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Originally Posted by Moneyguy1
Does a president by himself dictate the tax rates or is that a function of both the legislative and the executive branch. Tabs; my background is finance and economics. No matter who the president puts in certain positions and no matter what actions these individuals undertake, the long run effect of their actions is unknown and inconsequential. Short term effects can be seen like the run-up of certain stocks after a rate cut. However, the long range effect of such a cut cannot be, with accuracy, foreseen. The economy is, after all, an irrational animal, more affected by emotion than by reason or logic.
The tax cuts are a short term effect. The additional deficit spending cannot continue indefinitely, no more than the uptick in real estate prices could. Sooner or later, the chickens will come home to roost. Strength of the dollar from this point forward........
Liquidity during the 30s....The inability of many investors at all levels to cover their losses. How does this differ in theory from a current population with massive debt and living from month to month, always on the brink of economic ruin? Slightly different scenario, totally similar potential results. Greenspan is right to warn us af a potential future recession.
Sorry....This is an extremely complex question and the number of indicators that indicate future problems for the economy frighten me. I hope I am wrong and somehow sanity returns to national fiscal policy. And, just as a corollary to this, I hope that somehow we return to a personal fiscal philosophy of: "If I can't afford it and it isn't an absolute necessity, then I don't need it today". Instant gratification is a large part of the problem.
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There is not too much to argue with you about. However I want to put an additional perspective of the defceit spending. 911 was a hugh shock to the financial system, which could have brought about its collapse. To stave off the collapse and keep the system liquid, money had to be pumped in. This was done by lowering interest rates which led to excesses down the road when the situation stabilized. It led to unrestricted federal spending, which led to excesses by the legislative branch down the road.
My take on it is that America and the Bush admin was thrown by 911 and had to take action which went contrary to what they would have done otherwise. Bush in his natural habitat is a fiscal conservative, 911 forced him out of it by necessity.
Nobody wants to admit what a potential death blow 911 was to the world economic system. However if explained with that premise in mind the actions and events seem to make sense, where they make little sense with another explaination.