The Pessimism Machine

PART I

King Dollar

The New York Times is at it again with a long hit piece on the American economy and the dollar.

Virtually every claim they make is factually wrong.

I’ve got a couple numbers for you. Maybe the most important error in the Times piece was their failure to cite that 89 percent of foreign exchange trades are dollar based. Now if that isn’t King Dollar, I don’t know what is.

And the principal stablecoins are dollar-denominated. And foreign investors have bought around $263 billion of Treasuries over the past year, and these government yields have gone up mostly because of a strong economy is raising real interest rates.

This is a healthy return to normalcy.

Meanwhile, the Times’ biggest cheap shot was some mumbo jumbo about Norway’s wealth fund pulling out of the United States and unfortunately for the old Gray Lady, that’s completely untrue, factually.

And then the old saw that Treasury Secretary Scott Bessent is repurchasing off the line old Treasuries in order to somehow fix prices and yields. Wrong. Mr. Bessent has denied this. As an old Wall Street hand, he knows well. You’re not going to be able to fix prices in a $32 trillion market.

Yet what he is doing, is adding liquidity by buying back old issues and putting in new ones. And of course the Times, in a mob-like assassination attempt on the American economy and King Dollar, never mentions the incredibly good news where median real income just hit a record high, and poverty rates just hit a record low, including children’s poverty.

Almost anyone can see last month’s incredible jobs number which is an increase of about 220,000, including upward revisions, plus the boom in business investment, capital expenditures, and the AI boom, which is rising at a 20 percent year on year rate.

The inflation rate’s coming down gradually. And the Atlanta Fed just estimated a 5.1 percent real GDP growth rate for the third quarter, ending September 30. President Trump is right. This is the hottest economy in the world by far.

None of this was in the piece. Shame on the Times. Shame on the reporter. At the same time, Mr. Trump and the GOP could use a better loudspeaker for all this good news.

PART II

The AI Alarm

Hat tip to Attorney General Todd Blanche for wondering out loud why all of a sudden the press and the Democratic Party, including President Obama and Senator Bernie Sanders, are suddenly hyperventilating over the hyperscalers on the eve of an important midterm election, where Democrats have insanely nominated a bunch of hyper socialists who are gonna get whooped on November 3.

By the way, the hyperventilating press is also trying to force the Federal Reserve to raise the interest rate. As Mr. Blanche put it earlier this afternoon in today’s press briefing:

This should not be breaking news that this issue that suddenly comes up two months before an election is being held, the president calls it a hoax. The way this has come around today and not three months ago.

The attorney general added that:

I was watching the news today. Every Democrat senator suddenly races to a microphone to talk about it after being eerily silent for months and months, a month. So to talk about the timing of this as being nothing but an effort to to influence the midterms.

Am I supposed to believe that suddenly these AI bosses are pleading for more government regulation? Really?

The White House technology advisor, David Sacks, is right. You want to slow things down? Go ahead and slow things down. It’s a free country.

Yet President Trump is right. It’s a free enterprise country. And Mr. Sanders is wrong. The government must not and will not run this whole AI story.

And the big AI companies have to face antitrust law and product liability exposure. They’re not getting around that. And we’re not going to set up some kind of world peer review testing operation that includes Communist China and our other communist enemies.

So stop talking nonsense. And we’re not gonna let 27-year-olds who can’t hold a job dictate the entire business landscape for AI. I mean the guy can’t even hold a job, and people are listening to him. Really? Putting him on TV, really?

Once again Mr. Sacks is right, this smacks of an election season psy-op run by the lefty press.

Why don’t you take out regulatory capture and liability exemption? All you’re doing is allowing these robot companies privileges they should not have. Including financial privileges they must not have.

Yet the press seems bound and determined to allow this to continue. Or is this just Anthropic ginning up interest in its $100 billion stock offering which might be valued at $2 trillion? I wouldn’t want any product liability or antitrust law breathing down my neck with those kinds of numbers.

Which brings me to another point, why is the press, including the Wall Street Journal’s news pages, trying to force the Kevin Warsh Fed to raise interest rates?

Almost on a daily basis, another story or two or three.

How bad is inflation? It’s really not all that bad.

The brilliant economist John Rutledge has posted an interesting Substack piece. 

He is arguing that if you take out the owners equivalent rent category, which is a third of the core consumer price index, even though it is a nonsensical line item that does not measure the cost of living, and is a quote “wholly made up concoction,” then the 12-month change in the core CPI is just 2.1 percent. Just about on the Fed’s 2 percent inflation target.

Meanwhile, there’s a lot we don’t know about the duration of temporarily high oil prices. Yet the press keeps pounding away that the Fed must raise their target rate, not so much because we have a big inflation problem, but because Mr. Trump doesn’t want the Fed to raise rates. Isn’t that really the press story?

In much the same way that Mr. Trump does not want the government to regulate AI, because he doesn’t believe in the doomsday scenarios. And he does believe that whoever wins AI will win because it will be the greatest economic development engine in history.

Guess what? Mr. Trump is right and the press is wrong, on AI and probably on Federal Reserve inflation also. Oh yes, and by the way, he’s right to talk about those tax cuts if he and the Republicans win the midterm elections. And the press will be wrong about that also.

Lawrence Kudlow is a Fox News Media contributor and host of both “Kudlow” on weekdays and the nationally syndicated “Larry Kudlow Show” each Saturday. This column is adapted from his monologues on “Kudlow.”