James Pethokoukis

Fellow Reuters columnist Agnes Crane see trouble ahead:

Turn the calendar to September and markets are fixated about potential problems at the banks again. The obsession with September being a bad month for stocks and for the world in general has nothing to do with it, I’m sure.

I’m certainly the last person to downplay the still tough road ahead given the state of the U.S. consumer, commercial real estate and the excesses that still need to be wrung out of the system, but the fickle trading, especially in the stock market this summer, has made it difficult to read too much into the daily moves.

Fellow Reuters columnist Rolfe Winkler has it. Exactly. Right:

What Cash 4 Clunkers did for cars, the first time home buyer credit is doing for housing — pulling future demand into the present. Count on home sales to head back down after this tax credit disappears.

What is the case, really, for the Fed being the superregulator of the US financial system? I mean, what is the record of achievement in either regulating banks or detecting systemic crises? Not to mention that by expanding the Fed portfolio de jure, you are opening it up to increased political interference. It is already operating as a quasi fourth branch of government. It doesn’t need any more authority. I realize that Bair’s Justice League of Regulators may be unwieldy in a crisis, but let’s not get into a TBTF position to begin with. Raise capital requirements that increase by a greater percentage than assets and be done with it, no wild swings in rates, and make sure accounting rules don’t magnify cyclicality.

I got some really great comments on that post

1) Don’t these idiots realize that a transaction tax makes a market even more volatile? Look at China for example, they have a 1/10 % transaction tax, which severely reduces liquidity. Look how their market girates UP 5% one day, DOWN 8% the next! If you want to generate some fees from trading profits, TAX the profit on on those who earn them. Like Goldman Sachs & Warren Buffet. Don’t let them weasel their way out!

2) Placing a tax on trades will dry up much liquidity, and drive most traders out of America’s mkts.

3) This tax AMOUNTS TO 5 TIMES all of my current trading cost combined!

Example:

5000 shares $50 per share costs $50 to buy and sell. At a low cost direct access broker. (Including commission, exchange fees, SEC fees, etc)

This tax would be an additional $250 for that trade. To add insult to injury you have to pay it even if you lose money on the trade. On top of that you have to pay taxes on any profit via capital gains tax!

There is no right time to have a tax like this. BUT ATER A MARKET CRASH THERE IS NO WORSE TIME TO CONSIDER SUCH A TAX!

4) Using the logic of this article, then the US should also levy an extra tax on all UAW members since tax money bailed out the union auto companies. Stop all bailouts and stop all goverment redistribution of wealth programs so that ALL people can have lower taxes.

It always amazes me when people act as if raising taxes has no impact on economic growth, like this article from a Financial Post columnist who advocates raising US taxes by $1.4 trillion a year:

1) Washington could raise US$600-billion per year or more if Americans paid a 5% federal sales tax on goods and services if it were identical to Canada’s 5% GST.

2) Another US$280-billion could be generated if Americans paid slightly more than double what they pay now, or US$3.75 a gallon, for gasoline, which is roughly what Canadians pay.

2) Another US$180-billion is available if Americans paid the same taxes on cigarettes as Canadians.

4) Then there’s another US$355-billion for government coffers if Americans had the same liquor taxes as Canadians. The total that could be raised from all four is US$1.415-trillion. That is, by the way, the size of Canada’s or Spain’s economies.

Allan Meltzer (WSJ) pleads for people to stop comparing this downturn to the Great Depression. It is more like the 1973-75 period, he argues. He also opines that it has been in the Obama administration’s self interest to overstate the severity of the recession so it could hype its own achievements in “saving” the US economy.

I would also add that it was in the WH interest to maximize economic concern to maximize the chances of successfully pushing through its economic agenda. But the WH made the mistake of a) thinking that concerns about economic security would dwarf concerns about the sustainability of massive government spending and budget deficits, and b) underestimating how concerns about economic growth would undercut cap-and-trade  and the attempts to pay for healthcare reform by raising taxes.