SUBJECT: greenspan/rubin & federal deficits
AUTHOR: daytraderhell
DATE: 12/12/01 5:20:46 PM
STATS: 154 reads 3 replies
It wasn't too long ago (1995 till they decided not to run the story anymore because it would scare investors) it was explained to us at great lengths by the Rubin/Greenspan camp that since the federal government was no longer running large deficits the fed could pump occasional cash infusions on the system, bail out third world economies on whims, rescue multi millionaire hedge funds with ease and little disruption, the creed of the moment told us that by being fiscal disciplinaries the U.S. markets and the dollar could gain unlimited strength needed for massive forien investment, and as a result, was an essential contribution to the last half of the bull market, justifying the lofty valuations of american equity markets and real estate. This was the Rubin/Greenspan spin, I remember it well.
How times have changed. Political hats have changed and Greenspan now says what Bush camp tells him to say. He's political, 100% political, all he cares about is his power, at any cost.
The fed has decided to scrap the thirty year stating that it doesn't anticipate future deficits. Why do they even bother saying such things. By the time Bush leaves the White house will be back up to 200 to 300 billion dollar deficits. Anyone with a brain, including leading economists and people in charge of policy must see the inevitable, that the combination of tax cuts, the biggest chunk not to set in till 2005 and beyond, the retiring baby boomers about to crash the health care industry and social security simultaneously, largest demographic to ever go into retirement in this countries history, an on-going war against mystery terrorists at 100 billin a cell (Afghan at 60 and we haven't even gotten the man yet), new homeland security, continued cash give-aways to any corporation with a pulse, all of these on-going expenses plus the decrease of tax reciepts from layoffs and profitable companies, the lack of capital gains taxes from the 90's bull, an enormous contributor to the surpluses now working against government in capital loss. No social safety nets left for those left behind by capitalisms darwinian forces. We are setting the stage for big deficits for many years to come and huge social costs. Everyone must know this.
Compulsive lieing is the greatest American fad, export of choice these days, the more ridiculous the spin the more likely we'll believe.
Tax cuts will stimulate the economy. Deficits are good. Rebate checks will boost the economy. Stocks anticipate rebounds. Lower interest rates always make stocks go up. Blah blah blah.
The U.S. treasury is praying money grows on trees, and continue to take big gambles in that direction, all in the name of the almighty stock market, which has become the U.S. economy's achilles heal (the sad fact is before the 20 year bull market nobody cared, now the nation's mood is entirely dependant on the ticker) This is not normal. We have a lot of nerve telling Japan to clean up their books.
If the stock market is so brilliant with its foresight you would anticipate a long and painful retracement over the next several months and years (despite the occasional government-corporate manipulations designed to extend the excesses of Wall Street and the hyper-elite fueling the ever present V shaped rallies that are the lifeblood of hedge funds)
Eventually values get to the 7 - 12 PE range where investors who have any money left can begin again.
Growth is not sustainable at 3% and would anticipate something like 2% on good recovery years. All the numbers were skewed from the 90's and the economists/talking heads are using them deceptively, not unlike there CEO brothers with the endless gimmicks. A couple more Enron-type falls and GAAP and the SEC will be forced to clean house.
Get used to deficits, they will become part of our daily lives.
If you follow the times Greenspan flip flops on positions your head would be spinning, compulsive lieing is a conatagion and he certainly has the bug. He just wants to retire with the dow hitting a new high, that's all that man cares about. I don't think he will be successful, and just watch the Bush camp roast him like a pig if the market continues going down while he's president. |
