Unleash Prosperity Hotline #1014

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Unleash Prosperity Hotline
Issue #1014
05/08/2024
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1) For More Prosperity the Fed Needs a Price Rule

It’s not much of an oversimplification to say that on monetary policy, a major difference between the left and the right is that WE want a rules-based monetary policy, and the left wants the Fed to make up the rules as they go along. That’s been the Jerome Powell approach, and with prices up just under 20% in just over three years, how is that working out for us?

CTUP co-founder Steve Forbes and our friend Judy Shelton have argued for a gold standard. Others of us have called for holding an index of commodities constant, or some such price rule. That is what Paul Volcker used in the early 1980s to conquer a decade of inflation.

A must-read piece in the WSJ by Jeff Yass of Susquehanna Capital, argues that the “make it up as you go along” strategy only creates arbitrage opportunities for speculators and lowers growth by as much as one-half percent per year. That seems high to us. But even if he’s only half right – this means an announced rule that the Fed abides by will provide a stable value dollar and reduce investment risk, which would make America a lot richer over time.

Economists generally assume the equity risk premium—or the amount of extra money you can expect to make for bearing risk—is about 25 basis points per volatility point. A 10% increase in volatility increases the expected return or cost of capital by 2.5%. That’s one of the unintended consequences of the Fed’s interfering in the market—without which we could expect much lower volatility. Higher cost of capital means less investment, which results in fewer goods and services that the world needs.”

Let's hope the next Fed chairman adopts this strategy.

Jeff Yass, Managing director and co-founder of Susquehanna International Group.

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2) With Inflation Surging, Fed Might Hike Before They Cut

Here's a surprise headline from a regional Fed president:

"That's not my most likely scenario, but I also can't rule it out," Bush bailout chief turned Minneapolis Fed president Neel Kashkari said yesterday.

Why the change of tune? As we've reported, the data show inflation accelerating again in recent months.

Kashkari posted this on the Minneapolis Fed website to back up his point:

No wonder voters think prices are rising again – even the Fed thinks so. Here's the latest from pollster David Winston:

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3) Elite Colleges Are as Liberal as You Thought

This College Pulse survey written up by former 538 polling ace Nate Silver finds some eye-popping numbers consistent with our own "elites" polling earlier this year:

Now we know why the Marxist tent cities rallying for Hamas have found such a receptive audience. What we still don't understand is why Congress continues to fund these institutions to the tune of billions of taxpayer dollars every year.

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4) A Useful Reminder of the Benefits of LEGAL Immigration

We worry that Biden’s outrageous open border policies have masked the huge benefits of legal immigration.

The story of Indian Americans is astonishing – with their median annual household income being $119,000.

"Although they make up about 1% of American society, they pay about 6% of the taxes,” says GOP Congressman Richard McCormick, who represents many Indian immigrants in the Atlanta suburbs. “They're amongst the top producers, and they do not cause problems. They follow the laws.”

He adds: "One out of every five doctors in my community are from India. We should streamline the immigration process for those who come here to obey the law and pay their taxes and be the most creative and productive in society.”

A recent National Bureau of Economic Research paper by two University of California at Davis economists concludes that immigrants to the US boost both wages and employment for native-born Americans. Skilled immigration results in an occupational upgrading of the jobs held by the native-born, raising wages for even less educated workers.

Just a useful reminder that legal immigration is still one of America’s great comparative advantages.

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5) Climate Panic May Finally Be Post-Peak

Have you noticed that climate change fanatics have become even more strident lately, blaming rising temperatures for everything from fewer fish to drought to earthquakes to higher insurance premiums?

We believe Americans are on to the over-the-top climate hysteria, and polls show it.

Take the new Monmouth University poll, which has been surveying Americans for a decade on climate. While over 70 percent of Americans say they accept the existence of climate change, the number who see this as a very serious problem has fallen to 46 percent of respondents. That’s down from 56 percent in 2021. The drop in the perceived importance and urgency of climate change has been most pronounced among younger adults.

Among young people between the ages of 18 and 34, those who see climate change as a very serious problem has fallen to 50 percent, down from 67 percent in 2021.

Climate concerns are also heavily bunched in certain demographic categories. While 77% of all Democrats believe climate change is very serious, only 43% of independents and 13% of Republicans do.

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6) Biden's Plan for Campus Hamas-Supporters

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