Besides stocks, other market indicators are trying to tell the
central bank: No More Rate Hikes. Copper is down 16 percent over
the past year. Inflation expectations in the Treasury bond
markets have fallen significantly. And the dollar over the past
several years has increased roughly 30 percent.
A healthy King Dollar is a good thing, and so are falling energy
prices. But enough is enough. More Fed rate hikes will raise the
dollar and reduce energy prices so much that the economy will be
completely disrupted. A stable, reliable greenback is a good
thing. But let’s not press our luck.
Now, if the Fed were operating on a true price rule, it would
keep the dollar where it is today for as far as the eye can see.
In turn that would stabilize gold and other commodities and
avoid further economic disruption.
In a speech back in 2014, former Fed head Paul Volcker argued
for a rules-based monetary policy along with international
currency cooperation. Right now we have neither. Europe and
Japan have moved toward negative interest rates while the Fed
threatens higher rates. Where is Volcker’s currency diplomacy?
Nowhere to be seen.
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
percent 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 percent 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.
Larry Kudlow is a senior contributor at CNBC. To
read more of his work,
CLICK HERE NOW.
To find out more about
Larry Kudlow and read features by other
Creators Syndicate writers and cartoonists, visit the Creators
Syndicate web page at
www.creators.com
To read more of Mr. Kudlow's blogs,
CLICK HERE NOW.