Word: laffer
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...Instead, Laffer predicts the behavior of the economy by using only four indicators. One is the level of federal spending. Two others are interest rates and stock prices, which Laffer believes offer "unbiased forecasts" of future inflation and future profits, respectively. His "efficient markets theory" holds that interest rates and stock prices reflect largely the judgment of market insiders who "possess information about the future." This idea might bring hollow laughs from borrowers and investors who have lost money because of the gyrations of interest rates and the stock market...
...Proxmire had looked to the far end of the witness table at the Joint Economic Committee hearing, he would have seen a squat, tousle-haired economist who is partly responsible for reinforcing the Nixonian optimism. Arthur Laffer, 30, an associate professor on leave from the University of Chicago to serve as the OMB economist, has been in Washington for only three months. Few but Shultz seem convinced that Laffer's analytic methods are correct, but the academician's ideas have nonetheless provided Shultz with a basis to defend the Administration's forecast against doubts voiced...
Averaging Zero. Laffer has constructed a theoretical model of the U.S. economy that he insists is "most likely better than any of the well-known larger models." It is certainly constructed on different lines. Laffer uses only raw economic data; he ignores the seasonal adjustments that more conventional economists prefer because he thinks they "smear things." He also disregards such matters as the likelihood of a steel strike next summer, the prospective size of the federal deficit and the amount of money saved in banks. "These things all averaged out to zero when we tracked their effect [on the overall...
Christmas Every Month. Laffer's most important indicator is the rate at which the Federal Reserve expands the nation's money supply. That is also Milton Friedman's central idea, but Laffer gives it a special twist: he believes that an increase in money supply gives the economy an "instantaneous and permanent" boost. His reasoning is that businessmen and consumers will immediately spend every cent they get their hands on, and that new money moves speedily into their pockets. "People want to see the color of the money," he says. "When they see it, they jump quick...
...plant each year, e.g., 4% annually for 25 years, until eventually it recovers the full original cost. An obvious flaw in the system is that it makes no allowance for the speeded-up obsolescence caused by the billions going into new product research. As President William G. Laffer of Cleveland's Clevite Corp. says: "In electronics, for example, where there is a fast-changing technology, equipment is frequently outdated as soon as it is designed," and every industry, from aviation to petrochemicals, is learning that five years is frequently the maximum instead of the minimum productive life...