Kass: 'Kudlow & Company' Recap

This blog post originally appeared on RealMoney Silver on Dec. 3 at 7:33 a.m. EST.

We had another lively session on "Kudlow & Company," with CNBC's Denny "The K" Kneale and Loomis Sayles' David Sowerby. I looked forward to last night, as I enjoy debating Denny The K and I have long-admired David "Small Cap" Sowerby's sound and sober analysis.

So, without further ado, let's go to the tape.

In short, look for a post-bubble world to remain in recession throughout 2009, followed by an anemic recovery, at best, in 2010. In an era of globalization, we became intoxicated with what cross-border linkages were able to deliver on the upside of a boom. But as that boom went to excess and spawned a lethal globalization of asset bubbles, the inevitable bust now poses an exceedingly tough hangover.

-- Stephen S. Roach, Financial Times op-ed (Dec. 3, 2008)

My principal point was, as Morgan Stanley's (MS Quote) Stephen Roach writes in today's Financial Times, that "the textbooks have little to say about post-bubble economies." Specifically, while there will be a huge savings and tax cut from lower energy prices, it will be trumped by the debilitating negative wealth effect of both a reduction in home and equity prices.

Not surprisingly, Sir Larry Kudlow and the other panelists did not agree with me that the risk of a capitulating consumer is near.

I will remind my readers that many of those same permabull talking heads on "Kudlow & Company" (and elsewhere) said earlier this year to ignore the headwind of shockingly high energy costs when the price of a barrel of crude went to $148 a barrel, so noting the benefit of oil at $47 a barrel (particularly in the face of numerous other headwinds) seems to be somewhat myopic and framing a positive economic argument through selective logic. There is little doubt that there will be a benefit. I quantified the oil "tax cut" at about $365 billion in 2009 if the price of crude averages $50 less than 2008's average ($105 a barrel) in the coming year.