Wednesday, April 22, 2009

MUST READ BOOK: Greenspan's Bubbles by William Fleckenstein

The Obama Administration has learned nothing from the mistakes of Bill Clinton and George Bush. They are attempting the same old (and failed) monetary policies of Alan Greenspan and Ben Bernanke to grow the U.S. economy out of the worst economic crisis since the 1930s. And all preliminary indications are they are making the economy worse, not better.

Super low interest rates to encourage borrowing. Instead of changing the tax code to encourage savings and investment. Trying to reinflate a broken bubble is not an economic policy.

Extensive government spending on every conceivable boondoggle imaginable. Instead of fiscal restraint, even program cuts. How much of GDP should this government consume? Every dollar spent by Washington is one less available in the private sector. Has anyone ever heard of inflation or a capital crunch down at Foggy Bottom?

GREENSPAN'S BUBBLES by author and noted money manager William A. Fleckenstein is MUST reading for investors concerned about the direction of the U.S. economy. The subtitle of this book says it all:

"The Age of Ignorance at the Federal Reserve"

Unfortunately Bernanke is making Greenspan look like a fiscal conservative. And his partner at Treasury Geithner only makes what is awful much worse.

Generations of Fed Chairman think they can fine tune monetary policy to aid U.S. economic growth. The arrogance of such a policy view is obvious. Trying to release and then remove capital from a $10 trillion economy with precision is like trying to do brain surgery with a chainsaw. There are too many variables, too many considerations, factors, problems, people. The result is what we have now and have had since the Fed's ungodly creation in 1913. Bubble markets, severe recessions, and inflation---and swings up and down between extremes.

The Fed was created to moderate economic panics. Instead it creates them by overstimulating the economy and then overcontracting it, sort of like giving a kid 1,000 cups of coffee and then 50 valium to calm then down.

I urge all investors to read this important book. The analysis inside is stunning. If you think you can "Fight the Fed" and invest in stocks and real estate using fundamental analysis alone you are kidding yourself. The Fed is THE mover of markets and right now we have Moe, Larry, and Curley running the U.S. economy instead of any business owner who has actually met a payroll, started a company, or created a job.

Robert J. Abalos, Esq.