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If you like to read clear and concise economic theory and what's wrong
with what is happening now, the Wall Street Journal had an interview
with in the Saturday Oct 18 edition with Anna Schwartz, co author
with Milton Friedman of A Monetary History of the United States.
Here's the link.
http://online.wsj.com/article/SB122428279231046053.html
The Journal allows non-subscribers to read opinions for a few days
before they take them down.
This is an exceptional look at economic theory from someone who was
alive during the depression and through all of the recessions. She
understand economic policy as well as any Fed executive.
As traders, we all need to prepare for a return to the oppressive tax
policies of the 1930's through the 1980's. Implied tax rates hit 70
plus percent in those days. If you want a read an article that
illustrates how someone with a small amount of historical knowledge
and misapplied statistics can make a case for higher taxation as a way
to grow, here's a link to an article written by such a person.
http://www.oregonlive.com/opinion/index.ssf/2008/10/bailout_instead_double_the_top.html
I also found it interesting how many comments were supportive. Wow,
does this speak to the level of education, or lack of it, in our
society. There is a huge difference between implied rates and
effective rates. In those days there were a zillion ways to tax
shelter income. Back then the IRS even allowed income averaging. Those
deductions are gone. No mention of that. No mention of the effective
tax rate back then and why rates were brought down.
In addition, America was not a global economy then, the economy was
nationalized. We bought what we consumed so we had a huge post war
expansion because of the population growth. Of course the standard of
living was much lower then than it is today. In addition, credit was
hard to come by. No one was leveraged up to their teeth in credit card
debt. Opps. Was that all conveniently left out, forgotten, or maybe
the author just didn't know about those economic factors--that's
called ignorance. This is what happens when GDP is looked at as an
isolated number. Back then the government accounted for less than 10%
of the GDP. As we've moved toward socialism, the government now
accounts for 28% of the GDP. And it's going to grow in the next 8
years to something over 35%.
I also noticed that the economic history writer left out the fact that
when Europe raised taxes, particularly the UK, to those levels upto
90% business investment dropped and the wealthy left. (If that's
incorrect, the UK members my age should correct my argument.)
Anyway the point is when all these new tax policies hit, it's going to
change trading strategy. TA isn't going to help with that. When a
trader is keeping $0.40 on the dollar from successful trading rather
than $0.67 on the dollar, it changes the risk/reward ratios.
Remember the government is our partner only when we win. If we have a
net loss, the government only allows us to deduct up to $3000 a year
in losses. That's a great partnership. If you win I get 35% (moving up
to 50% or more shortly) and if you lose, my share of your losses is
limited to $3000. Sweat!
A large part of the population is yelling for change. They might want
to be careful what they wish for!
Enjoy those articles. Your trading life is going to change in the
years to come. Well, only the ones of you who survive.
Super
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