Wednesday, June 07, 2006

Protect the Dollar

My old friend, and frequent Kudlow & Company guest, Brian Wesbury, basically has the economic story right in today’s Wall Street Journal. (“Economic Rehab”)

I’m not so sure about a 6 percent fed funds rate being “monetary policy nirvana” however.

Right now, futures markets are saying 5.25 percent is adequate, and this could drop to 5-percent by the end of next year. But this whole debate is just a trifle; the reality is we’re in an economic boom. It’s still the greatest story never told.

And if the Fed drains cash to remove inflationary money, in order to protect the value of the greenback, then I’m a happy camper.

Remember, the Reagan economic growth model is all about low tax rates to spur growth, and a steady, stable, firm dollar to contain inflation. The Bushies got the tax rates right, but they have neglected the dollar.

So long as Mr. Paulson and Mr. Bernanke protect the dollar, then this boom will continue along for years to come and stocks are undervalued.