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  • GOP debate...the focus needs to be on stabilization & pro-growth [Edit or Delete]1 comment
    Sep 12, 2011 12:52 PM
    The republican candidates will face off in yet another debate. What won't be discussed eclipses the supposed 'hot button' issues of the day, namely debt and social security. Instead, the debate SHOULD be about stabilization of the financial markets and pro-growth policy. George W. Bush, a greatly underrated president, was savvy about business and economics and knew that populism was bad for the economy , so he embraced pro-growth economic policy of more spending, free trade and de-regulation - the culmination of which was a five-year bull market and record profits & earnings.


    PE ratios plunged along with stock prices during the 2007-2009 bear market because fundamentals for most S&P 500 companies & sectors remained sound. Prices were rapidly falling, but earnings not so much. In 2007, for example, the S&P 500 PE ratio was 22 and it fell to 13 in March 2009. Now it's still 13 despite the large rally off the March 2009 lows. Housing prices have not recovered but profits and earnings have made enourmous gains from the lows. This refutes the commonly held notion that the Bush & Clinton bull markets were built on a housing & credit bubble. The economic role of housing has been irresponsibly overstated by the media and blogs.

    When Bush entered office America had free trade agreements with only Canada , Mexico, and Israel, and when he left office there were agreements with seventeen countries, including several developing ones.

    Growth is achieved though calming and stabilizing the financial market by taking advantage of the historically low treasury yields to provide ample liquidity to key institutions and by embracing free-trade & globalization. Quibbling over the debt or social security is counterproductive in a world awash with liquidity and uncertainty. 

    Even job creation & incentive programs don't work because American labor is too expensive in a hyper-competitive, profits orientated global economy. The job creation programs and tax incentives proposed by the republican candidates won;t reverse this shift to cheaper labor & automation. Investors and businesses want stability and new growth channels, not hiring quotas. Rebates should be offered not for hiring, but for capital spending on new technology to increase profits. 

    "US trade deficit narrowed sharply to $44.8 billion in July as exports surged to all-time high"

    This is the good news largely ignored by the blogs that deserves to be mentioned during the debates. The candidates' goal as president should be to raise exports, and this is accomplished though accommodative monetary and free trade policies, not spending phobia.
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  • The first part of my post got eaten, but just click on the link above.

    You say, "The economic role of housing has been irresponsibly overstated by the media and blogs." Oh, come on, it was the money-making scam of a lifetime, and then the banks got their butts saved by the bailouts. Suck in all marginal buyers, hell, bring in the no-docs too, collect fees and ridiculous bonuses, securitize these AAA-rated junk mortgages and offload them to world investors, pension funds, suck in more bonuses -- did I forget to say "suck in more bonuses" -- and then throw your hands in the air and say, "We didn't know, we didn't see it coming." Sprinkle on another dose of bonuses and options. The fraud that was committed was unconscionable, and the money made was too.

    Sure, let's embrace free trade and globalization. Giddee-up, everybody, and jump on the job train. Whoops, they've been sent overseas. Sorry. But buck up, growth is sure to return because high frequency trading is alive and well. Don't forget to cash in on those artificially suppressed mortgage rates which we're keeping low, not for the export industry (but that's what we tell you), but so that everybody is pushed back into the stock market.

    Ain't capitalism grand. I get to rip you off and smile at the same time.
    21 Sep 2011, 12:28 AM Reply Like
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