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Minyan Mailbag-Politics and Policy



Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.

Dear John:

Hmmmm....I was just pinging Toddo on the issue of intervention.....and then you popped up in the
mailbag with minyan aa.....and that dialogue: some salient points I want to make.

1. I am a neophyte and NOT an economist or professional trader or money manager.

2. I am however, pretty fast on my feet and take learning seriously ... often slowly to make sure I get it right.

3. But I don't agree with your scenario....though the caution you recommend is well grounded.

I think saying we are headed for Weimar is a touch TOO POLITICAL. Perhaps it is because you are not a supporter of W and the Republicans, I dunno.

Weimar was a unique situation socially, politically, and economically. We are not at all like that on ANY level, and I reject any inference that W is so right wing he appears like that Soros video.....any more than the democrats appear like Stalin.

Greenspan dated Ayn Rand. Never forget that. He is presently married to a left biased NBC television talking head.

The free flow of money occurred most precipitously, did it not, during the CLINTON YEARS....which INFLATED THE BUBBLE. The recent moves of printing money occured because it was also Greenspan who POPPED THE BUBBLE in December99-March 00. So by my watch, it appears the ugliness occurred on Clinton's and Rubin's watch. And the real kicker is that the bubble was largely a great big internet / pc / switching device / networker / fraud.

Those industries have lead to the loss of manufacturing AND service industry jobs.....NOT GEORGE W. BUSH. Further, NAFTA and other trade deals have exacerbated the problem, aided and abetted by the labor squeeze. As our cost of living rises, the pressure for higher wages rises, further exacerbating rising cogs and thus margins, and thus the pressure to move overseas with jobs.

Look at the situation that W inherited when he took office? A popped fraudulent bubble, a wicked recession, and economic pressures from all angles losing jobs, costs rising, and an asian growth that is out of control....?

JFK cut taxes to kick the economy going and it worked. So did W. Lowering fed rates also helped. Yes, it prints money, but so does Congress when they spend it, and 9-11 caused them to spend a lot of money they didn't plan on spending. And as you know, if you piss off the government, they are going to come at you with not three FBI agents, but tens of thousands of troops, tanks, and whatever, sort of like a bad hollywood movie where they arrive at someone's house with a swat team of hundreds of cops and army guys in tanks to solve a lost dog problem. Only 9-11 wasn't a lost dog, it was real and it was very scary and I would argue their response wasn't OVER THE TOP, it was necessary.

Yes, we have to pay for it, and we also have social security problems, but that is ALSO a congressional problem and don't just blame the repubs, that is silly. They are a body of 435 representatives and 100 senators and they act TOGETHER in spending bills. Otherwise, they would never leave committee.

Where are you going to cut the budget? Homeland Security? Intelligence? Military? Social Security? Medicaid? Me, I would cut NASA. It's interesting and fascinating but largely a waste of money with HIGHER domestic priorities at the present. The NRO can "lease" rockets from a private outfit, much cheaper than spending TRILLIONS to look at rocks and gas in space.

But I digress.

The point I am making is that we do have a government deficit problem, but who wants to raise taxes and kill the goose that is laying the skimpy golden eggs of today? THIS ISN'T 1999 with a stock market that is PRINTING MONEY FOR THE GOVERNMENT TO RETIRE the backs of moms and pops.

You talk about who wins and loses money battles? The middle class got HAMMERED in the bubble and when it popped in real terms (loss of 401k money, other investments) as well as indirectly when their job got downsized in the ensuing recession. And who got rich during the bubble? WALLSTREET UNDERWRITERS AND GORILLA TRADERS.

I postulated to Toddo I see a MASSIVE INTERVENTION OF THE DOLLAR COMING.....HUGE DOLLAR BUYING by MANY CENTRAL BANKS: Chinese, Japanese, Europeans, and the Fed itself to prevent its free fall. Me thinks they have a bright red line and it won't go below that number because if WE go in the dumper they ALL go with us. We are the largest consumer in the world and without us buying THEIR PRODUCTS, they die.

Thanks for listening and respectfully submitted,

Minyan name withheld.

Minyan NH

Let's start slow with a few points.

I used Weimer as an analogy. If you look a little closer, you will see that I referred to our situation as a "mild form". This is to let people understand that we are not doing things out of stupidity, as you point out, there is reason behind the actions.

Where did I ever say anything about Bush? I think all government is flawed in their manipulation of markets. I was heavily critical of the Fed under the last administration as well. This, it seems, is a philosophical difference between you and me: I believe eventually this intervention, when it gets severe, does more harm than good: It delays consequences and thereby exacerbates them; it does not solve them. Only market forces solve imbalances by eradicating inefficiencies to allow new capital to form.

I am all for tax cuts, when they make sense. Cutting taxes may work this time too, although I have not seen much evidence yet. But the fact is that doing so in this environment is highly risky: If it doesn't work we run the risk of actually bankrupting the country. Remember, just because risk is only potential doesn't make it less real.

I NEVER blamed just the Republicans. I blame them for not doing what Republicans normally do, which is scream bloody murder when we are fiscally irresponsible, but I blame the Dems for what I always blame them for, which is obvious. The point is we need to spend what we can afford. But spending whatever and then conducting shenanigans to cover it up is no good.

And I never said to raise taxes, but I never said lower them (at least here either).

The middle class may get hammered when a bubble pops, but we shouldn't let the government CREATE a bubble in the first place. The rich get richer as the bubble grows, but the poor and middle class don't. So when the bubble pops the rich are much better off. They are better off before it pops too.


Prof. Succo

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