Send Terrorists A Message (Joseph Farah Swallows Pride And Urges Vote For President Bush Nov. 2)

So you accuse Clinton of manipulating the economy as a bad idea, but for Bush to do so as a good one? I agree the real culprit that has driven away American exports was the strong dollar policy of Clinton. However, the current Treasurer has committed to maintain that strong dollar policy. The dollar has simply been falling due to market forces beyond even the President's control.

I know the SPEND and LEND is the typical Keynsian answer to economic collapses, but a false one IMHO. This idea creates mega taxpayer waste such as the bailout of the the LTCM. Economies can survive failures of big enterprises but cannot survive the money pit of throwing money to fix bad economic decisions.

Again I do agree the real blame for the trade deficit was a strong dollar policy. It made American goods and labour expensive relative to other nations. The only benefit of the policy was to tame inflation and keep foreign money in the stock bubble.

Your post is deserving of a reply at length.

"However, the current Treasurer has committed to maintain that strong dollar policy. The dollar has simply been falling due to market forces beyond even the President's control."

Watch what they DO, not what they say. Every Treas. Sec. must say he's for a strong dollar or there would be a precipitous collapse, which we have not seen. The idea is a gradual decline. This is NOT beyond political control, but rather a direct consequence of tax cuts, just as the Clinton/Rubin dollar rise came from their tax increase.

"I know the SPEND and LEND is the typical Keynsian answer to economic collapses, but a false one IMHO"

Keynes understood markets and market economics with great insight, even brilliance. For example, he was a brilliantly successful investor of his own and other people's money.

Here is a problem for economic conservatives. The twenties were an era of very low government intervention, bureaucracy, spending, and borrowing. There were very low tax rates. Yet the depression hit and hit hard. The great lesson of 1929 is that, when a bubble breaks, if action is not taken immediately, psychology will go sour, and a liquidity trap will develop. Once that happens, the government can lend and spend all it wants and it will not work because the liquidity they try to inject into the system will be "trapped" in the lowest risk investments (government bonds and under the mattress).

Even though they relied on the unpleasant tool of a tax increase and dollar rise,the early economic policy of Clinton/Rubin was not kooky. Rubin understood markets and gave them a nice boost. My biggest problem is that it amounted to a zero-sum game with producers such as farmers given the shaft while consumers and wall street got the benefit. But, hey, farmers didn't support Clinton, urban consumers did. What they did, at first, was reasonable coalition politics.

But where Clinton/Rubin went wrong is that they didn't cool things off when the thing began to go wild, which they could have easily done via moderate tax cuts. This would have lowered the value of the dollar and given pause to the foreign money that eventually inflated the preposterous dot-com bubble. I believe Clinton/Rubin neglected their duty deliberately because of the campaign contributions from the dot-com entrepeneurs who wanted to cash out their options, and who could only do so if the bubble stayed up as long as possible.

We are generally in agreement on bailouts, though it is the Mexican bailout that I am more familiar with. To me the proper levers are general fiscal and monetary policy, which shows less favoritism than direct bailouts.

Thanks for a reasoned response. I guess we will not agree on Keynsian economics b/c I think he was a hack and I know an admirer of Stalin's Russia.

As far as the 30s what caused them was the excess of the 20s. Just like other crashes such as the South Sea Bubble it takes time to work off. Interventionists seem to think adjustment periods should be eliminated but when we interfere we either make the adjustment period last longer or we build up the bubble even more (like the tech bubble under Clinton and the housing bubble now).
I would lay the blame far more on Greenspan kept on spiking the punch bowl with liquidity. Only this insane world would actually give him a knighthood.
I think the whole world wanted the game to continue and pretend it could go on forever with no consequence.

I believe the US Dollar is still under support. It is being supported more by Europe and Japan who do not want to lose their trade advantage they had with a strong dollar. Whether the US steps in the give support as well is hard to prove.

Favouritism I guess was my problem with airline, steel and farm bailouts. Airlines cried 911 bankrupted them. But who runs a business that can't endure 3 months of unusually slow sales? Why didn't Bob's camera shop 1 block from the towers get bailout money? GM and Ford get bail out money for the promise to not cut jobs, and they go ahead and cut jobs anyways.

It would be quite the scandal if what you said could be proven true - that dot coms were bribing Clinton to keep the party going.

"It would be quite the scandal if what you said could be proven true - that dot coms were bribing Clinton to keep the party going."

It would be interesting to know the conversations between Rubin and the dot commies in 1999-2000, because I feel sure he knew very well that a bubble was forming. But there doesn't have to be a conspiracy to make my observation right. Let's just say that the dot commies supported Clinton because his policies were good for them. Just as the farmers supported Dole because his policies were good for them.

Greenspan certainly was not part of this game. He blasted the "irrational exhuberance" right as the bubble began to form in 1996 (IIRC). He could only have killed the bubble through massively jacking up interest rates, and, in the absence of inflation that was not part of his mandate. Similar to the 1920's the strong currency actually kept a whiff of deflation in the air. Jacking up interest rates would have made the dollar soar, compounding the problem.

The right medicine was a corrective in fiscal policy (slashing taxes, creating a fiscal deficit and driving the dollar down).

By the way, I think the Bush team's economic management has been supurb. The stock market decline was deep enough to get rid of the crazy valuations and excesses, but not so fast as to destroy confidence. The decline in the dollar has been steady but measured. The damage to the real economy from popping this bubble has been so small as to be almost miraculous. A correction is a proper event in a market economy, to get rid of excesses, and that is what we have had. A DEPRESSION, on the other hand, is an altogether bad thing were matters spiral downward out of control and damages the real economy.

I think we will not agree on Greenspan. That speech about irrational exuberance was made in 1996, but the years after his actions showed he didn't mind feeding the bubble. He didn't need to lower interest rates over that period, which he did. I think he has his own game. He has betrayed his Libertarian past and seems to believe he can eliminate the business cycle. I think that is his goal. I mean when is this guy going to retire? I think power is so important to him he will die one day during his mumbo jumbo speeches to Congress.

But I do agree with your statement about dot commies. These young new techies were telling us that “heh, profits is so old thinking” to excuse the fact that none of these ventures were making money. And of course naïve investors said, “yeah, your right”.

I agree that one can be complicit without actually being in a conspiracy. What chance would a New York judge even listen to a stock price manipulation lawsuit when it could mean his portfolio could lose money? Same with Congress? They didn’t want to question Enron. I remember the SEC at the time saying “we want a new accommodative relationship with Wall Street” What? The SEC was set up to POLICE the markets. Since when are police suppose to smooze with those they are suppose to keep an eye on? It would have helped if Wall Street had done some self-policing but they became just as bad as the Vancouver Stock Exchange – except the money is much much bigger.

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