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Strategies & Market Trends : Heinz Blasnik- Views You Can Use
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To: John Madarasz who wrote (1756)5/23/2003 12:31:30 PM
From: Bid Buster  Read Replies (1) of 4905
 
A little more history from 1968...

Richard Nixon was elected in 1968 saying he would end the Vietnam War and also pledging elimination of the 10% surtax. Upon his election, he took the advice of his conservative Keynesian advisors -- Herbert Stein and Paul McCracken (Stein is the father of tv personality Ben Stein) -- deciding to maintain the surtax in order to balance the budget, and also to increase the tax on capital gains. Stein has been a lifelong proponent of high capital gains tax rates. This combination caused a further decline in the stock market as it anticipated the weak economy of 1970. Because European central banks could still exchange surplus liquidity for dollars, American banks began transferring the surplus dollars to their European branches, which would exchange them for foreign currencies in Germany, France, etc. Because we were no longer exchanging gold for our surplus dollars, we would issue special Treasury bonds to mop up the surplus. The foreign central banks would hold these interest-bearing bonds as reserves, instead of gold, although France refused to participate -- refusing to hold U.S. debt as monetary reserves. France was smart in doing so, for as 1971 opened, the monetary crisis was ripening.
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