GatewayRedbirds.com

First, it is the result of a financial crisis that severely affected stock-market valuations.

GE's stock price has tanked because it's a mess, not the other way around. Many libertarians/Austrians are partial to claiming the financial crisis was a natuaral outgrowth of our government's engineering of various financial bubbles, first in the stock market and later in the housing market. They've got a point. So when I read this:

So how do we stimulate the economy without increasing the already large current-account deficit? It's not easy, but here is an idea: Create the incentive for people to take more risk and move their savings from government bonds to risky assets. There is no better way to encourage this than a temporary elimination of the capital-gains tax for all the investments begun during 2009 and held for at least two years.

I want to scream. The R&D proposal isn't as icky -- it doesn't rely as much on the notion that the financial markets solve problems -- but a bubble in health care or green tech isn't my cup of tea either.

The argument is that the recession is more credit-driven than consumer-driven, and that the government should take steps to create policies that encourage saving and capital investment.

But with consumers using their homes as ATMs to feed a consumption splurge, it circles back to the truth that we have had two asset-price bubbles in ten years (first tech, then housing) largely due to excess liquidity in the wake of 9-11. Too much money chasing a relatively fixe supply of assets usually leads to bad decisions, bubbles, and crashes.

greenback44 wrote:

First, it is the result of a financial crisis that severely affected stock-market valuations.

GE's stock price has tanked because it's a mess, not the other way around. Many libertarians/Austrians are partial to claiming the financial crisis was a natuaral outgrowth of our government's engineering of various financial bubbles, first in the stock market and later in the housing market. They've got a point. So when I read this:

So how do we stimulate the economy without increasing the already large current-account deficit? It's not easy, but here is an idea: Create the incentive for people to take more risk and move their savings from government bonds to risky assets. There is no better way to encourage this than a temporary elimination of the capital-gains tax for all the investments begun during 2009 and held for at least two years.

I want to scream. The R&D proposal isn't as icky -- it doesn't rely as much on the notion that the financial markets solve problems -- but a bubble in health care or green tech isn't my cup of tea either.

I'm by no means a financial expert, but yeah, isn't infusing a bunch of cash into the stock market just asking to create a bubble with no real foundation?

Wasn't it somewhat inevitable that baby-boomers would pull out most of their savings that were in the stock market at some point, which would lead to a bear market? I mean, that money wasn't going to stay in there forever, and the baby-boomers have more money in it than the Gen X'ers and the Gen Slackers (or whatever 20-somethings are called now) behind them can absorb right away.

Hungary Jack wrote:A 15% decrease in the marginal tax rate is significant, but I wonder if it would have much effect at this point given that capital gains are hard to find. Expanding the credit for net losses at this point would appear to offer much more leverage.

Its hard to say what role cap gains rates play in the economy. I know WSJ aficionados say eliminating capital gains taxes is a cure-all.

Yet, a good chunk of the pie is in retirement fund pools and 401k is unaffected by capital gains taxes

chiselers like Wayne Huzienga don't like the cap gains rates. pure speculators don't like it. but real businessmen like W Buffet aren't worried about the 15% CG rate when they make a move.

Didn't we have a thread somewhere with our various predictions of how low the stock market would get? IIRC I said 6,400. We're getting there....

[expletive]

Obviously there's some reaction to the news, or lack of news, regarding nationalizing the banks, etc., but I wonder how much of the market drop is due to countless companies no longer matching 401k investments. That's a huge chunk of money no longer being put into the market.

The US dollar and gold have been moving in tandem for several months but today gold moved higher and the dollar reversed down. This could be significant and a sign inflation is coming- I still say markets predict the future.

dangerous wrote:The US dollar and gold have been moving in tandem for several months but today gold moved higher and the dollar reversed down. This could be significant and a sign inflation is coming- I still say markets predict the future.

The way things are going, I don't think you need market data to predict that inflation is coming.

I just opened a 401k. This was pretty stupid of me, wasn't it?

docellis wrote:I just opened a 401k. This was pretty stupid of me, wasn't it?

I'd say not.