Posted on 07/22/2002 3:58:28 PM PDT by churchillbuff
Asleep At The Wheel
By, Investor's Business Daily , July 22, 2002
Six hundred and sixty-five points on the Dow industrial average last week. Seven hundred the week before. Twenty-six hundred in four months. What in the world will it take to get the Fed, the administration and Congress to sit up and take notice?
Maybe another Black Monday. On Oct. 19, 1987, as if you needed reminding, the industrial average fell 22.6%. That came on top of the 17% sell-off in the prior two months. But it wasn't until the bottom fell out that our financial stewards finally took action. Is it going to take another session like that - an 1,800-point drop, in today's terms - to awake the do-nothings in Washington?
We hope not. But after listening to them drone on last week about everything but the problem at hand, we can't help but wonder.
The market is in free fall. And it isn't just high techs. They've already disintegrated. (The Nasdaq is drawing ever closer to the Dow's 89.5% loss of 1929-32.)
Now it's rock-solid companies like Johnson & Johnson, which plunged 8 Friday, and Automatic Data Processing, which cratered 10 the day before, that are crumbling. Hardly a day goes by when some prior low isn't taken out. And this is occurring in a bear market that is now 2 1/2 years old.
All we hear out of Washington, however, is Enron this and WorldCom that, and how the economy is slowly coming around - if we just give it time.
We don't have the time. Congress needs to realize that all the new laws in the world aren't going to slow this decline. In fact, they may hasten it, as in 1962, when Wall Street came under investigation in a strong economy.
As for economy watchers at the White House and Fed, they need to realize it'll take more than a drop in jobless claims, a restocking of inventories or a blip in car sales goosed by no-interest loans to convince professional investors and institutions that everything's OK.
st and millions of investors were hurt badly As we've pointed out, this period is very much like 1929-32, when another market bubble burst and investors were hurt badly. It took years to recover from that debacle, just as it took years to recover from 1973-74, the worst market since '29. How many more years are we going to have to wait this time?
To repair the damage the bursting of the tech bubble has done, to restore faith of investors who have suffered huge market losses, to head off the panicky liquidation of mutual fund holdings and to allay the fear and uncertainty added by 9-11, Washington must act. The Fed can go first. Yes, it has cut rates a lot already. But more is needed. And by that, we mean more than a quarter-point.
Congress can go next. Yes, it cut taxes last year, and not a moment too soon. But here, too, more is needed. And by that, we mean making last year's cuts permanent and providing across-the-board cuts for all consumers.
Helping start-up businesses with lower corporate and capital gains taxes would also help. The point is, this is no ordinary recovery, and no ordinary stimulus will suffice.
The sooner our leaders realize this, the sooner our pain will end.
making last year's cuts permanent and providing across-the-board cuts for all consumers would help.
Helping start-up businesses with lower corporate and capital gains taxes would also help. The point is, this is no ordinary recovery, and no ordinary stimulus will suffice.
The sooner our leaders realize this, the sooner our pain will end.
I doubt there's much much government can do to stimulate the market. It seems that all the so-called properity during the Clinton years was inflated corporate earnings, probably the result of bogus accounting practices. I hate the idea of reacting to the Nervous Nellies whose investment behavior is based on tea leaves, or how the hairs on the back of their necks are standing out today, but it seems Bush and the Republicans can really work this to their advantage in terms of systemic economic and tax reform. The Democrats would be hard-pressed not to stonewall or gridlock economic stimulus initiatives. And if they did, they'd likely lose the congressional races bigtime.
That may have been the reason for the 1929-32 selloff too, but it didn't stop the selloff from helping to plunge us into the Depression.
"for a full-court press on major economic revisions: greater tax cuts, particularly capital gains; further reductions in interest rates (as the article suggests).
The quicker we realize that these remedies just try to goose an economy which has been hollowed out. A continuous stream of unbalanced trade has resulted in our swapping factories and jobs for cheap underwear and trade deficits.
We have been sold that we are in a post-industrial age of a 'service and information' economy. We are left to raise export dollars with 'information (audited?), hamburger knowhow, the soft porn of Hollywood and the lyrics of gansta rap as our exportable items of America's creation.
Sorry folks, we have been had by the foreign trade lobbyists. In a one-world economy, we have to be a producer again and we have to find out how - soon. Smoke stack or the like. The GOP better get cracking or they will be sucking wind for many moons. Saddam is a pimple on America's arse compared to the economy. As an election winner once said - "it's the economy, stupid."
IBD urging the Gubmint to intervene in the markets is a sure sign that the bottom is approaching IMHO.
Also the Clinton Administration changed the way unemployment statistics are reported by the government, if someone was working part time with no benefits they were considered employed, many businesses were cutting back by ending full-time employees and hiring people often to work a few hours a week. It lied about the economy in several ways ---making many people have confidence in the stock market they never should have had. People went into debt and were buying stock ---which isn't really very smart.
Congress needs to realize that all the new laws in the world aren't going to slow this decline.
New laws would have nothing to do with slowing the decline...
New laws simply give the government more power... Which is what it wants anyway... Only this time, the slaves are screaming for it...
Any action that the Fed or government takes that puts more money in the hands of the individual gives more power to the individual...
In no way will the government volutarily reduce it's power over it's subjects/slaves...
Helping start-up businesses with lower corporate and capital gains taxes would also help.
Of course it would, but it would also give the individual more power. It will therefore NOT happen...
The ONLY way that individuals will have more power is to take it from the government/Fed...
Attention sheep/slaves: Your power and freedom has been taken from you... It will not be given back... You must take it... Otherwise, freedom will be just a word with absolutely no meaning...
Do you think it is good practice for the President of the United States to interven in free markets? What do you call that philosophy?
When p/e's fall to traditional values and August 14 the rolls around as the drop dead date for CEO's to unload the dirty laundry, the market will recover. IBD urging Alan Greenspan and the POTUS to correct the markets may be your idea of capitilism, it sure the hell ain't mine.
Fleckenstein said the opposite. The depression was the natural outcome of the unwinding of a huge bubble. Smoot Hawley and the New Deal and all the other missteps were the aftermath, not the cause of the depression. Basically you had a double-dip- a recession, a recovery then another severe recession. The totality was called the great depression. Imagine having a year or so of recovery then going through another period like the last three years. That was the great depression.
So, it is just generally accepted that a large tax cut would do a lot of good for the economy. The actual evidence, based on our nation's historical experience, is that a big tax cut would cause gnp growth to increase, unemployment rate to decrease, income to go up for all groups and for government revenue to increase.
Thats the first paragraph which contains the theme of the article. Tu' comprende?
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