Memo To: the Internet
From: Jude Wanniski
Re: Spreading the Good News
Since we came to the World Wide Web in April 1996, we have discovered the pleasures of meeting a great many people from cyberspace who share our passion for public affairs and the political economy. The list grows longer every day and we wonder how we can ever keep up with the names and personalities, but somehow we do. We think of Zilko, Christina, RhinoPrino, Ho we, Muggeridge, JAG, the fellow from Emery U., the legislator from Honolulu, the clever crank from London, Scott I and Scott II, von Mises, and on and on. For the first six months, we never topped 35 hits a day, and I wondered if it was worth the time and effort I was squandering on this new world. But without any publicity — except a single line we got in NATIONAL REVIEW, courtesy of John O' Sullivan -- word of mouth and e-mail has gotten us to a sturdy plateau of 650 per day. Registered students at Supply-Side University are now at 160 and the folks at Polyconomics who thought I was wasting my time and energy are finally realizing that it may be worthwhile after all. Vlad Signorelli and Paul Bond, who created the website and everything that goes with it, can now imagine us at 6500 hits not long from now and I can imagine 65,000. And without spending a fortune, a la Bill Gates and his Slate, or using porno graphics, a la you-know-who.
Not that I expect to ever "make money" on this. The reason it is working is that I have no intention of ever turning this into a profit center for Polyconomics. When I'm asked why I do it, I say only that it is my form of philanthropy. Ted Turner and Bill Gates are rich enough to give away a billion here or there. I'm not that rich, but through the Internet I can imagine myself having a bigger influence on the way the world works than others do by writing checks. Like a "Field of Dreams," I thought I need only build it, and you will come. And you have. You self select by coming in and staying, or leaving, instead of me having to go out and round you up. For years, since I had my dazzling insight to the mechanisms of the world political economy, I could never figure how I could overtake the economics profession, which owns all the colleges and universities and high schools and their textbooks. Just at exactly the right time, a divine hand delivered the Internet, and told me how to proceed. There are six billion people on earth, the great majority of them living in great poverty, with almost no hope of getting out of it. Now there are people who care about them, in every corner of the planet, who can link in with us to learn what it takes to dig them out. By linking together, we may even be able to defeat the Death Star, my term for the free-floating menace of the International Monetary Fund.
We can continue to let this happen as a matter of course, but on this Thanksgiving weekend the idea came to me to ask you to give it a push. To think of a man or woman you know, someplace near you or far away from you, who does the Internet, and who might like to be a part of this marvelous enterprise I am describing, and spread the good news. It could even be a local business reporter you know or an economics teacher in a local high school or college. Most of the people who come in will do so only in order to enjoy being part of this extraordinary discussion about the future of the world. They would normally have no ability to influence it much beyond their votes or local letters to the editor. And that's all to the good. By tuning in others they know have the youth or energy or time or influence, though, they will have the satisfaction of knowing they leveraged themselves into something bigger.
To tell you the truth, several months ago I asked three dozen editors and columnists I've known for decades to give Supply-Side University a boost, with a mention that it is available here, free of charge. That was what produced the single line in the National Review. I was astonished at how many responded by telling me it would be unethical for them to promote what I am doing by telling their readers about it. Some of the same periodicals and newspapers routinely run stories about how shocking it is to find certain websites that appeal to purient interests — and then telling their readers how to find the website. If I ran a photo of a nude supply-sider on our home page, it would enable The Wall Street Journal to write a page one story and an editorial about what we do here. If I don't, it is not news that at <www.polyconomics.com> you can learn classical economics, which is not taught anywhere else in the world, excepting a class here or there by a student of Bob Mundell or Art Laffer. How can the world economy function in the 21st century if every head of state, finance minister or central banker has a PhD in demand-theory, which assumes that if consumers have money in their hands, production will occur automatically?
So I make this appeal once again. Don't knock yourself out, for goodness sakes. But take a moment or two to think of whom you know who might be interested in what we do here, and alert them. It takes no more than hitting the print button to get this message on hard copy, to then send out by fax or post on your office bulletin board. The more people who come in, the richer the curriculum will be, the sooner we will be able to put a more positive spin on this planet Earth. Happy Thanksgiving.
Our Deflation Warnings This Year
The Polyconomics surveillance of Federal Reserve Board monetary policy is simply the best there is. Paying particular attention to the dollar-gold price, we were able to forewarn clients well in advance of the October 27, 1997 stock market rout, that the Fed's deflationary tilt was ushering in market volatility. We warned about the Asian flu in July! Here are a few examples we think were especially prescient concerning this year's Fed policy:
Where is the Fed taking us? — On February 12, 1997 in a client letter entitled, "Fedwatch: A Whiff of Deflation," we alerted clients to the three month decline (to around $340/oz.) in the price of gold — gold being the best forward looking indicator of incipient inflation or deflation — as "taking on somewhat more ominous overtones... Trading at near a four-year low, the price of gold is now unmistakably manifesting a dearth of dollar liquidity, calling for a monetary response to offset the deflationary impulses."
Down Goes Gold — Since the 2-12-97 client letter, gold would remain mostly within the $340-360 band. Yet, on the eve of successful legislation for the reduction of capital gains taxes, our June 27 letter, "A Few Thoughts for the Weekend," noted with caution as the dollar-gold price fell below $340. "The gold price continues to edge down as the economy expands, demanding more liquidity. At $336 it is at a four-year low...As gold inches toward $330 under these market conditions, a successful tax bill signed by the President will only increase demand for liquidity. Greenspan must find some way to educate the market that the tax cuts will expand productivity and raise national living standards — as long as they are not offset by a monetary squeeze. If he doesn't, the fiscal expansion will have to struggle against monetary deflation."
Gold At $320 — What This Means For World Markets. On July 9, 1997, "Gold At $320," we warned clients of the gold price's deleterious effects on the international economy, especially the dollar-linked economies of Asia. "One of the worst effects of gold at $320 is that the Fed's monetary error on the deflation side is being transmitted to all countries in the world, to one degree or another. Small countries that have been tying their currencies to the dollar are dragged into a deflationary squeeze with far greater rapidity than the U.S. itself...Unless Greenspan can soon get out of the corner into which he has painted himself, he will do more damage to Hong Kong than Beijing could do if it tried... The problem for the world is that because of the movement toward a budget agreement here, with at least a reduction to 20% in the capital gains tax, there is relief on that score to the deflating dollar. It gives the Fed a sense of domestic security, even though it is causing international trouble. As long as Greenspan does nothing, the rest of the commodity universe has to gradually follow in train, with oil first inline."
Gold Levels Below $340 — With the continued deflationary bias ~ gold remaining between 317-329/oz. — we apprised clients of the added risks in international financial markets, on August 15, 1997, "Fedwatch: Deflationary Disturbances. "An increasing source of risk is the outlook for the dollar's parity relative to the other major currencies as the dollar/gold price remains in its deflationary mode. Just as this phenomenon was the major factor in the unraveling of dollar-linked southeast Asian currencies, it is now infecting commerce and policy in Europe... The earliest disturbances of a deflationary move of the dollar against gold rippled through southeast Asia...Its effects are now rippling through the D-mark currency bloc. The currency volatility adds risks to all financial markets, with no one in the world quite sure of how policymakers will respond to these still relatively minor convulsions."
Finally, the Evidence Begins Weighing In — On October 23, 1997, with "The Asian Flu," our clients learned the Fed's deflationary policy — taking gold to $320/oz. from $385 last year — continued to be the main culprit behind southeast Asia's domino-like devaluations and the region's continued financial turmoil. "...Our economy survived this minor deflation because of the success of the budget deal and the long-awaited cut in capital gains tax. Thailand caught a cold, though, because of its currency's link to the dollar...When the dollar deflated this year, Thailand was the weakest of the Southeast Asia countries and the logical place for speculators to hammer. When its currency fell, the speculators moved on to the other countries of the region, just as they attempted to make a killing in Argentina after the killing they made in Mexico...Alan Greenspan and Treasury Secretary Bob Rubin should be on the hotseat. Instead, they are hiding in the weeds, pretending all that bad stuff going on over there in Asia is the result of bad loans by bad bankers. Greenspan will argue that these countries want to have it both ways, desiring the dollar peg for currency stability, but also wanting a cheaper currency to spur exports. This is not what's happening, though. Greenspan knows the Asians are suffering because they put faith in the dollar and his conduct of monetary policy. He also knows the $320 gold price is bad for us and bad for them, and should be lifted back to $350 by liquidity additions to the banking system. This would instantly relieve pressure on the Hong Kong dollar and the rest of Southeast Asia, China and Japan."
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