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Dan of FMT: Greetings and thank you for joining us at I’m here with Steve Moore. He was a former Chief Editor for the “Wall Street Journal” and now is the Chief Economist for the Heritage Foundation. Thank you for joining us.

Steve Moore: Hey, great to be with you. Thank you.

Dan of FMT: A pleasure to see you here at a Casey Summit. You know, Casey Research puts on these great conferences.

You’re a big free market advocate. What’s your overall assessment of the US economy right now? Is the US in recovery? Because a lot of people…The Dow’s at an all‑time high, but I talk to a lot of people. They just don’t feel like ‑‑ it just doesn’t feel like the ’90s or something. The US economy feels like we never left Lehman.

Steve: Yeah, you’re right about that. This has been a recovery that, we’ve grown, since June of 2009 when the recession officially ended, the growth rate has been about two percent. That’s pretty flimsy, really pretty pitiful, given how deep the economy fell. Usually when you have a deep recession you have a real rapid catch‑up period.

Dan of FMT: Snap back.

Steve: Right, snap back, that’s good. We haven’t really seen that. I mean, if you look in the Reagan years, for example, there were quarters when we had seven, eight percent growth. We haven’t come anywhere near that, and so there is a growth deficit.

It’s also true if you talk to the man on the street, look at polling, half of Americans think we’re still in a recession. So there is that negative kind of attitude, because a lot of people haven’t seen income gains. To put it very simply, the average American worker hasn’t seen a pay raise in six years.

Going forward, I’m a little more optimistic than most people here at this conference. I’m not a gold bug. I mean the gold price has gone from $1,800 to $1,250 or something like that, so it’s been a tough period for the gold.

One of the interesting things that’s happened to the economy as I look, just in the last three or four months, has been the dramatic rise in the dollar, relative to other currencies and the gold. That is a bullish sign for the US economy because it means capital is flowing into the United States.

Dan of FMT: Do you think the precious metals falling could actually be an indicator of deflation? Could the metals be leading the way?

Steve: Maybe, you know you never know. I’m not a big believer that we’re going to see deflation. In fact I think if anything we’re going to start to see inflation rates and interest rates rise. Not a lot, but it’s tough to say. That’s a tough call to make, but I will say this, I think that if you got…my area of expertise is more looking at how the political scene is influencing Wall Street and companies.

You’ve got a President in office who is not pro‑business. He is not pro‑profits. He’s not pro‑industry, especially the energy industry. If you got some more restraints on him, and especially if you get a regime change in 2016, you could see a real potential liftoff in the economy.

Dan of FMT: Do you think we’re going to see a Rand Paul with a serious run in the Republican nominee?

Steve: Yeah, I do. I think he’s going to be very strong in 2016. I don’t know if he can win, I’d like to see him win. I’m doing a lot of work with him. By the way, if he doesn’t win in 2016, he’ll be well set up in 2000…who knows, but often times it takes one run ‑‑ a trial run ‑‑ before you win. And so…

Dan of FMT: I’m sure that’s what Hillary’s thinking.


Steve: Yeah. That was what Mitt Romney thought as well. We’ll see, but I think he’s got the message. I’m a Republican and one of the attractions to Rand Paul is not only do I agree with him a lot of things, but I think he broadens the Republican base, brings new people into the party, especially young people and, hopefully, minorities, as a way to create a winning coalition.

Dan of FMT: Now the Fed has thrown trillions at the economy. We’ve got these rock‑bottom interest rates. My question to you is, we are getting six years away now from the last recession, or five years, I guess technically. Even cyclically we are due for another recession. So what does the Fed do if we have another major slowdown?

Steve: I want the Fed to start raising interest rates. We’ve got to start withdrawing this money from the economy. It’s sloshing around out there. It has not caused inflation yet because it hasn’t been spent and lent out and invested, but I think now the prudent man theory says pull back.

By the way, I actually think when the Fed pulls back, that’s good for the economy, not bad. So I’m counter‑intuitive on that. Most people in Wall Street, they want the cheap…they’re addicted like crack cocaine to this easy money. But in the long term easy money is not a good thing. I always say no country ever devalued themselves to prosperity.

I would like to see the Fed, and by the way I have to say that Janet Yellen, so far, even though I don’t agree with her philosophy, I applaud the fact that she is pulling back on the easy money.

Dan of FMT: As a free market advocate, you do not want to see the Fed abolished, or you just accept it as part of the game?

Steve: I want to see a rules‑based Fed. I don’t even care that much what the rule is, but I think we make a big mistake putting power into the hands of one or two or three or four or five people, like she’s the wizard of Oz.

It would be much more stabilizing and pro‑growth if we had the dollar pegged to something. Gold, commodities, maybe a market basket of commodities with gold, cotton, corn, silver, and let everyone know what the rules are.

Because right now you’ve got this cottage industry, it’s bigger than a cottage industry, and people just going around trying to predict what the Fed is going to do. Wouldn’t it be better if we had rules?

I’d also like to see, by the way, total transparency. Every Fed meeting should have TV cameras there, C‑Span should be covering it. Why this veil of secrecy? I mean, I never could understand the rationale behind that, can you? [laughs]

Dan of FMT: No, I’m the little guy, so… [laughs]

Steve: I have no idea why those meetings…and then they leak out the minutes of the meetings and so on. All of that, look, we want information to be readily available to everyone.

Dan of FMT: It’s always bothered me, and I’m sure it bothers you, that a company can report great earnings and it has a little effect, but the Fed can come out with a rate cut or even just a hawkish comment and the Dow can go 300 points.

Steve: Yeah, and it’s also, it’s almost like insider trading, because they, those people know what the Fed is doing, or might get a glimpse of what Janet Yellen is thinking or what she had for breakfast today. [laughs] Again, why do you want a system, why not have perestroika, openness, right?

Dan of FMT: Yeah.

Steve: Also a rule. By the way when Paul Volcker was Fed Chairman, he was essentially using a commodity‑based rule and the economy exploded. The stock market did very well and it was a kind of de‑facto rule‑based system.

I think we’ve got to get…I would like to see a du jour rules‑based system that basically takes away the discretion of the Fed, because the Fed has screwed up so many times. Why do we want to put the power into…it’s like Central Planning.

Dan of FMT: Yeah. Last question. The stock market’s gone up now for over two years without a 10 percent correction. What’s going on with the market?

Steve: [laughs] I don’t know.


Steve: I’m the last person you need, want to ask that question. Let me just say this. In the longer term I’m bullish on the US. I just think, first of all I’m bearish on Europe. The US, when it even comes to our monetary policy, I always say one of the reasons the dollar is rising, we’re the least rotten apple in the cart, right?

Dan of FMT: Yeah.

Steve: Yeah, but if you’re asking me what’s going to happen in the next three months or six months with the dollar, I don’t have any idea.

It is interesting that I’ve noticed in the last 8 to 10 weeks more and more people are saying, are we at that top of this bubble. When people start asking that question, you know…

Dan of FMT: It’s almost like it wouldn’t be the top then, right? If a lot of people are thinking it’s the top?

Steve: If people think we’re getting to the top, there’s a lot of nervousness in the sell impulse. God forbid that we see another crash like we had in ’99 and like we had in 2008, because those are gut‑wrenching experiences. They cause recession, they throw people out of work. I’d rather see a minor correction than a crash.

But look, it’s amazing to me we’ve been able to grow at all, given the dysfunction of Washington. Can you think of a single thing that Washington has gotten right for the last five years? I can’t.

Dan of FMT: No. Did you see the documentary “Mitt” on Netflix?

Steve: Parts of it.

Dan of FMT: It was actually, I just saw it the other day and it was really good. I did not vote…


Steve: Yeah, I’ve heard it was really good.

Dan of FMT: …for either of the major parties, but just briefly, and I know that I’m taking up your time. How did they fumble that so bad? How did Mitt Romney lose an election when everything was going against Obama, well with the exception of the media endorsing him?

Steve: The media played a big roll, no question about it. I think it all came down to one thing. The exit poll question, “Which of these two candidates do you think cares more about people like you?” On that question Mitt Romney lost, 60 to 40. So that meant people, even though the economy stunk, Obama…you know that line that Bill Clinton used to use, “I feel your pain.” People didn’t think Mitt Romney cared about them, and that’s a big issue to people.

Presidential elections are popularity contests. They really are in most cases, and the fact is people liked Barack Obama more than they liked Mitt Romney. They liked George Bush more than they like John Kerry, they liked George Bush better than they liked Al Gore.

So Republicans better put somebody up in 2016 who is not just good at policy but is likable.

Dan of FMT: All right, Steve.

Steve: OK.

Dan of FMT: Thank you so much for your time. I appreciate it.

Steve: My pleasure.