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Now Is No Time to Give Up on Markets
The Wall Street Journal ^ | March 21 | MARY ANASTASIA O'GRADY

Posted on 03/21/2009 8:08:54 AM PDT by Hockey Mom II

"What can we do that would be beneficial? [One thing] is lower corporate taxes and businesses taxes and maybe taxes in general. Particularly, you want to lower the tax on capital so you raise the after-tax return to investing and get more investing going on."

Gary Becker, the winner of the 1992 Nobel Prize in Economic Sciences, is in New York to speak to a special meeting of the Mont Pelerin Society on the global meltdown. He has agreed to sit down to chat with me on the subject of his lecture.

Mr. Becker sees the finger prints of big government all over today's economic woes. When I ask him about the sources of the mania in housing prices, the first culprit he names is the Fed. Low interest rates, he says, were "partly, maybe mainly, due to the Fed's policy of keeping [its] interest rates very low during 2002-2004." A second reason rates were low was the "high savings rates primarily from Asia and also from the rest of the world."

"People debate the relative importance of the two and I don't think we know exactly," Mr. Becker admits. But what is clear is that "when you have low interest rates, any long-lived assets tend to go up in price because they are based upon returns accruing over many years. When interest rates are low you don't discount these returns very much and you get high asset prices."

On top of that, Mr. Becker says, there were government policies aimed at "extending the scope of homeownership in the United States to low-credit, low-income families." This was done through "the Community Reinvestment Act in the '70s and then Fannie Mae and Freddie Mac later on" and it put many unqualified borrowers into the mix.

(Excerpt) Read more at online.wsj.com ...


TOPICS: Business/Economy; Government; News/Current Events
KEYWORDS:
I thought this was a very insightful article about our current financial problems.
1 posted on 03/21/2009 8:08:54 AM PDT by Hockey Mom II
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To: Hockey Mom II
Beckner is a fool, how did anything other than greed give the united states 14 million unsold homes. And about that many more properties under development for more homes.

The banks were lending the money because they thought the demand would go on forever and they thought there was no down side.

2 posted on 03/21/2009 8:17:37 AM PDT by org.whodat (Auto unions bad: Machinists union good=Hypocrisy)
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To: Hockey Mom II
Gary Becker writes a thought-provoking blog with Richard Posner.
Fans of heavy reading click here.
3 posted on 03/21/2009 8:24:35 AM PDT by 1rudeboy
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To: Hockey Mom II

When Wall Streeters lose this much Money, with no end in sight, they drill down to what is happening, and the American people just received a Chris Dodd/Geithner/Obama in Action lesson this last week.

Its becoming Obvious to the most casual Observer.

Even the MSM might have to Report it...or they are going down with the President and his crooks in association,.


4 posted on 03/21/2009 8:29:16 AM PDT by 4Speed
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To: Hockey Mom II

Great analysis, thanks for posting.

In time, the uninformed and/or idealogically-driven will be confronted with the real causes of this mess, as outlined in this article. Hopefully safeguards will be put in place, but it will be, to some extent, locking the barn door after the animals have already escaped.


5 posted on 03/21/2009 8:38:57 AM PDT by bigbob
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To: Hockey Mom II
The market will have to rebound. Americans always have come to the rescue when the realization that a failing market is a failing of millions of 401k and IRAs. This throws a huge burden on families trying to not only help their failing retiree members but even themselves.

Here is the rub. King Obama will flood the airways that he saved us. And the cult will once agin bow down to their savior in spite that the market survival will have nothing to do with this pompous ass.

6 posted on 03/21/2009 8:39:55 AM PDT by Logical me (Oh, well!!!)
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To: bigbob

I will not buy anything much less a stock in america as long as zero is President. All my money is in cash,gold and overseas investments so when the dollar crashes to worthless I will still have some wealth.


7 posted on 03/21/2009 8:40:36 AM PDT by ground_fog
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To: bigbob
I am in a conflict with myself. Do I still put money in my 401k for the tax benefits today and pray somebody who isn't hostile to markets comes along someday and fixes this or do I get out today and horde cash??
8 posted on 03/21/2009 8:42:16 AM PDT by lakertaker (Libertarian Party since 1998)
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To: lakertaker

The “market makers” are going to manipulate the markets until the last dime is wrung out of gullible “retail” investors.

Keep your cash. Better yet, convert it into tangible commodities.

Buy & Hold is toast.


9 posted on 03/21/2009 8:59:56 AM PDT by IDRATHERNOT
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To: lakertaker

hoarding cash is just about useless if you fear rampant inflation. Ideally you want to convert cash into something that has ‘intrinsic’ value, i.e. something that will increase accordingly with inflation. Gold is probably in a bubble right now, and investing in foreign stocks isn’t really better than investing in domestic ones. At worst it’ll probably be like the 1980’s again in terms of inflation, I seriously doubt we’re gonna hit zimbabwe-territory.


10 posted on 03/21/2009 9:03:36 AM PDT by OH4life
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To: Hockey Mom II

Mr. Becker sees the finger prints of big government all over today’s economic woes.


Too many see govt as the answer to the problem, not the cause of the problem. I don’t see that changing but am willing to be enlightened.


11 posted on 03/21/2009 9:14:09 AM PDT by PeterPrinciple ( Seeking the truth here folks.)
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To: OH4life

Hope you’re right, but in the ‘80’s we weren’t buying our own debt.


12 posted on 03/21/2009 9:32:58 AM PDT by NEWSHOUND
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To: ground_fog
I will not buy anything much less a stock in america as long as zero is President. All my money is in cash,gold and overseas investments so when the dollar crashes to worthless I will still have some wealth.

What "overseas investments" are you in which you consider safe and a good return on your money?

13 posted on 03/21/2009 10:55:30 AM PDT by Riodacat (Legum servi sumus ut liberi esse possimus.)
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