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 ...
The banks were lending the money because they thought the demand would go on forever and they thought there was no down side.
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,.
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.
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.
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.
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.
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.
Mr. Becker sees the finger prints of big government all over today’s economic woes.
Hope you’re right, but in the ‘80’s we weren’t buying our own debt.
What "overseas investments" are you in which you consider safe and a good return on your money?
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