March 30, 2002

Larry Kudlow would like to

Larry Kudlow would like to see Dallas Fed president Bob McTeer replace Alan Greenspan. Not a bad choice. I met him last summer at a conference on the French libertarian, Frederic Bastiat. For a man like McTeer, to come to an event filled with people opposed to your very job is a sign of his self-assuredness. McTeer's a Bastiat and Adam Smith fan. He's an ardent free trader, and being in Dallas, he sees the good results from expanded trade with Mexico. Having an intellectual foundation of free market learning is essential in a good Federal Reserve Chairman. Also very important is an nominee's view of macroeconomics. Kudlow points out that McTeer rejects the Phillips Curve relationship between "falling unemployment and rising inflation." Inflation is a monetary issue. It's simply too much money chasing too few goods. McTeer knows this and Kudlow believes he wouldn't be trigger-happy at any hint of good economic news.

But still, why not Kudlow for Fed Chair? His credentials are Wall Street, but that gives him an intuitive sense of how the market would react to Fed actions. Kudlow also believes in a stable dollar and wouldn't be afraid to lower interest rates to levels others (Paul Krugman) would consider ridiculous.

One big drawback to Kudlow as Fed Chair is we wouldn't have the privilege of hearing him comment in papers, on CNBC, or the Web. But I'm willing to sacrifice to get a free market, supply-sider as the world's top banker.

"Why Not McTeer?"