Thursday, February 24, 2005


Lawrence Kudlow is a former Reagan economic advisor, a syndicated columnist, and the host of CNBC’s Kudlow & Company.

Larry wrote an optimistic piece yesterday. He quickly received 50 odd comments. I couldn't resist the opportunity. The following is a copy of my response.

Amen Brother Kudlow! The nit pickers totally miss the law of substitution. Lower taxes on dividends suggest higher relative demand for stocks versus bonds. Expansion of Roth accounts suggests higher relative demand for stocks versus bonds. Reform of Social Security suggests higher relative demand for stocks versus bonds.

Americans were frightened into hoarding wealth in government debt. To avoid a deep recession, Mr. Bush and Mr. Greenspan provided the paper. America's wealth has never been higher. As confidence grows, billions will be shifted from bonds to stocks; bull market ahead!

The nit pickers do not understand that the falling dollar is the cure not the curse for the world economy. They do not understand that a declining dollar goes hand and hand with low long term rates. They do not even understand that the next risk will be that the world economy grows too strong; not to worry now as excess resources abound.

Those ready to bet against Mr. Bush passing Social Security Reform are making a big mistake. Some of the budget deals that will have to be made will be unfortunate but Mr. Bush has the long term interest of America at heart. An Amtrak line, a crop subsidy or even an army base or two may be "saved", but the reform of Social Security, a terrible drag on the American economy, must be fixed.

Your optimism is well placed. Mr. Bush is on a winning streak as is America. God bless the USA.