By James Langton
(September 17 – 11:00 ET) – Influential free market economist Lawrence Kudlow is predicting
the emergence of a new political force: the individual retail investor. Kudlow is chief economist and managing director at Schroder & Co. Inc.
In a rousing speech given Thursday at the Securities Industry Association’s retail conference in Chicago, Kudlow mused on the creation of a new investor class – the retail investor that has been dragged into the equity market through tax-deferred retirement plans.
Kudlow imagines these new investors will be a force for political change, pushing for liberalization of capital gains taxes. He also forsees an increased use of investment plans, such as Roth IRAs – the U.S. equivalent to Canadian RRSPs – to help privately fund investment in health and education.
Kudlow maintains that the U.S. is in a virtually zero-inflation environment. He says the economy is vibrant and the capital markets is the place to be. “There are no bubbles, buy and hold, and add to your holdings whenever you can.”
Along the way Kudlow, an ardent Reaganite, took a few shots at the U.S. Federal Reserve Board. He says its chairman, Alan Greenspan, is a “much better central banker than he is a portfolio manager”. As for the Fed itself, he comments “the Internet is more important to the economy than the Fed”. And Canada? “It’s the 51st state, it’s not a real country,” says Kudlow.
He suggests that the U.S. deal with its tight labour markets, not by raising interest rates, but by relaxing its visa requirements to allow more immigration and by relaxing its disincentives for seniors to work.