From Larry Kudlow's blog at National Review March 11, 2006:
"Despite the grim picture the mainstream media continue to paint about just about everything...there’s one thing they just can’t taint: This U.S. economy remains very healthy...

It’s always amazing to listen to conventional demand-side economic pundits and mainstream reporters who try as hard as they can to minimize the excellent performance of the American economy ever since lower marginal tax-rate incentives were put into place almost two-and-a-half years ago. The latest chant is that..a day of reckoning marked by a housing-price crash and an overwhelming debt burden is headed our way. This is utter nonsense...

Reagan economic guru Art Laffer taught us thirty years ago that lower tax rates ignite economic growth. Now, the Laffer curve is tracking a business-led expansion that is throwing off record budget revenues while corporate profits are soaring. Profits are the mother’s milk of business, the economy, and stocks, and are laying the foundation for even more hefty job gains...

In the months ahead, Ben Bernanke will follow the anti-inflation thinking of Milton Friedman. President Bush will continue to embrace the pro-growth Laffer curve. And the anti-worker Phillips curve will be pushed into the dustbin of history. In other words, economic growth principles will keep American capitalism on the prosperity path."
http://www.nationalreview.com/kudlow/kudlow200603111211.asp

Economists At War: The Kudlow Chronicles

TW: Those who read the blog know I do not care for Larry Kudlow. As part of the on-going Economists At War series here at the White House, we will examine some of LarBear's gems from the past several years. Fox News and the right-wing radio hacks are engaging their minions to wage a pre-emptive attack on Obamanomics. Perhaps they are right, but then that would mean they have gotten a lot smarter since they uttered some of these bits of wisdom.

From Larry Kudlow's blog in the National Review June 20. 2005:
"Homebuilders led the stock parade this week with a fantastic 11 percent gain. This is a group that hedge funds and bubbleheads love to hate...So have all the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market...the homebuilders index has increased 76 percent over the past year, with particularly well-run companies like Toll Brothers up about twice as much. The bubbleheads missed all this because they haven’t done their homework...

It is plain to see that the family demand for homes has far outstripped the supply of newly built residences. So it should not be shocking that home prices have tended to rise on a steady basis...

Homebuilding also faces another obstacle with the effects of price-hiking. Local zoning and environmental regulations have restricted the availability of land on which new residential units can be built. So while housing demands are white hot, the green lobby has cooled down new designs..." [TW: damn those greenies otherwise we could have built even more homes!!!]
http://article.nationalreview.com/?q=MDNhMDFhNmJmYmU3NDQyZTAyOWNhMmYzNTY3NDNiODA=

Automaker Bailout BS!!

TW: Have been remiss on posting re the automaker bailout for no other reason than there is so much flying around relative to the bailout that I have not been able to pin myself down to fairly absorb it enough to have a perspective. But thanks to the inimitable Larry Kudlow, I have finally found a nugget to highlight.

I am increasingly agnostic on whether bankruptcy or some sort of government intervention is the better route. There are many arguments on both sides, most of them bad and one ends up picking the least bad one. But I will leave that small issue until later (if I get around to it).

There is now a cabal of mainly Southern Republican Senators blocking the current iteration of the intervention. These Senators clearly have an agenda beyond this particular intervention. Some have big foreign car interests in their states (i.e. Shelby AL, Corker TN etc.), some have visions of leading a Republican small government revival (i.e. Coburn OK etc.). Most of them have an axe to grind with unions generally. All Senators have their own parochial interests so I begrudge the first group no more than I would those Dem and Repub MI, OH, WI Senators pushing for the intervention. The latter group of small government patriots concern me as they are ideologues and ideologues can get you into some deep holes, but again that is for a diffferent post.

This post is about intellectual dishonesty. The Republicans are pinning the blame for the failure of the latest intervention on the UAW.

"...In truth, the UAW is to blame...Average compensation for the Detroit little three is $72.31. Toyota's average wage is $47.60, Honda's is $42.05, and Nissan's is $41.97, for an average of $44.20. So Corker's idea was to bring that $72 a lot closer to that $44."

--Kudlow via the conservative Real Clear Politics site

We posted on this last month(http://treylaura.blogspot.com/2008/11/gm-et-al-what-to-do-part-6.html). The $70+/hr figure is an average reflecting the salary and benefits of not only current GM/Ford workers but the retiree costs at those firms as well. There is a gap between current compensation of the domestic autoworkers but the gap is small and rapidly decreasing (despite the fact that most of the foreign owned auto companies are located in lower cost areas, but again a separate topic).

A guy like Kudlow knows this but attempts to perpetuate a stereotype to further his right-wing agenda. That is intellectual dishonesty. I hate intellectual dishonesty. More posts to come.
http://www.realclearpolitics.com/articles/2008/12/whos_losing_the_us_car_busines.html

When Ideology Trumps Realism

TW: I have mentioned previously the danger of ideology over realism. One of the worst offenders in this respect is Larry Kudlow, conservative economist and CNBC host. Investors must be as politically agnostic as feasible. Kudlow and places like Fox Business who are primarily cheerleaders for the Republicans do great disservice to investors. First Kudlow refused to see any clouds emerging in his so-called "goldilocks economy" then he continues to push the same tired mantra, tax cuts, tax cuts, tax cuts.

From Kudlow via the National Review's den of inequity The Corner Blog from one year ago Dec, 2007:
"There is no recession. Despite all the doom and gloom from the economic pessimistas, the resilient U.S economy continues moving ahead...defying dire forecasts and delivering positive growth. In fact, we are about to enter the seventh consecutive year of the Bush boom...Earlier today, a doom and gloom economic forecast from Macro Economic Advisors was released predicting zero percent growth in the fourth quarter. This report is off by at least two percentage points. These guys are going to wind up with egg on their faces...Down in Washington, Democrats are stuck with a Keynesian message of economic pessimism, spending increases, and tax hikes to finance their big government proposals. Unfortunately, they still refuse to acknowledge that tax rates have a profound effect on behavior. This kind of tax and spend, big government, Walter Mondale approach may come back to haunt them at the polls next year. The GOP, on the other hand, has a positive supply-side message of limited government, lower spending, and lower tax rates... That's just one reason why—not to mention what I expect to be continuing growth in 2008— I believe the economic pendulum will soon swing in favor of the GOP. There's no recession coming. The pessimistas were wrong. It's not going to happen. At a bare minimum, we are looking at Goldilocks 2.0. (And that's a minimum). Goldilocks is alive and well. The Bush boom is alive and well. It's finishing up its sixth consecutive year with more to come. Yes, it's still the greatest story never told."
http://corner.nationalreview.com/post/?q=NmZlZjlhYTFjYTQ2YWViZmE3MmUzNWQzODE3NDhhNTQ=

Greatest Hits: Larry Kudlow

TW: (Originally posted 9/12/08)Just in case any of you should ever run across Larry Kudlow on CNBC, a particularly dangerous species- the investment/economics pundit with a strident political agenda whose focus instead of making you money is to WAG THE DOG

From the Economist:
"LARRY KUDLOW might know less about markets than any other prominent business television persona out there. It's always amusing to watch an ostensibly serious figure argue in front of millions of people that markets fell on one day because a certain candidate won a primary battle or rose on another day because a new poll showed a jump in Republican numbers...But this takes the cake...

Mr Kudlow writes [speaking of Palin]: 'Even the financial pages are looking better. Oil is about to drop under $100 a barrel. Gold is plunging. And the greenback continues to rally in true King Dollar fashion. Is there a Sarah Palin effect here, too?'

Under any circumstances, the argument that a vice-presidential choice...had rejuvenated American markets would be ludicrous. But Mr Kudlow is writing this about an individual whose brief stint as nominee has occurred during a fortnight of disastrous economic news. American markets are down something like 6% since Mr McCain announced his choice at the end of August. The federal government has just bailed out two massive mortgage agencies, and two other financial firms—Lehman Brothers and Washington Mutual—are on the brink of collapse, their shares having tumbled to practically nothing in a matter of days. And of course, drops in commodities are widely seen as a sign of economic pessimism. The prospect of subtrend growth for months or years is expected to reduce demand for such resources."

Economist: Please Do Not Listen To Larry Kudlow

TW: Just in case any of you should ever run across Larry Kudlow on CNBC, a particularly dangerous species- the investment/economics pundit with a strident political agenda whose focus instead of making you money is to WAG THE DOG

From the Economist:
"LARRY KUDLOW might know less about markets than any other prominent business television persona out there. It's always amusing to watch an ostensibly serious figure argue in front of millions of people that markets fell on one day because a certain candidate won a primary battle or rose on another day because a new poll showed a jump in Republican numbers...But this takes the cake...Mr Kudlow writes [speaking of Palin]:

'Even the financial pages are looking better. Oil is about to drop under $100 a barrel. Gold is plunging. And the greenback continues to rally in true King Dollar fashion. Is there a Sarah Palin effect here, too?'

Under any circumstances, the argument that a vice-presidential choice...had rejuvenated American markets would be ludicrous. But Mr Kudlow is writing this about an individual whose brief stint as nominee has occurred during a fortnight of disastrous economic news. American markets are down something like 6% since Mr McCain announced his choice at the end of August. The federal government has just bailed out two massive mortgage agencies, and two other financial firms—Lehman Brothers and Washington Mutual—are on the brink of collapse, their shares having tumbled to practically nothing in a matter of days. And of course, drops in commodities are widely seen as a sign of economic pessimism. The prospect of subtrend growth for months or years is expected to reduce demand for such resources."