modern-day view of inflation that as the economy gets closer to fuller capacity, there are greater inflation costs for every additional unit of output.

The economist and lecturer, who was influential in the White House thinking of President Reagan's administration, provided political and economic forecasts for a select group of executives attending a conference on investing for offshore insurance companies in the 1990s.

Dr. Laffer told the investment symposium hosted by Continental Asset Management Bermuda Ltd. at The Princess Hotel, that he did not subscribe to the view that there is a trade-off between inflation and unemployment or inflation and economic growth or that the worry about the economy over-heating is that it means higher inflation.

He said that the mistake was the application of micro-economic principles to the macro-economy. And inflation is basically a macro-economic phenomenon that relates all goods and services to money.

"Growth,'' he said, "does not cause inflation, period. In fact, just the opposite is true. The faster an economy grows, the lower inflation will be.

"Inflation is a goods and monetary phenomenon. The faster money grows, the higher inflation will be. The faster growth, the output growth, the lower inflation will be.

"Inflation is too much money chasing too few goods.'' Dr. Laffer defended the oft-maligned Reaganomics policy, but admitted there were some mistakes. He predicted the demise of Bill Clinton's presidential career in 1996, forecasting that it will be inflation that will bring him disfavour.

Referring to President Reagan's economic policies back in 1981, he said that the mistakes that they made included two things that should never be done in an economy.

"You should never delay (defer) tax cuts and you should never delay price cuts,'' he said. "How much would you shop at a store, the week before that store has a big discount sale?'' But he believes that the US economy will slow next year and early in 1996 and find itself in another recession.

He also predicts that there will be some $75 billion of US investment in Cuba, five years after President Fidel Castro departs office.

The major mistake President Clinton is making, asserts Dr. Laffer, is that he is uniting all of the formerly divided, conservative element.

Dr. Laffer agrees that President Clinton has the right issues before the American public on the agenda for discussion.

But he said that the environment is too hot with politics, and he had never seen as political an environment as he sees facing the Presidency, today.

It was a serious mistake, he said, for President Clinton to demand, and eventually get, a special prosecutor to probe the "Whitewater Affair'', because the mere appointment alone will mean that young lawyers will dig and dig until they unearth something damaging, real or imagined. They will find something, he said. The incentive is there to find something.

He predicted a Republican controlled House of Representatives, Senate and White House in 1997 and said that it will be Germany that will be the primary beneficiary from the opening up of Eastern Europe.

"The two superpowers will be Germany and the United States,'' he said.

"There will be no prospects that Japan will ever become the economic superpower it once was.'' His pick for the Republican nominee in the next Presidential race is former Housing and Urban Development Secretary, Mr. Jack Kempe (his preference) or Senate Minority Leader, Mr. Bob Dole.

"Jack Kempe is my guess, and it is his to lose.'' An American delegate to the conference challenged Dr. Laffer on the effect of Reaganomics, suggesting that it left a bigger budget deficit for the next generation to deal with.

The professional woman and mother offered an opinion expressed by many Americans: "I think all that partying under Reaganomics is what we will pay for.'' But Dr. Laffer took the Bermuda resident's concerns in stride, declaring: "Deficits do not matter, period. Spending matters. There is no difference between the Government borrowing $100 from you, or taxing $100 from you.

"It is only when you get to the dynamics that it starts to matter, whether it is raising or cutting taxes.

"If you give the spendthrifts in Congress more money, they will spend more money.'' Dr. Laffer defends Reaganomics