Is This Bottom?
Jude Wanniski
April 5, 2001


I think we may have hit bottom, but we still have fingers crossed. Thanks to those of you who are crediting my client letter for setting off today's boom, by scaring the short sellers into covering. My thanks to Senate Majority Leader Trent Lott for letting the cat out of the bag with a late-afternoon floor statement on Wednesday that warned of deflation and gently nudged Greenspan to do more. Senator Lott, remember, led my list of policymakers with whom I discussed the deflation issue during my "Five Days in Washington." In my Wednesday letter I hinted that something was up, knowing that Lott was toying with the idea of doing something to get the ball into play, but I could not confirm as he and his key people were subsumed by the tax bill on the Senate floor. Lott wedged his deflation concerns into a larger floor statement about the economy. The reason it is so incredibly important is that the most senior member of Congress SHOULD rightly take the lead on solving this monetary issue, as the Constitution gives Congress SOLE responsibility in the management of the dollar. Treasury can come in behind Lott, with the Fed and then the White House following in train. The fact that Wall Street cheered so loudly today was certainly an encouragement to those who've bought my thesis.

Lott's statement did not mention gold, but he is not adverse to mentioning it in the context of a solution to the distress in the economy. If he takes another step after having dipped his toe in the monetary waters, I'm hoping he will push hard enough on the gold envelope so the political and financial markets can move in the direction of seeing the promise of a relinking of the dollar to gold.

This is still the early phase of a political solution, so do not take my enthusiasm as a sign that everything is okay and the sky is the limit on the DJIA and the NASDAQ. We unexpectedly have major problems with those "supply-siders" in our own ranks, who think we are all wet on this monetary deflation and that we are getting in the way of their tax cuts by stressing money. The Wall Street Journal editorial page is in this camp. And so are those supply-siders who continue to insist that the root cause of any monetary problems was the increased cash in the system provided by the Fed to deal with Y2K.

We should know a lot more tomorrow and will provide guidance.