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Politics : Al Gore vs George Bush: the moderate's perspective -- Ignore unavailable to you. Want to Upgrade?

To: long-gone who wrote (2358)	10/13/2000 6:00:00 PM
From: Zeev Hed	Read Replies (5) \| Respond to of 10042

Long, assume for a moment that you are right and that a PPT was indeed in action. Let's assume now that it would not have stepped in. I presume that your desired crash would have happened. You think that a government that lets a financial crisis develop into a depression is s good government? How many people in this country would have committed suicide? How many families would have lost their jobs, their homes, their life savings. What would be the impact of a financial meltdown on world stability and even peace? You would rather see all these calamities coming down on the human race, just to be "politically correct"? If the market is destined to come down (and I think it is) gradualism rather than sudden death impact are much better, since it allows the system to adjust to the new realities. Every time we attempted to make a drastic change in this country, we end up with mud on our face. You people discussed earlier the S&L "scandal". The thievery did not start until after the collapse when people close to the table, (and I will not name names) got to serve themselves big chunks of real estate essentially free. But what caused the collapse? A small change in the tax law (as part of Reagan Master tax program). To simplify the code and remove the special loophole that investment in real estate involved (where you could shelter most of your income by leveraging the real estate you bought), the new code introduced the "at risk" test for depreciation of real estate. That test was made retroactive. Suddenly, billions of real estate deals that had no economical justification without the tax shelter, where no longer profitable. Guess what, investors (including this one) walked away from the deals. The S&L were left holding the bag (overvalued real estate with no prospects of rapid leasing out), thus the closings of the S&L and the wholesale liquidation (selling for pennies on the dollar to you know who) of the real estate, and a bag of close to a trillion bucks to be paid by the tax payer. The funny thing is that the intent of that law was very rational (there should not be tax incentives for business deal that have no economic value without those incentives, that process misdirects important capital to worthless endeavors), its implementation was flawed. If the law would have been written to give the participants a long period (I would say ten years) in which it was slowly implemented, including complete implementation of the "at risk" test for new transactions and granfathering it to prior transactions on a gradual base (10% per year or so), we would not have had that collapse, nor would the tax payer be ladened with an additional trillion bucks of federal debt. A sudden financial collapse of the market would dwarf the impact on the economy that the S&L fiasco had, and you are praying for it and complaining that some smart guys in the government found a way to moderate the markets. That would have been funny if it was not scary. I presume you also support wholeheartedly the proposition to put one of every six dollars of future payroll taxes (social security) in a market that you yourself would love to see collapse to 10% of its current value. Be real... By the way, part of the Federal reserve statutory responsibility is to intervene in the private financial markets if stability of these markets is threatened. One of the reasons that the law gave the fed the right (obligation) to control maximum margins against securities, and the right, to essentially print money or soak money from the system through various overnight and longer term dealings in treasuries. Zeev

To: long-gone who wrote (2358)	10/13/2000 6:19:07 PM
From: fuzzymath	Read Replies (1) \| Respond to of 10042

I don't think this market manipulation is new in the Clinton era. I remember times during the Bush presidency when I was sure the big brokers, etc., were manipulating the market -- commercials on TV over the weekend saying "don't panic, don't you know that long-term investing ... blah blah blah!". The brokers lose a lot of money if the market tanks. Now -- I must agree that a big drop now does not serve Gore very well. On my FuzzyMath.com web site I have a table that correlates stock market performance with the make-up of Congress in the Clinton era. Guess what: the greater the number of Republicans in the House of Representatives, the greater the gains of the stock market during that two-year period! In the 1998 election, the Democrats almost took over the House. The razor-thin advantage the Republicans had in the house gave Clinton a fairly free hand on policy. After all, he holds the veto pen, no one else does. So, what's the market done since November 1998? During the 4 years when Republicans really set the agenda (11/94 - 11/98), the market had stunning growth. This past 2 years, however, hasn't been much fun for any investor. Yes, I agree, Clinton will want the markets to be propped up. I'm just saying, it's not a new event for that to happen... Kevin/fuzzymath