"It was the best of times, it was the worst of times."
These are indeed Dickensian times.
Regular readers of my column know that I am a bear. I believe, however, that I am not an eternal pessimist; I just see the current reality with worry.
But I do know an eternal optimist. His name is Larry Kudlow.
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Larry was guest of honor at the recent annual Newsmax Global Survey luncheon, hosted by Newsmax and MoneyNews publisher Christopher Ruddy, held each year just before the New Year here at Newsmax headquarters in West Palm Beach, Fla.
Chris brought together an eclectic and exciting mix, including former Secretary of State Alexander Haig, journalist Arnaud de Borchgrave, famed financier Wilbur Ross, Forbes magazine's Bob Forbes, pundit Dick Morris and other notables.
Despite my having some on-air disagreements with Larry Kudlow about the current state of the economy, he is a man I both greatly respect and admire.
First, Larry Kudlow has succeeded in making the normally boring subjects of finance and economics entertaining. Indeed, the proof is that his nightly TV show has recently been promoted to prime-time!
This is an outstanding achievement. In the past, many people have tried in vain to achieve a prime-time audience for finance.
Second, despite some dark clouds on the economic horizon, Larry remains upbeat. He exudes good cheer for the year ahead.
Larry is a fine, patriotic American and a shining example of the optimistic can-do attitude that has made our country great. His positive attitude contributes greatly to the latent confidence that is crucial to the long-term health of both our markets and our economy.
So what did he say that was so good?
Well, initially, he treated us to some sound economic history.
He pointed to the recent, unprecedented boom in world prosperity, and to the key contributions made by President Ronald Reagan and Prime Minister Margaret Thatcher.
The essence of their strategies could be summed up in a single word, a single word for which millions have fought and died and a word that lies at the heart of both the Magna Carta and the Declaration of Independence — freedom!
Both Reagan and Thatcher freed their people and their entrepreneurs from the dead hands of the taxman, government regulators, and both industrial monopolies and trade-union monopolies.
Then, with Mikhail Gorbachev's help, Reagan and Thatcher brought an end to the Cold War and encouraged free market capitalism to burst forth upon the world economy. The result was worldwide prosperity on an unprecedented scale — heralding a new, information economy and a technological explosion.
Larry cited the nineteenth century English Whigs as the party of national confidence and of free trade that served as the spur behind Great Britain's domination of world trade at that time. "Reagan and Thatcher rejuvenated opportunistic Whig policies," he commented.
Larry then went on to praise today's central bankers "for targeting inflation — that devastating and hidden taxman — at 2 percent."
He praised former Fed Chairman Paul Volcker who, with President Reagan's support, had become the "slayer of inflation." Until that time, Larry pointed out that the predominant political "trade-off" target had been full employment at the expense of inflation.
Since then, he asserted, "The U.S. economy has seen prosperity for 95 percent of the time — Goldilocks has outperformed the critics!"
"Recession will happen sometime, but not now! The export boom, combined with low inflation and low taxes, is off-setting the 1 percent loss of GDP due to housing," he said. "However, the inverted Treasury yield curve and the low level of increase in the Fed's monetary base show that the Fed can and should lower its key rate by 100 basis points."
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On outsourcing, Larry emphasized, "We're shedding labor in manufacturing, just as we did in agriculture in the past, only to be replaced by higher-paying jobs in healthcare, technology, financial services and by inward investment, by such companies as Toyota."
On the dollar, Larry accepted that the greenback has fallen by some 50 percent from its historic high against the euro, which is itself now overvalued. Indeed the dollar, when measured against the standard basket of 26 currencies, is now about where it was in 1996-97. It is substantially above where it was in 1980, and in 1973, when Nixon closed the gold window.
"The importance of the dollar decline is overrated; no one should lose any sleep over it! It really does not matter, as the dollar is still the world's reserve currency, with 70 percent of international transactions still denominated in U.S. dollars versus only 20 percent in euros," Larry pointed out.
Larry then demonstrated to us how people misguidedly tend to concentrate on America's liabilities, while ignoring America's assets, which are predominant and vast. "Corporate and household wealth creation have never been stronger!" he said.
Finally, Larry turned to the China question.
"It is total nonsense to call on China to revalue its yuan by 40 percent as some politicians are pressing for. It has already revalued by about 10 percent against the dollar," he said.
He went on to explain that, "even the $20 paid for a pair of imported Chinese sneakers served to purchase U.S. Treasury bonds held on China's account at the New York Fed."
"So we end up with both the sneakers and the actual money! In short, the U.S. dollars owned by the Chinese are their ‘crown jewels.' They will not disrupt our dollar."
Larry summed up by reminding us all that "America is both the best customer and the best producer in the world; 5.6 million U.S. companies are still paying tax to the IRS, because overall profits are rising. So don't worry about our dollar!"
Larry kept his personal remarks about our presidential candidates off the record. However, he did say that he was looking for a candidate who was not necessarily a micromanager.
"You can always employ micromanagers. What I am looking for is a candidate who represents leadership and vision!" he said.
And so say all of us at Newsmax!
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