The Fed was right to hold the rate at 2%. However, the SEC must re-instate the Uptick Rule to prevent bear raids. McCain wants a commission to investigate what happened, but Obama's advisors were the ones who caused this disaster, so he and the press want no investigation. by Natalie Schultz
(libertarian)
Wednesday, September 17, 2008
Yay! The Fed voted unanimously to hold rates at 2% today. How did CNBC's Cramer react? He was furious! He was practically crying - about the loss of Alan Greenspan! YIKES!
Cramer believes that we are not facing inflation, but deflation. Is he NUTS? Simply put, Cramer said that Greenspan's 2003 cutting rates to 1% was a great thing, and "No one questioned him." NO ONE questioned him? Hmmm. Perhaps no one in the media questioned him, but that is because the media worships him - still - TO THIS DAY!
Sound familiar? There are three people the media never seems to question: Barack Obama, Alan Greenspan, and Warren Buffet. Let's see, Alan Greenspan caused the credit crisis (by constantly cutting rates to historic lows), Warren Buffet profited by being smart enough to see what was happening, and Obama was anointed "The One" because he thinks McCain is George W. Bush.
Who cares what Cramer says, right? Well, normally. The problem, as I see it, is that many people who do not normally pay attention to economics see the headlines in all the newspapers on Tuesday about Monday's 500 point drop, so on Tuesday evening, many of these people probably tuned-in to Cramer's Mad Money today. And what did they hear? This crazy guy saying that the Fed screwed up, that the economy will collapse, that not cutting rates was the dumbest thing in the world; and that the Fed is wrongly being praised for it's "bold" move.
The move by the Fed was not "bold;" it was just correct. Cramer is a trader, not an economist. He says so himself. The problem is that if an ordinary American just happened to tune in and hear his rant, they are probably taking him seriously. Not that Cramer comes off as a serious guy, but the fact that he was waxing nostalgic for the days of the "Great" Alan Greenspan probably did have an affect on people. This is the media's fault.
After his first rant, he went into the AIG disaster. His argument was that only a bold rate cut could have saved AIG. He never explained how, because the only way such a theory can hold water is if it is based solely on the idea that traders like him would have ploughed their money into AIG stocks. Yeah, right. Even traders are not that stupid. Want proof? Later, even Cramer himself said the financials are NOT the place to put your money; that you should stick with companies you understand, like Mac Donald's and Disney. High School Economics front and center! Actually, he did sort of explain how a rate cut could help by - increasing liquidity; but the Fed did that without cutting rates.
He was basically begging for a $75 Billion bailout of AIG. Well, maybe the Fed was listening, because they even out-bid Cramer soon after with an $85 Billion loan. A loan? Fine. What really worries me is the fine-print: That the government will take ownership of a large stake of AIG in return? ARE YOU KIDDING ME?!? Has the government learned NOTHING about quasi-private, quasi-government owned entities?
Now, Cramer did say something that was actually right: The SEC eliminated the Uptick Rule and that led to a Bear Raid and the collapse of so many financial firms. Eliminating the Uptick Rule was downright stupid - it forces traders to keep dumping stocks to profit - there is no floor until the company goes bankrupt. The problem now is that these financial firms cannot be sold to a buyer even though they have valuable assets because the stock is worthless. This is truly a disaster. The SEC must reinstate the Uptick Rule! I have nothing against short selling, but this is just wrong; this is not free-market capitalism. It's like renting a house, burning it down and collecting the insurance payments on behalf of the landlord and then walking away.
McCain has recommended a commission to study what caused the credit crisis. Obama made fun of this suggestion. He said "This isn't 9/11. We know how we got into this mess. We need a leader who will get us out." McCain actually co-sponsored a bill in 2005 titled The Federal Housing Regulatory Reform Act; the democrats blocked it. Imagine if it had passed! Normally, I would not agree with such a commission, but in this case I believe it must be done. Obama does not want an investigation because many of the people who caused this crisis, particularly high-ranking officials from Fannie Mae, are his top advisors. It was the Clinton Administration and Obama's people who caused this mess that is why Obama does not want an investigation and why even the media is calling McCain stupid for suggesting such a thing. Bush may have made the situation worse by being a "Compassionate Conservative" pushing for minority homeownership, but the Democrats were behind him 100% on that. This disaster is a Democrat disaster and only an investigative commission will bring the truth into the light.
I think Ron Paul should be appointed to head up this commission. He is non-partisan and understands economics; he's been warning us about an economic collapse for decades. Ron Paul is the only person who knows what is going on, can point out the problems for the world to see, and finally set us straight.
Now I'm going to bed. I cannot stand hearing Obama and his surrogates make false assertions that Obama wrote bills that would have prevented this (he did not he did not even vote on the one that made it to the floor). Obama has gone far beyond the point of making me sick now he sounds just like Al Gore (he invented the internet, remember). He claims that the Kennedy-Hatch service bill was stolen from his ideas (during the forum on National Service). Now they are even claiming that he has been talking about our monetary and deficit crisis for years - talking points stolen directly from Ron Paul. Obama knows diddley-squat about the economy. His voting record proves it. Plagiarizing Hillary, JFK and RFK is one thing, but stealing Republican talking points (cutting taxes) and particularly plagiarizing Ron Paul is downright sickening.
It's after one in the morning, but for me it's still today, although technically today is yesterday. So this article will post as written on Wednesday, which for me is still tomorrow ;)
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The right thing for the government to do is get out of the way and let the market revalue and correct itself. Government and FED interference in our marketplace is what is causing this debacle to begin with. More of the same poison is not going to cure the malady.
Cramer is about 6 months late with this deflation idea. Get your financial information somewhere else. Cramer is all over the place with his predictions. Mike Shedlock is one good place. He's been pushing deflation for months . Now that it's undeniably obvious, Cramer suddenly figured it out. However, he does make boring economics entertaining for the masses.
No, Cramer is not nuts. He's an evil, lying idiot who hasn't made a single correct prediction about the economy since he's had his show.
Price deflation may occur but the only tool that the federal reserve has against the economic situation we're in is inflation. They will print more dollars to "solve" this crisis and we will enjoy more monetary inflation.
You state (your opinion) that Alan Greenspan, by lowering interest rates as he did (he also raised them sometimes), that he caused the current "crisis". That crisis manifests with non-prime mortage holders and is tprobably he most well-known manifestation of the American economy crisis.
I disagree with you. Alan Greenspan did that all right. But it was not Mr. Greenspan who offered the complex loans that brought this crisis to a head. Banks offered, assuming people could read the written word. People might be able to read the written word of the mortagages they obligated themselves to, but many were unable to fulfill their obligations.
Myself, I think it was stupidity on the part of the consumer and irresponsibility on the part of the banks who did the lending. A duality, do you see? Two players, each making an individual mistake and their combination brought the situation into crisis. Which is quite a different thing that saying it was Mr. Greenspan's responsibility because he lowered and raised interest rates to keep the economy healthy.
The issue is that the Federal Reserve manipulates interest rates and money supply. Whether the Fed increases its target rate, decreases it or keeps it unchanged is irrelevant because the Fed is still in the mafia-style business of fiat money and fractional reserve banking.
Arguing for a hike or a cut is pretty much the same thing; it is an outright defense of the Federal Reserve system. To use the "drunk man" analogy, a hike is gin tonic and a cut is vodka orange. Only alcoholics argue for hours over their respective advantages.
The best transitional strategy to get to free-market money is the gold standard.
Otherwise, I hope Palin will win the presidency because liberals as losers are more entertaining than the conservatives. I currently find government politics more entertaining than baseball despite the awful costs of that sports on our life. Government is crime. Always.
Cramer is right on this one. Short selling without adequate enforcement is like a stranger walking up to your house and telling a prospective buyer that he can sell your house for less than you can. Just by making that statement, you now have to compete to sell your house with someone who has no business getting into a competitve selling arrangement with your buyer. At the end of the day, you have to sell your house to whoever has the cash, which is probably they guy who just sold your house earlier that day. This is an extreme example. But in a thinly traded market, the short seller has more influence than he should.
The good or evil of the short sell has nothing to do with the opinion of a bookseller with sound effects. The rules surrounding a short sell need to be enforced fairly, or the honest investors will be burned.
This form of market abuse should be looked at separately from interest rate manipulation by governments, which is a different form of market abuse. If the markets were operated fairly, then, yes, they will adjust by struggling to find the correct prices.
DigitalBob and Cramer are wrong on that one. Bear Stearns did not collapse because of the uptick rule. It collapsed because it is the nature of socialism to collapse. For a long time, traders could bypass the uptick rule by using combinations of options and synthetic shares, often called married put or conversions, which were pretty much banned in 2003. I know it because I used them a little bit and had to pay SEC fees on those... Frankly, the elimination of the uptick rule was not such a big deal. When it appeared that Enron was dead, the uptick rule was irrelevant.
If anything the markets are more efficient, that is they better capture all available information, with complete freedom; short-selling is good and inside trading is good.
As a former Libertarian (how can I call myself Libertarian when I see Libertarians asking for the SEC to bring the uptick rule???), I must add that financial markets (NYSE, Nasdaq, Londont Stock Market...) should be the one that decide if they allow short-sellers or not. It is none of the SEC's business.
The SEC must be abolished and shut down right away. For the sake of investors. Financial markets must take responsibilities for their business instead of dodging them behind SEC/NASD rules and regulations. The SEC is so useless, so dangerous, so in the hands of the same guys that run central banks and governments.
I urge you not to join the government crowds that go after short-sellers and greedy investors to hide the real culprit: government, central banks. Don't miss the real target! The state is the enemy!
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