Tax Financial Transactions?

Liberal politicians and powerful unions controlling them are seeking to tax frequent financial transactions, and thus discourage what they call “excess speculation.” The estimated tax revenue this would bring to the U.S. government is about $190 billion over six years. Liberal legislators view such taxes as a bonanza.

A similar move is afoot in Britain and Europe amidst their left-thinking politicos.

This tax and its dire consequences on the economies of countries involved. on their trading transactions won’t be the only problem. Yes, securities trading is integral to economic facility.The tax would be indirectly felt, in time, by everyone.

But so-called speculation will be penalized whenever and whatever politicians do not favor at any time. That opens a Pandora’s Box of political terror, reflective of a typical fascist-type government.

All this hides the fact that speculation in a capitalistic society does not cause pricing problems. It merely reflects pricing, something politicians of the left will never comprehend. It may appear to help boost rising prices but works the other way around just as easily, when prices fall.

The anti-capitalists, however, only notice when prices go up, not down.

Liberal Financial Thinking and Unintended Consequences

I learned a long time ago that here are basic thoughts and ideas that make someone a political liberal.

They may be ingrained in liberal minds and no further education about practical education will dissuade that thinking. Sometimes they may be merely a political device for getting populist votes when running for office or organizing workers on behalf of unions.

In either case, experience and common sense has always proven that these liberal financial thinkers have always been wrong. Their actions have unintended consequences that are damaging long term, even to their own interests or constituents.

It may not be profitable for these folks to pursue the truth. Or they may just be dumb.

Government Dollar Spending Does Not Produce Economic Growth

Learn the difference between a dollar “invested” by government and a dollar invested by private industry.

Those who believe in state control would leave you to believe that it is the same, if not better, if government makes the decision to spend, or as the Obama administration says, “invest.” As opposed to private enterprise investments.

In one case, the allocation is made by political decision which often is subject to pressures which have nothing to do with supply and demand. Rationing and corruption follow. The other is more likely to conform to what the public wants.

Moreover, private industry investment has a multiplier factor that government spending does not.

Too many government jobs have no multiplier effect on the economy. Their purpose may be different. Often it primary has political, social and environmental intention.

Governments don’t innovate and create new companies and multiples of jobs. Nor do they enervate optimistic psychology of a booming economy. You don’t have to be a rocket scientist to appreciate this. Yet, that psychological effect is most important.

Remember: Socialist countries have never successfully been satisfactory consumer societies

What Many Investment Bankers Do When Fired

Many who have been on Wall Street for years, have shown their true colors when fired. It seems they were not really interested in finance. They have wound up doing work totally outside finance.

They have become chefs, gardeners, nutritionists, any thing but financial experts.

You would think they knew enough about finance to have it in their blood, to do something in the field. To write or talk or teach about the subject of investments. Stick to finance in some way.

But seemingly they never did. It was a job that paid more than it ought to. Better at the time than being at another mundane position.

And it showed in their past efforts.

Be Careful When a Government Honcho Hollers “Bailout”

Bailouts have all appeared to have been failures when you look back at them. So why do we still keep hearing of them as solutions?

The financial disaster was going to be bailed out, for example, by a whole assortment of actions:

One: The takeover of banks.

Two: The takeover of Fannae Mae and Freddie Mac.

Three: The Takeover of American International; Group (AIG).

Four: The Troubled Asset relief Program (TARP) to buy bad mortgages from banks.

Five: The Public-Private Investment Program to buy the same troubled assets.

Six: The takeover of GM and Chrysler.

Though we had perfectly good car companies operating elsewhere in the U.S. to pick up business and relocated jobs, we had to bail General Motors and Chrysler. That helped their powerful union but did little else for the economy. Ford and others in the industry operating in the U.S. have been able to do so without that crutch

At the same time we pumped out money like water going into the ocean. Federal Reserve funds are being priced down to practically nothing in the banking system.

All this outlay of funds cost trillions upon trillions. That must be repaid with taxes and cheaper-valued dollars to come in our future, and that of our grand kids and their offspring.

And with little success to show for all that, compared to what would have happened if the politicians and “experts” sat on their hands.

The Worst Recession since the 1930s?

Politicians love to bandy about their estimates of past recessions. It comes in handy when they are running for office and they need to paint a suitable bleak economic picture for which the present officeholder bears responsibility.

In the year 2000, with unemployment about 4.0%, we were being told by Democrats out of office, that we had the worst depression since the 1930s. We actually were in the midst of a boom economy.

What about the mid 1970s when President Reagan took over. We were experiencing a severe downturn that can be considered worse than what we have today. The fall in GDP was 4.9%. Compared to a drop of 18.2% in 1937-38. That truly was the worst economic cycle since the 1930s.

What we can therefore correctly say is that today’s is the worst recession since 1973-75.

Who Can Stop a Financial Bubble?

I have recently commented on systemic risk and the role of the Federal Reserve. Many commentators have done so, particularly with regard to potential bubbles.

In my past studies in both graduate school and on the job as a market analyst and as an observer and businessman, I have intimately seen how bubbles originate and then caused their damage.

I would like to make a suggestion about bubbles. No other commentator I know of has mentioned what I am recommending.

Bubbles usually are not stopped by Federal Reserve action on interest rates, as is usually suggested by the pundits. That is because politics always take over, and often preclude any dampening of interest rates by the Fed.

Not in a manner that can have an effect on any bubble. It would, for example, have had done absolutely nothing, as with the internet bubble. Or even with the mortgage bubble because interest rate adjustments then would have been applied too late. The Fed’s miscues were too early for a bubble to have been recognized.

On the other hand, action or inaction of the Securities and Exchange Commission would have done the trick. Sitting on obviously useless and dangerous underwritings instead of open-handed approvals of questionable underwritings created the internet bubble. The Fed had little to do with that.

By merely slowing down the underwriting of questionable underwriting, the SEC would have dampened many such past bubbles.