Lawrence Kudlow: Fed Freaks Out About Markets It’s Unable To Read

Investors Business Daily ^ | Feb. 1, 2016 | LAWRENCE KUDLOW

[expat_panama]

Early in the new year, on Sunday, Jan. 3, Federal Reserve Vice Chairman Stanley Fischer delivered a hawkish speech to the American Economic Association. Completely misreading the economy, which is woefully weak while inflation is virtually nil, Fischer strongly hinted that the Fed would be raising its target rate by a quarter of a percent every quarter for the next three years.

The next day, Standard & Poor's 500 index dropped 1.5%. In the week that followed, the broad index fell 6%. The week after that, it fell over 2%. During that two-week period, the Dow Jones dropped 1,437 points.

The dollar went up. Oil plunged 21%. Raw material commodities dropped. And credit-risk spreads in the high-yield junk market rose substantially.

Actually, it was a global event, as stock markets around the world plunged. Utter chaos.

Then the Fed retreated...

[snip]

Thankfully, there's a way out of this mess. Let the Fed keep interest rates and the dollar stable. No more tightening.

Meanwhile, the Republican Congress can pass a significant tax cut for large and small businesses. Push the rate down to 15% for C-corps and S-corps. Provide easy repatriation of U.S. money overseas. And permit immediate tax write-offs for new-business-investment expenses.

Congress could also push for reduced regulatory burdens, although it looks like there's no stopping the Obama administration's unconstitutional march toward even greater regulations.

But a big business tax cut would be the most stimulative way to move the economy from near recession to 4% or 5% growth. That's what we need. Put it together with a stable and reliable dollar, and we can move from pessimism to optimism.

It's been done before. We can do it again.

[expat_panama]

Stocks ended up OK yesterday and today the futures traders says it's either OK or bad --this is the same daja-vu we had yesterday.  Wait, oh yeah it's

GROUNDHOG DAY!!!!!!!

At least this time the only reports we get hit w/ are Auto & Truck Sales later this aft. 

Silver's flat but gold's inching up; and in case of boredom:

I Love Wall Street: An Engine of Prosperity - Ben Stein, American Spectator
Laurence Fink Takes Investors to Task - A. Ross Sorkin, New York Times
Why Peak Profits are a Big Problem for Wall Street - Shawn Tully, Fortune
If It's a Recession, Stocks Have Much Further to Fall - George Perry, RCM
How to Escape Market Meltdown Mentality - David Kaufman, National Post
Ignore the Pundits, Oil's Fall IS the Boom - John Tamny, RealClearMarkets
Japan's Experiment w/Rates of Less Than Zero - Noah Smith, Bloomberg

[lucky american]

Larry is an idiot. Companies like GE, Microsoft, and Google aren’t paying any taxes now.
Bernie Sanders is right about one thing. Banks are bigger now than they were before the bailouts. Larry wants the free money flowing and to hell with what’s right.

[Alberta's Child]

Most of the measures he proposes seem to be aimed at small and mid-sized businesses, which sure do pay a hell of lot of money in taxes.

[glorgau]

Why do they keep insisting there is no inflation?

While the cost of gas has returned to previous levels, practically everything else needed for daily existence - food, rent, etc - continues to steadily increase.

[CincyRichieRich]

They still should do it even though 00beyama will veto it.

[Moonman62]

Thankfully, there’s a way out of this mess. Let the Fed keep interest rates and the dollar stable. No more tightening.

...

Kudlow’s close. The Fed should primarily look at the bond market and the yield curve in order to keep everything stable while the economy grows and wages increase.

Too bad the Fed’s actual goal is to keep wages suppressed.

[central_va]

But a big business tax cut would be the most stimulative way to move the economy from near recession to 4% or 5% growth.

BS, cut income taxes and make up the difference with import tariffs. US economic goes thru the roof.

[JudyinCanada]

Agreed - when I saw that inflation was pretty much nil, I wondered if they had been shopping for a steak or cauliflower lately. Heck, never mind the steak, just ground beef. Heck, never mind the ground beef, six SOUP BONES with marrow were $12 the other day.

The only thing I can think is that perhaps gas and heating fuel are low enough that it’s offsetting the ridiculous price of groceries. Thankfully, wine is holding steady.

[tbpiper]

Why do they keep insisting there is no inflation?

They must not have bought groceries in a while. A 1 pound package of bacon is now 12 ounces for the same price generally. Old recipes will call for a 16 ounce can of something that now only comes in 14 or 15 ounce sizes. Seems the prices stay the same while the content shrinks.

[kearnyirish2]

That’s right, but they’ll point to the gas prices to say there is no inflation (and therefore they don’t have to increase Social Security payments). This way they keep it solvent longer while maintaining the lie that there is a “recovery”.

We’re doing exactly what Weimar Germany did and expecting a different outcome.

[expat_panama]

...no inflation?     - food, rent, etc - continues to steadily increase.

That's sure how everyone feels, especially on these threads.   The disconnect here is that the article is not referring to feelings but rather to recorded transacted prices of things spend money on.  That grand total hasn't changed since 2014 and actually went down last month.

[rstrahan]

Food and energy are intentionally excluded from the inflation index. It was the only way the govt could say they reduced inflation.

[MRadtke]

I've been noticing the same thing. Its actually quite significant. 16oz. ring sausage is now 14oz. And it isn't beef or pork, its mechanically separated chicken. Yech.

[Auntie Mame]

Companies like GE, Microsoft, and Google aren’t paying any taxes now.

This is a lie. Just because something's been repeated over and over (by the likes of Elizabeth Warren, Bernie Sanders, Hillary Clinton and others) doesn't make it true.

[kearnyirish2]

What is the index where they compare a bag of groceries? I seem to recall that such a thing was used in the past.

This is a short-term scheme to screw people on government fixed income while maintaining an illusion of recovery. For all intents and purposes (at least here in the northeast) discretionary dollars for most people are gone.

[expat_panama]

GE, Microsoft, and Google aren't paying any taxes now.

Wow, people sure do make up terrible things about businesses these days.  Sure, the rest of us just check the annual report of say, Microsoft and find on page 31--

Our effective tax rate for fiscal years 2015 and 2014 was approximately 34% and 21%, respectively. The fiscal year

--but some freepers just hate business so much they'll see what they want and ignore the rest.

[tbpiper]

Sounds yummy.

[expat_panama]

Food and energy are intentionally excluded from the inflation index.

That's a hoot!  Soooo many folks passing that one around, I even heard Rush say that once.

[expat_panama]

GE, Microsoft, and Google aren't paying any taxes now.

This is a lie.

'Fraid so.  The fact that crazy lefites spout it is to be expected, but how come we get that cr@p here?