Your Questions About What Is Wrong With The Stock Market Today

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Charles asks…

Its the 1930¨s all over Again ? with all the political wrong decisions……….?

It’s the 1930s All Over Again
by Llewellyn H. Rockwell, Jr.
by Llewellyn H. Rockwell, Jr.

DIGG THIS

Jittery stock markets, an economy drunk on credit, and politicians calling for varieties of dictatorship: what a sense of déjà vu! Let us recall that the world went bonkers for about ten years way back when. The stock market crashed in 1929, thanks to the Federal Reserve, and with it fell the last remnants of the old liberal ideology that government should leave society and economy alone to flourish. After the federal Great Depression hit, there was a general air in the United States and Europe that freedom hadn’t worked. What we needed were strong leaders to manage and plan economies and societies.

And how they were worshipped. On the other side of the world, there were Stalin and Hitler and Mussolini, but in the United States we weren’t in very good shape either. Here we had FDR, who imagined himself capable of astonishing feats of price setting and economy boosting. Of course he used old-fashioned tricks: printing money and threatening people with guns. It was nothing but the ancient despotism brought back in pseudo-scientific garb.

Things didn’t really return to normal until after the war. These “great men” of history keeled over eventually, but look what they left: welfare states, inflationary banking systems, high taxes, massive debt, mandates on business, and regimes with a penchant for meddling at the slightest sign of trouble. They had their way even if their absurd posturing became unfashionable later.

It’s strange to go back and read opinion pieces from those times. It’s as if everyone just assumed that we had to have either fascism or socialism, and that the one option to be ruled out was laissez-faire. People like Mises and Hayek had to fight tooth and nail to get a hearing. The Americans had some journalists who seemed to understand, but they were few and far between.

So what was the excuse for such a shabby period in ideological history? Why did the world go crazy? It was the Great Depression, or so says the usual explanation. People were suffering and looking for answers. They turned to a Strongman to bail them out. There was a fashion for scientific planning, and the suffering economy (caused by the government, of course) seemed to bolster the rationale.

All of which brings me to a strange observation: when it comes to politics, we aren’t that much better off today. It’s true that we don’t have people running for office in ridiculous military suits. They don’t scream at us or give sappy fireside chats or purport to be the embodiment of the social mind. The tune is slightly changed, but the notes and rhythms are the same.

Have you listened carefully to what the Democrats are proposing in the lead-up to the presidential election? It’s just about as disgusting as anything heard in the 1930s: endless government programs to solve all human ills. It’s as if they can’t think in any other way, as if their whole worldview would collapse if they took notice of the fact that government can’t do anything right.

But it also seems like they are living on another planet. The stock market has a long way to fall before it reaches anything we could call low. Mortgage interest rates are creeping along at the lowest possible rates. Unemployment is close to 4%, which is lower than even Keynesians of old could imagine in their wildest dreams.

The private sector is creating a miracle a day, even as the stuff that government attempts is failing left and right. The bureaucracies are as wasteful and useless as they’ve ever been, spending is already insanely high, debt is skyrocketing, and there’s no way that any American believes himself to be under-taxed.

The Democrats, meanwhile, go about their merry business as if the public schools were a model for all of society. Oh, and let us not forget their brilliant idea of shutting down the industrial economy and human prosperity so the government can plan the weather 100 years from now. We can only hope that there are enough serious people left to put a stop to this harebrained idea.

But before we get carried away about the Democrats, let’s say a few words about the bloodthirsty Republicans, who think of war not as something to regret, but rather the very moral life of the nation. For them, justice equals Guantánamo Bay, and public policy means a new war every month, and vast subsidies to the military-industrial complex and such other Republican-friendly firms as the big pharmaceutical companies. Sure, they pay lip service to free enterprise, but it’s just a slogan to them, unleashed whenever they fear that they are losing support among the bourgeois merchant class.

So there we have it. Our times are good, and yet we face a choice between two forms of central planning. They are varieties of socialism and fascism, but not overtly: they disguise their ideological convictions so that we won’t recognize that they and their ilk have certain predecessors in the history of political economy.

Into this mix steps Ron Paul, with a message that has stunned millions. He says again and again that government is not the way out. And even though his political life is nothing short of heroic, he doesn’t believe that his candidacy is about him and his personal ambitions. He talks of Bastiat, Hazlitt, Mises, Hayek, and Rothbard – in public campaign speeches. And let no one believe that this is just rhetoric. Take a look at his voting record if you doubt it. Even the New York Times is amazed to discover that there is a principled man in politics.

It is impressive how crowds are hard pressed to disagree with him. How much good is he doing? It is impossible to exaggerate it. He provides hope when we need it most. You see, the American economy may look good on the surface but underneath, the foundation is cracking. The debt is unsustainable. Savings are nearly nonexistent. Money supply creation is getting scary. The paper-money economy can’t last and won’t last. One senses that the slightest change could cause unforeseen wreckage.

What would happen should the bottom fall out? Scary thought. We need ever more public spokesmen for our cause. In many ways, the Mises Institute bears a heavy burden as the world’s leading institutional voice for peace and economic liberty. So does LewRockwell.com. And we are working in every way possible to make sure that the flame of freedom is not extinguished, even in the face of legions of charlatans and power-mongers. Even though the politics of our times is as dark as ever, there are bright lights on the horizon.

July 28, 2007

Llewellyn H. Rockwell, Jr.
Thanks, Asawalli,
but im trying to give answer to soo many question from regular and honest hard working people, who is asking every day: Why the world is up side down?

Justin answers:

Wow!!! You are an expert. I think I cannot answer this.
You should be in Government or working on Wall Street.
There are no bright lights. It is time for our civilisation to fall, as the Egyptians, Greeks and Romans did.
Immorality brings the fall of economy, as history can prove.
If we rely on money we will be very disappointed!

Mark asks…

Wrong time to begin investing in 401(k)?

I am 23 years old. Given the recent stock market downturn, I have recently turned my attention to saving for my retirement. I know the correct 401(k) investment allocation for my age is supposed to be heavy in stocks, light in bonds and less risky investments. However, would it be unwise to allocate more in bonds and less risky less rewarding investments, at least until the stock market finds somewhat of a bottom? I know I’m young, and can tolerate the risk long term, but it seems like a good idea to stick with stable funds, bond funds, anS&P 500 equity index fund, and other vehicles of low market risk. On the other hand, is it a good idea to invest heavily in stocks, knowing that there are 40-50 years ahead of me during which the storm can easily be weathered? If I just put my first dollar into a 401(k) today, Oct. 27 2008, generally what allocation approach would best suit me given my age (23) and the volatile market? Thank you!

Justin answers:

Hi myeys–

First, if the company is matching you are getting free money- so in any case max out your 401k if you can afford it no matter what you decide to do with it.
Second, what are your choices? I personally think that 20% in fixed income at your age is enough. S&P500 index is one good pick and you need some international– I like about 30% of your equity portion in international , at least, which will include about 10% emerging markets. You are one of the lucky ones, IMO, lots of time to grow your wealth and your question is a common one and a very good one. Also, check out other investment sites that are dedicated to answering questions like yours. Morningstar.com has a forum, rest you pay, but it is a good site. Www.moneyrec.com is a site developed for your investment questions- free to new users.

Best of Luck, keep asking and keep learning!

Grace

John asks…

What the hell is wrong with GM? Somebody that works for GM, please let me know?

I have no clue what GM is thinking anymore. The economy is not doing great at all, a lot of people are losing their jobs, monday was one of the worst days ever with the stock market, all the other car companies are lowering there prices and making cars more affordable (especially with the SUVs) And GM is making it even harder and less affordable. I went car shopping last week and was checking out the Saturn Outlook or the GMC Acadia and saw 72 month financing at 0% and got a price from Saturn which I can afford. Then today I went to GMC to see how much the Acadia would cost a month and they informed me that GM doesn’t offer 72 months anymore, and the most is 60 months and its not even 0%, its 1.9%. (And that’s with every GM, including the Saturn Outlook, and they just took away the 72 months as of yesterday)

I just went from looking forward to buying a GM to not being able to afford the monthly payments. I just want to know with the economy not doing to great at all and people cutting back on costs, why they would raise they’re prices and make them less affordable, if anything they should have lowered them. Are they trying to lose money?

Justin answers:

I don’t work for GM, but I do know that GM is experiencing the same economic problems as the rest of the nation. I mean, GM is turning in some of their worst quarterly reports in its history. They need money badly, and they need it now. This example you had in just an example of them trying to get quick cash. Even though they are turning away potential buyers, those that do buy are giving them more money which can be used in the short term.

Robert asks…

Would Obama, Dems Kill 401(k) Plans?

OBAMA’S PLAN TO SEIZE YOUR 401K
Would Obama, Dems Kill 401(k) Plans?
October 23, 2008 10:47 AM ET | James Pethokoukis | Permanent Link | Print
I hate to use the “S” word, but the American government would never do something as, well, socialist as seize private pension funds, right? This is exactly what cash-strapped Argentina just did in the name of protecting workers’ retirement accounts (Efharisto, Fausta’s Blog). Now, even Uncle Sam isn’t that stupid, but some Democrats might try something almost as loopy: kill 401(k) plans.

House Democrats recently invited Teresa Ghilarducci, a professor at the New School of Social Research, to testify before a subcommittee on her idea to eliminate the preferential tax treatment of the popular retirement plans. In place of 401(k) plans, she would have workers transfer their dough into government-created “guaranteed retirement accounts” for every worker. The government would deposit $600 (inflation indexed) every year into the GRAs. Each worker would also have to save 5 percent of pay into the accounts, to which the government would pay a measly 3 percent return. Rep. Jim McDermott, a Democrat from Washington and chairman of the House Ways and Means Committee’s Subcommittee on Income Security and Family Support, said that since “the savings rate isn’t going up for the investment of $80 billion [in 401(k) tax breaks], we have to start to think about whether or not we want to continue to invest that $80 billion for a policy that’s not generating what we now say it should.”

A few respectful observations:

1) McDermott is right when he says the savings rate isn’t going up. But the savings rate doesn’t include gains to money you invest in the stock market. It ignores the buildup of net worth. (If you bought a share of XYZ Corp. in January at $100, for instance, and its value doubled by December, the savings rate measure would still value that investment at $100. In short, the savings rate is a phony number.)

2) So based partly on the above faulty logic, the $4.5 trillion, as of the start of the year, invested in 401(k) plans doesn’t count as savings.

3) Ghilarducci would have workers abandon the stock market right at the bottom of the market. A stupid idea, according to Warren Buffett: “I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: ‘Put your mouth where your money was.’ Today my money and my mouth both say equities.”

4) Ghilarducci would offer a lousy 3 percent return. The long-run return of the stock market, adjusted for inflation, is more like 7 percent. Look at it this way: Ten thousand dollars growing at 3 percent a year for 40 years leaves you with roughly $22,000. But $10,000 growing at 7 percent a year for 40 years leaves you with $150,000. That is a high price to pay for what Ghilarducci describes as the removal of “a source of financial anxiety and…fruitless discussions with brokers and financial sales agents, who are also desperate for more fees and are often wrong about markets.” Please, I’ll take a bit of worry for an additional $128,000.

5) What effect would this plan have on an already battered stock market? Well, I would imagine it would send it even lower, sticking a shiv into the portfolios of everyone who didn’t jump aboard. But I am sure the Chinese would love to jump in and buy all our cheap stocks to fund the retirement of their citizens.

My bottom line: If you believe in the long-run dynamism of the American economy, then you have to believe in the stock market. Listen to superinvestor Buffett, not the prof from the New School.

Do you think this is a good plan?

Justin answers:

I dunno’ where you get this stuff, but I do know that because all of these things have to go through a long and involve legislative process and eventually they have to be signed into law by the president. After that, if anyone objects to a given law it will be challenged in court. Of course anything can happen, but as a rule very few things of a radical nature ever get passed. Worry about real things, not stuff that totally foolish!

Paul asks…

politics of our time is as dark as ever, but with a bright ligths in the horizon?

politics of our time is as dark as ever, but with a bright ligths in the horizon?
Its the 1930¨s all over Again ? with all the political wrong decisions……….?
It’s the 1930s All Over Again
by Llewellyn H. Rockwell, Jr.
by Llewellyn H. Rockwell, Jr.

DIGG THIS

Jittery stock markets, an economy drunk on credit, and politicians calling for varieties of dictatorship: what a sense of déjà vu! Let us recall that the world went bonkers for about ten years way back when. The stock market crashed in 1929, thanks to the Federal Reserve, and with it fell the last remnants of the old liberal ideology that government should leave society and economy alone to flourish. After the federal Great Depression hit, there was a general air in the United States and Europe that freedom hadn’t worked. What we needed were strong leaders to manage and plan economies and societies.

And how they were worshipped. On the other side of the world, there were Stalin and Hitler and Mussolini, but in the United States we weren’t in very good shape either. Here we had FDR, who imagined himself capable of astonishing feats of price setting and economy boosting. Of course he used old-fashioned tricks: printing money and threatening people with guns. It was nothing but the ancient despotism brought back in pseudo-scientific garb.

Things didn’t really return to normal until after the war. These “great men” of history keeled over eventually, but look what they left: welfare states, inflationary banking systems, high taxes, massive debt, mandates on business, and regimes with a penchant for meddling at the slightest sign of trouble. They had their way even if their absurd posturing became unfashionable later.

It’s strange to go back and read opinion pieces from those times. It’s as if everyone just assumed that we had to have either fascism or socialism, and that the one option to be ruled out was laissez-faire. People like Mises and Hayek had to fight tooth and nail to get a hearing. The Americans had some journalists who seemed to understand, but they were few and far between.

So what was the excuse for such a shabby period in ideological history? Why did the world go crazy? It was the Great Depression, or so says the usual explanation. People were suffering and looking for answers. They turned to a Strongman to bail them out. There was a fashion for scientific planning, and the suffering economy (caused by the government, of course) seemed to bolster the rationale.

All of which brings me to a strange observation: when it comes to politics, we aren’t that much better off today. It’s true that we don’t have people running for office in ridiculous military suits. They don’t scream at us or give sappy fireside chats or purport to be the embodiment of the social mind. The tune is slightly changed, but the notes and rhythms are the same.

Have you listened carefully to what the Democrats are proposing in the lead-up to the presidential election? It’s just about as disgusting as anything heard in the 1930s: endless government programs to solve all human ills. It’s as if they can’t think in any other way, as if their whole worldview would collapse if they took notice of the fact that government can’t do anything right.

But it also seems like they are living on another planet. The stock market has a long way to fall before it reaches anything we could call low. Mortgage interest rates are creeping along at the lowest possible rates. Unemployment is close to 4%, which is lower than even Keynesians of old could imagine in their wildest dreams.

The private sector is creating a miracle a day, even as the stuff that government attempts is failing left and right. The bureaucracies are as wasteful and useless as they’ve ever been, spending is already insanely high, debt is skyrocketing, and there’s no way that any American believes himself to be under-taxed.

The Democrats, meanwhile, go about their merry business as if the public schools were a model for all of society. Oh, and let us not forget their brilliant idea of shutting down the industrial economy and human prosperity so the government can plan the weather 100 years from now. We can only hope that there are enough serious people left to put a stop to this harebrained idea.

But before we get carried away about the Democrats, let’s say a few words about the bloodthirsty Republicans, who think of war not as something to regret, but rather the very moral life of the nation. For them, justice equals Guantánamo Bay, and public policy means a new war every month, and vast subsidies to the military-industrial complex and such other Republican-friendly firms as the big pharmaceutical companies. Sure, they pay lip service to free enterprise, but it’s just a slogan to them, unleashed whenever they fear that they are losing support among the bourgeois merchant class.

So there we have it. Our times are good, and yet we face a choice between two forms of central planning. They are varieties of socialism and fascism, but not overtly: they disguise their ideological convictions so that we won’t recognize that they and their ilk have certain predecessors in the history of political economy.

Into this mix steps Ron Paul, with a message that has stunned millions. He says again and again that government is not the way out. And even though his political life is nothing short of heroic, he doesn’t believe that his candidacy is about him and his personal ambitions. He talks of Bastiat, Hazlitt, Mises, Hayek, and Rothbard – in public campaign speeches. And let no one believe that this is just rhetoric. Take a look at his voting record if you doubt it. Even the New York Times is amazed to discover that there is a principled man in politics.

It is impressive how crowds are hard pressed to disagree with him. How much good is he doing? It is impossible to exaggerate it. He provides hope when we need it most. You see, the American economy may look good on the surface but underneath, the foundation is cracking. The debt is unsustainable. Savings are nearly nonexistent. Money supply creation is getting scary. The paper-money economy can’t last and won’t last. One senses that the slightest change could cause unforeseen wreckage.

What would happen should the bottom fall out? Scary thought. We need ever more public spokesmen for our cause. In many ways, the Mises Institute bears a heavy burden as the world’s leading institutional voice for peace and economic liberty. So does LewRockwell.com. And we are working in every way possible to make sure that the flame of freedom is not extinguished, even in the face of legions of charlatans and power-mongers. Even though the politics of our times is as dark as ever, there are bright lights on the horizon.

July 28, 2007

Llewellyn H. Rockwell,

Justin answers:

You really expect anybody to read this?

I suggest you put it on youtube, explained by a beautiful woman in a bikini. Then somebody actually might pay attention.

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