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To: mishedlo who wrote (63706)	6/15/2006 1:01:00 AM
From: shades	Respond to of 110194

Laffer curve fallacies? I don't get it - Philster says kennedy's tax cuts DID NOT pay for themselves - I know he wouldn't say this flippantly - yet Kudlow keeps saying yes the tax cuts were good. kudlowsmoneypolitics.blogspot.com The fact is that the Laffer curve tax-cut paradigm remains the most powerful policy weapon in American politics. When you tax something more, you get less of it. JFK and LBJ both adhered to this principle, as did Ronald Reagan. Papa Bush deserted it and got whooped. Bill Clinton originally opposed it, and the Dems lost Congress as a result. When Clinton finally embraced it during his second term (with a cap gains tax cut) he did well. George W. Bush successfully used tax cuts in 2003 to re-ignite the American economy, and lead the GOP to big election victories in 2002 and 2004. And the President and Karl Rove are going to use it again in 2006. But, as long as the Dems keep banging their heads against the Laffer curve brick wall, they are doomed to defeat. As John Kasich pointed out recently on “Kudlow and Company,” nobody ever won a close race by promising tax hikes. Winning Elections trumps long term survival of the nation perhaps? socialize.morningstar.com 3. How Is Debt Defined? rklepper\| 06-13-06 \| 04:18 PM Debt is defined as publicly held federal debt. This is taken from the footnote in the graph. What this means is that all of the debt that is issued in connection with Social Security is not included. This is sort of like going through the year borrowing money from your kids college fund and at the end of the year declaring yourself prudent because your debt is still manageable (of course the money borrowed from the college fund is excluded). The illusion of prudence persits until either (i) the child goes off to college or (ii) the money put aside for college runs out. Much of the criticiism of the "trust fund" is akin to these spend thrift parents then blaming the child for not putting the money out of their reach (but I digress). I went there looking for this information because I knew I would find it. It's as predictable as the sun rising in the morning. Folks like Heritage really like to have their cake and eat it too, misusing statistics in very subtle ways. On the one hand they will go on and on about the phony "trust fund" and then talk about howmanageable the debt level by not considering it on that side either. It's the real problem with "think tanks". They are easily smart enough to understand exactly what they are doing, but unfortunately they have all sold their soul to the devil. The only difference is whether the devil is on the right or the left. 4. The essence of the matter RobertH\| 06-13-06 \| 04:31 PM From the article: However, unless Social Security and Medicare are reformed, lawmakers risk allowing debt levels to increase until they cause the highest intergenerational tax increase in history. The debt levels are not increasing because anybody misunderstood the nature of the Social Security and Medicare obligations. (Alan Greenspan chaired a committee to address Social Security's long-term solvency in 1982, which led to increases in social security taxes.) The debt is rising because we're spending down the surpluses that were to help pay for this obligation. (Or, what is the same thing, running deficits at higher levels than are consistent with funding this obligation.)

To: mishedlo who wrote (63706)	6/15/2006 1:09:03 AM
From: shades	Respond to of 110194

Bernanke Scares Pavlov's Sheep (benson sold his NY real estate and went into I-bonds several years ago - mistimed - now it seems he wants non dollar cash - is his timing way off again?) 321gold.com Pavlov's work on the conditioned reflex reaction of sheep to stimuli should be of the utmost importance to the Federal Reserve and world central banks at this juncture in a world where signs of speculative excess - even to the bubble level - clearly remain in all major risk asset classes including housing, commodities, emerging markets, and even major stock markets. In Pavlov's research, he discovered that if he gave the sheep a mild electric shock, it would bother them very little and their life would go on pretty much as if nothing had happened as long as the shocks were random. Warning the sheep in advance of a shock by ringing a bell, however, affected their behavior and it changed radically. The sheep were just smart enough to realize that if they heard the bell, the shock was coming. After repeating this exercise a few times, the poor sheep lost control of bodily functions and after a few more warning bells, they started dying of heart attacks. What Ben Bernanke and the Federal Reserve Governors should know, and are likely to find out the hard way, is that markets driven by speculation will react just like Pavlov's sheep. Indeed, the major market participants and speculators, particularly greedy retail investors, are there to get "sheared at market tops". Somebody has to buy when the smart money wants to sell and take their winnings out of the casino. Moreover, to keep the herd of retail investing sheep grazing on financial investments including commodities, there needs to be a steady stream of "feel good" press for stocks about how great productivity is and how the nomination of the new Treasury Secretary, Hank Paulson, will be good for the dollar. All the while, stock analysts and market touts are claiming "there has never been a better time to invest". With fears about a rising core inflation rate and slowing economic growth, Bernanke and the Federal Reserve Governors understand too much money was printed up over the last decade. They're not alone. The central banks in Europe are not done raising interest rates either and Japan is just beginning to raise their rates from zero to drain excess liquidity. After 16 rates hikes, the Fed announced it is not done raising rates. This "ringing of the bell" has the sheep sensing that more shocks are coming. This could be downright ugly for the financial markets! We would recommend that the Fed have plenty of tranquilizers and lots of liquidity available to bail out the markets if they keep on scaring the sheep. The market participants that started running like lemmings for the edge of the cliff are led by the market professionals! They have been heard shouting "get out before the sheep panic!" Over the last few months, easy money trades are down, and some Middle Eastern markets have crashed while other emerging markets are in a bear market. Commodities are also in a serious correction, including gold and silver. All too often central banks tighten until the financial markets suffer a significant failure. The Federal Reserve and Treasury have regular practice "fire drills" on what to do during a market crash, and given their behavior and what Pavlov taught us about sheep, they will more than likely create an opportunity to fight a real financial market fire. However, when the Fed has to fight a market event - and cuts interest rates in an effort to save the lives of some of the sheep - you can kiss the dollar goodbye. So, while the dollar has gotten a technical lift over the past week or so, my cash is still going into "non-dollar cash". The U.S. trade deficit is so massive, and our debt is so large, we believe the dollar will have to fall much lower. While a general stock market crash may pressure all stocks (including precious metal stocks) to go lower, precious metals and precious metal stocks are being offered now at significant discounts (much of the excess that causes sharp drops in price has been washed out). In the years ahead, the high prices we have all seen in gold and silver will be surpassed many times over. In addition, leaving your money in short-term cash with no price risk while receiving 5 percent, looks a lot better than losing money in stocks or real estate! Suddenly, risk is a four letter word and cash is not trash.