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An Overlooked Solution: Some lessons from Sweden September 23, 2008

Posted by The Armchair Economist in Business, Commentary, Economics.
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It seems as if Paulson’s plans aren’t getting through Capitol Hill as easily as easily as Paulson and the Bush administration would like it to. Rather than blindly react to a calamity (as they did after 9/11), cooler heads are prevailing. In a way, the quick announcement by the Fed for a ‘Bailout’ last Friday fulfilled its main goal.. of stabilizing a market that was running on fear. While the Senate Banking Committee is busy fleshing out the details of the bailout, I wonder why no one has brought up a strategy that was utilized by the Swedish Government in the 1990s to stabilize their own economy after a similar housing bust. (more…)

Open Letter to Senator Charles Schumer September 20, 2008

Posted by The Armchair Economist in Business, Commentary, Economics, Politics.
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The Honorable Charles Schumer,

I am writing to you, as a constituent and resident of New York State, to share with you my thoughts and concerns regarding the Federal Reserve’s action in response to this week’s financial upheaval on Wall Street.

While I understand the necessity for swift and decisive action in order to stabilize financial markets, the actions outlined by the Federal Reserve do nothing to address the root cause of the sub-prime lending debacle. It is of my opinion that our problems derive from monetary policy driven by our exclusive reliance on continual economic expansion to fund increasingly large government programs (and an unpopular war), a policy that favors growth over stability. (more…)

Fed bailout of Wall Street: Reverse Redistribution of Wealth September 19, 2008

Posted by The Armchair Economist in Business, Commentary, Economics.
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Fiscal conservatives (and the rich) have always cried foul over progressive tax policies and socialist policies(or as they see it, the redistribution of wealth from the rich to the poor). Today, we are witnessing perhaps history’s greatest reverse redistribution of wealth.. from the lowly taxpayer/common man to those who gambled on risky bets (and lost).

While this bailout was necessary to stem the fear running in on the Street and risking catastrophic damage to the US/world economy (think: companies going bankrupt, people losing jobs, less tax revenue, less social services.. depression perhaps), there is no debate that this is basically a free ‘put’ option to gamblers who were caught holding the bag. (more…)