Pelosi Math

The proponents of the transaction tax claim it will raise $150 billion dollars based on their math. Of course, if their proposal could be retroactively applied, the firm of Sullivan Crouth Trading, a proverbial "flea on the elephants ass" of U.S. trading, would owe the Feds $125 billion for the last 10 years. Wait a second while I get my checkbook-- I usually sign the checks on the dashboard. I think that makes three things clear; the proposal is absolutely ridiculous, the politicians who back it are either brain dead or liars, and Pelosi and that guy from Oregon could not care less about creating jobs.

The .25% Transaction Tax (or Let's Create Jobs by Chasing 50,000 Great Ones Away))

Surprise! Nancy Pelosi has convinced Tim Geithner that ending the U.S. co-leadership in financial markets is good for the economy. In a related story, Geithner is looking for someone to remove his horse's decapitated head from his bed. I don't think this bill will ever see the committee but the idea of it is so offensive to anyone who thinks actions have consequences that I have to call the hacks in Congress out. Financial markets require liquidity. Of course this tax would chase liquidity providers (like me and 4,500 other Chicagoans) overseas (or more accurately, the jobs would go overseas. We'd still be here.), but it also would tax long term investors. An investor is going to be less likely to invest in the U.S. knowing that the secondary market is less liquid. This affects every American. The tax would not raise the revenues Pelosi claims, as trading volumes would fall drastically,but more importantly, what right does she have to shut down a legal industry? Our government is for the people by the people. When it turns its power against the people, as it has done more and more frequently for the last 9 years, it loses it's legitimacy. The backers of this tax have more or less said it's purpose is to get back some of the bailout funds given to Wall Street but that begs 2 questions: Why did you, Congress, approve the bailout of Wall Street when the majority of Americans opposed it? (if they hadn't given them our money they wouldn't have to take it back) and second, Is Congress so clueless that they don't realize this is a tax on the American people and it may make Goldman et al more profitable by eliminating their less deep pocketed competition? When smaller market making operations disappear, with some moving offshore, Goldman and friends wider markets for securities will not have the competition that leads to efficient price discovery that benefits the American investor and, indirectly, the American pensioner. I'm at a loss.

The Nobel Prize winning New Keynesian, cheerleader of government intervention, Paul Krugman, wrote in 2002, "To fight this recession, the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble." ... WTF! What kind of an economist thinks it's a good idea for the Fed Chairman to create any kind of financial bubble? And why isn't he now telling the real story of how the bubble was created? Human frailties such as greed were really just symptoms, or maybe manifestations, of the disease. The disease was easy monetary policy by the Fed that fueled malinvestment in real estate. Furthermore, when an inhouse economist from a firm that stands to make hundreds of millions from said bubble calls for one, most journalists would be skeptical. Paul Krugman is not most journalists. This man just doesn't get it. If you subsidize something you will get too much of it. That means less investment will go to other areas. Now he calls for massive government intervention in health care and job creations. What will that do? Well, I don't have any Nobels laying around but I think we can expect health care to inflate more rapidly than it would otherwise and we'll see businesses encouraged to invest in labor at the expense of R&D. Since R&D expenditures correlate positively with increased production and productivity determines wages, the American worker should expect to be poorer. So as Krugman ramps up his cheerleading for another stimulus package from the Benevolent One, I'd like to say on behalf of the American worker, Thank you.