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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: skinowski who wrote (114633)	12/5/2008 12:25:43 PM
From: ChanceIs	4 Recommendations Read Replies (4) \| Respond to of 206347

>>>one of the two things will happen - either we'll have socialism, or the public will learn that the government cannot be allowed to mess with the economy.<<< I understand and respect your POV. I think that we will oscillate ad infinitum between the two poles. Why??? I love to go talk to the "man in the street about the economy." Sometimes I like to set them up to make a point. For example, in the past when discussing options with someone I will ask them if they have ever bought a put. They will invariably say no. Then I will ask if they have car insurance. They will invariably say yes. Then I will say that they have bought a put - and the little light goes on. If they have been bad mouthing derivatives, thy the light goes on a little brighter. Yesterday's episode went like this. I was chatting up a medical doctor about our (a*&hole) SEC chair, Chris Cox. This person didn't like the concept of shorting. So I said....what happens when the FED wants to raise interest rates. Blank stare back. I said....you know...open market operations. Blank stare back. I said...the FED sells Treasuries into the market thereby increasing the supply of Treasuries, dropping their price and requiring a higher yield/interest rate to compensate. Oh. The light goes on. I then said, what is the difference between the FED shorting Treasuries to manipulate interest rates and a hedge fund shorting Lehman to take away the car keys from the teenager who comes in late on Saturday night after a reckless drinking binge. Light goes on a little more. Finally I said...Please be frank with me. I want to know if you really understand central banking because I think that most of the public doesn't, and it is important for me to get a sense of the layperson's frame of mind. The Doc graciously admitted that he was rather clueless. The point is that a lot of very smart, well educated people don't know squat about basic economics. Hillary is running around saying that we have tried competitive markets and they just don't work. Jimmy Rogers would say that if the government wasn't constantly interfering with the markets then they would work. He especially like to attack the LTCM bailout - saying that Bear and the like would have failed back then and they wouldn't have been around to cause today's crisis. So we had a totally managed and stagnant economy under FDR. We started getting some loosening under Reagan. Of course we did get the S&L crisis then. Now we are headed back to Soviet style central planning. Back and forth. Back and forth. Query for Messrs. Roubini and Obama, who both favor a car Czar. Where are you going to find this Czar??? Surely not in Washington. Who in Washington has ever seen a lathe, drill press, or steel furnace. Are you going to get him from Detroit??? Perhaps Honda or Nissan?? All of those folks are in a heap of hurt. The Germans/Mercedes couldn't fix Chrysler when they had it. They lost their fannies and really knew what they were doing. They had their own skin in the game as opposed to the car Czar who will only have the taxpayers' money with which to play. When Detroit is finished imploding then just maybe we will be rid of centrally managed industry. But not until the Docs understand central banks and the wonders of shorting.

To: skinowski who wrote (114633)	12/5/2008 3:15:38 PM
From: energyplay	5 Recommendations Read Replies (1) \| Respond to of 206347

The government needs to stay out of most areas of the economy about 95% of the time. The other 5% of the time, when the is market failure and external events, like the 9/11 attacks, the 1973 oil embargo, and the sub-prime meltdown, intervention will be needed. The auto companies did not hold FED rates down at 1%, did not write a law saying that Fannie and Freddie had to make a certain % of loans to people with bad credit and high loan to value. Most of the reasons this is worse than a normal economic cycle are due to government actions - 1- SEC allows some banks to go from 12:1 to 30:1 leverage (Bear, Lehman, Merrill, JPMChase, Goldman Sachs, Citigroup) - that is a textbook case of being reckless. 2- A Congress passes law FORBIDING regulation of Credit Default Swaps. The law even excludes them from the gambling laws. Otherwise, they would not be legal in Nevada. 3- Allowing Lehman to fail, and their bonds to fail. When something gets "too big to fail", you don't let it fail. If the government does (1), it will need to do (3). There are about 20 more contributing factors to the crisis, most of them government related.