If we care about the future of the economy, then we have to pay close attention to the policies that shape it.
We are currently living in an age of extreme -- and in certain cases, unprecedented -- levels of monetary and fiscal policy.
Is that wise?
Or should market forces be allowed to play out more & free us from the constant intervention of the central planners?
To explore this, we welcome economist Dr Arthur Laffer. Dr Laffer was the first to hold the title of Chief Economist at the Office of Management and Budget in the early 1970s. He then later served as a member of President Reagan's Economic Policy Advisory Board.
He's perhaps best known for developing the Laffer curve, a model for determining the optimal balance between tax revenues and economic growth.
Dr Laffer observes the major nations of the world as declining into a sclerotic senescence economically.
BUT...he sees a way for us to reverse that plight, on a timeline that could be much faster than many imagine is possible.
The key question is: Will we have the conviction, courage and commitment to embrace the necessary reforms?
Here are my top takeaways from the interview:
Dr Laffer evaluates the current state of the global economy through the lens of the "5 kingdoms of macroeconomics," which encompass taxation, government spending, monetary policy, regulatory policy, and international trade. He frames his assessment within the context of a period of global economic decline/senescence since the 1990s, citing indicators such as declining growth rates and economic struggles in various countries.
Taxation: Dr Laffer advocates for a low-rate, broad-based flat tax system to encourage hard work, minimize tax evasion and provide stability. He believes the current tax system is taxing “too much”, leading to poorer outcomes.
Government Spending: While acknowledging the necessity of government involvement in areas like infrastructure and defense, he argues that
excessive government spending — as we have now — can hinder economic growth. He calls for spending restraint.
Monetary Policy: Dr Laffer emphasizes the importance of stable currency and monetary policy to facilitate long-term contracts and investments. He criticizes the current state of monetary policy for its high inflation and unstable balance sheets.
Regulation: He acknowledges the need for regulations but warns against overregulation, which he believes can cause collateral damage to the economy by strangling growth. Dr Laffer suggests that certain regulations, particularly in energy and other sectors, have become excessive.
International Trade: Dr Laffer highlights the benefits of international trade based on comparative advantage, arguing that countries should specialize in what they produce efficiently. He argues that trade liberalization can enhance economic efficiency, promote innovation, and create opportunities for economic growth. He cautions against protectionist measures, weaponization of the dollar and instead advocates for extensive trade relations with Arab nations, North Korea, China, Iran and Russia citing the potential for trade to foster collaboration, peace, and prosperity on a global scale. He references historical shifts in trade policies and their correlation with economic outcomes, such as the success of trade policies during the Reagan administration, contrasted with the failures of the Biden administration.
Dr Laffer is optimistic reforms can happen in the future if the right transformative leader emerges. History shows that when a political shift occurs, thrusting such a leader into the spotlight, it leads to widespread recognition of economic issues and the adoption of policies conducive to prosperity. He envisions this shift expanding globally, bringing about positive change on an international scale. And it happens quickly (within 2 years or less).
For the full interview of this discussion with a respected economic advisor to nearly every President since Nixon, watch the below video:
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