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Tuesday, May 15, 2007


This Blog has been temporarily out of commission as we changed our site host. I am happy to say that we are now back in operation and ready to move forward. I thank our readers for their patience.


I thought that Alan Greenspan was one of the worst Federal Reserve Chairmen the US has ever had. He was unable to communicate, he spoke in a form of speech which eventually became known as Greenspeak, and most of all he never saw an interest hike he did not like. He was always so concerned about inflation, even when it did not exist, and he also did not appreciate the fact that some things which are done which might affect the market might not be reflected in the financial markets until months down the pike. In this respect, President Bush with his tax cuts has been a better prognosticator than most. Imagine where we might be with our economy if we were not bogged down in a war.

Greenspan held the needle which pricked the .com market bubble several years ago, not that eventually the bubble would not have burst for some other reason. But we hire learned men like Greenspan to prevent these things from happening. He got credit for one of the greatest expansions of the US markets, when, in reality, he was just there when it happened anyway.

So here comes Ben Bernache. He instituted some 15 rate increases in a row. Like his predecessor, Greenspan, Ben does not appreciate the delay factor. If it were not for the Bush tax cuts, we would not be experiencing the growth in the economy that we now have. But Bush is so hated because of the Irak war that he will never get the credit. And, like his predecessor, Greenspan, Bernache held the needle which pricked the housing bubble. Without all those rate cuts the decline in the housing market might have been more gradual.

During this most recent collapse of the housing market there were some real losers and gainers. The losers are the people who lost their homes; the gainers are the banks who foreclose on properties.

Within the past two weeks there have been indications that the economy is slowing down at about the correct time after the Fed rate increases. But the Feds are not seeing it. By the time they do, it will be too late to correct the situation.

Because of economists always giving the on-the-one-hand and on-the-other-hand scenarios, Truman once quipped: Oh, please give me a one arm economist! I would like to see an economist who has a memory of history and who has vision. A knowledge of history would help in someone who might remember what happened after similar behavior in the past. Vision would help for someone to be creative for a chance.

The Federal Reserve has continued to print worthless paper money with nothing to back it up but a GDP number which is not a stable real commodity. Meanwhile, the Euro has increased in value so that it now takes about $1.33 to buy one Euro. I remember when the Euro was established there was parity. Additionally, the GDP of the European Union is not as strong as in the US. It does not take a genius to realize that the financial world considers the Euro more valuable. This scenario also holds true for other world currencies.

I understand the Federal Reserve finds itself between a rock and a hard place. If they up the interest rate, it would make the dollar go up but there would be the risk of pushing the US economy into recession. If they decrease the rate, the dollar will further decline in value as a reserve currency and other world currencies will rise against the dollar. This is all due to having printed all that paper money over the years without anything tangible to back it up. Who would have thought that some day the dollar would be worth .74 Euros? And it is not going to get any better!

I sometime think that, if we put individuals who at one time owned a successful small business in the Federal Reserve, they might do a better job in controlling the nations money supply. At least, these people would know the worth of a business is related to the money intake and the reserve on hand.

On a side note, it might also be interesting to dream what a government we would have without so many lawyers becoming politicians who tend to make more laws that even they do not understand.

This is the way I see it today.

nicola michael c. Tauraso, M.D.


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