CAPITOL IDEAS: Saving an Unstable Currency
Bethell, Tom
CAPITOL iDEAS TOM BETHELL Saving An Unstable Currency ~AM AT AN AGE WHEN MANY PEOPLE think about retirement, or have already retired. But I will keep working, God willing. The golf course is...
...Inflation is baked in the cake...
...Here are two more: the doomsterish Robert J. Samuelson (Washington Post) and the upbeat Lawrence Kudlow...
...So, which way are markets headed...
...But that is not the way the world is going...
...Man Reynolds and Brian Wesbury are also not to be missed...
...Well, they have gone up a tiny bit since then, but not by much...
...Another longtime friend and guru, Gilder is always interesting because he is always learning something new...
...The AARP (which once stood for the American Association of Retired Persons and now should be thought of as the Anachronistic Association of Retired Progressives) labor at every stage to increase government benefits for the elderly...
...Wall Street Journal, February 15, 2006...
...In addition I have no pension...
...Grant's biases are well known and readers can accept or discount them...
...Last month, I brought up the question of the conflict between the gold price (suggesting inflation) and the persistently 40 THE AMERICAN SPECTATOR APRIL 2006 TOM BETHELL low long-bond rates...
...It does help to concentrate the mind when your own retirement is at stake...
...It's significant that the Senate extension was supported by Senator John McCain, the idol of the press corps...
...That is the hard part and it is why free markets are such a challenge and give rise to widespread discomfort, especially in an era of unstable currencies...
...Eventually it will collapse, but not anytime soon...
...We were both about 20 years o l d - midshipmen in the Royal Navy...
...His success I attribute not necessarily to the correctness of his forecasts but to his literate and entertaining prose-never tiresome or technical...
...Anyway, like millions of others I depend on my own savings, so I pay attention to these things...
...He publishes a fortnightly newsletter called Grant's Interest Rate Observer for which he charges the impressive sum of $850 a year...
...interest rates will rise, bondholders beware...
...A measly 4.48 percent in annual interest...
...If pursued, they will cause the stock market to drop and the retirement plans of millions of citizens to suffer...
...both are excellent...
...The rest of us will have to save and invest on our own...
...He also says that there are "powerful deflationary forces in the world," notably from China...
...Watching markets, you soon learn that you can't really rely on anyone...
...My friend, Fergus Hinds, said that if brokers really knew which way the market was headed they would be able to make a killing with their own money and wouldn't need access to ours...
...I learned the hard way that you can't trust stockbrokers...
...Catholic bishops: instinctively, they act as a support group for the Democratic Party...
...T OO LATE FOR LAST MONTH'S COLUMN, I contacted another old friend and guru, James Grant, well known for his ever bearish sentiment...
...mI~ TILL, THE HAZARDS OF TAXATION a r e better understood...
...The number of such accounts will increase rapidly in the years "ahead...
...Jim Grant and Jim Glassman make practically opposite predictions...
...Then you have to make up your own mind...
...I hardly knew what a stockbroker was at the time...
...Company pensions are meanwhile being phased out...
...Grant's, November 4, 2005] Translation: Interest rates fell from 1981 to 2003 but that can't last...
...You just have to pay attention to the numbers and listen to a variety of people who respect markets...
...More and more, we will have to assume responsibility for our own retirement...
...Therefore, our elected representatives, however enamored of big government they may be, will increasingly be restrained by market forces...
...Taxes must be paid later, at a (presumably) lower tax rate after retirement...
...I asked George Gilder what he thought of all this...
...APRIL 2006 THE AMERICAN SPECTATOR 41...
...A straw in the wind was the recent Senate k , ) v o t e to extend the currently reduced (15 percent) tax rates on capital gains and dividends...
...Think about it the next time a broker advises you to buy or sell...
...He agreed that the long bond rate was an anomaly, perhaps attributable to the aging of Europe and Japan where "lots of old people are buying bonds...
...There's a market for that on Wall Street, where everyone gets charted to death...
...Workers are becoming shareholders whether they know it or not...
...He has no doubt grasped that campaigning in the midst of a tax increase that he helped to impose would not be wise...
...Who wouldn't prefer a benign feudal overlord...
...These thoughts have yet to penetrate the inner sanctum of the AARP, with its 35 million members and $900 million budget...
...The various "gurus" I named don't even agree with one another...
...The rise in per capita income in that country from $50 in 1980 to $1,700 today has been "an awesome event...
...And in that respect I am in the same boat as an ever-increasing number of Americans...
...If that means the workers will have to cough up more taxes to keep old folks happy, well, tough luck on the workers...
...But the remark stayed in my mind even when I ignored it...
...Investors and traders remember too well the glory years 1981 to 2003 to dwell morbidly on the yet unvalidated inflationary perils of 2005...
...Its leaders remind me of nothing so much as the U.S...
...Government employees will continue to enjoy their luxurious pensions...
...He puts out the Gilder Technology Report, and a weekly email...
...The golf course is not for me, and I enjoy my work...
...Taking care of your own retirement account is a bit like setting off in a rowboat across a choppy sea...
...And on the whole that is a good thing...
...Torn Bethell is a senior editor of The American Spectator and author of the new book, The Politically Incorrect Guide to Science (Begnery Publishing...
...I am not talking about Social Security, which I assume will putter along for the next 25 years or so...
...These rate reductions are scheduled to expire, and therefore to leap upward (to 20 percent, or 28 percent in the case of dividends), at the end of 2008...
...He sent me some of his recent issues, leaving me in no doubt where he stood: The comprehensive underpricing of risk in the global fixed-income markets will embitter another generation of trusting savers...
...It is a consequence of demography, he thinks-we are witnessing "flight to the long bond all around the world...
...When I mentioned the conflict between the gold and bond prices he immediately flattered me by saying it was the question on the street...
...In 2003, he had opposed reducing the tax rate on capital gains...
...Self-reliance is to be encouraged, and we should think of employers more as contractors and less as feudal lords responsible for our health care and retirement...
...It is sinking into the heads of politicians that certain policies--I am thinking of higher taxes in particularare bad for the economy...
...They are invested in the stock and bond markets, so more and more of us have a direct financial stake in thriving markets...
...This should have good political repercussions...
...The American Enterprise Institute's James Glassman, an old friend and one of the people I listen to on matters financial, had told me that "if the capital gains, and just as important the dividend rate reductions, are allowed to expire, the stock market consequences will be negative and possibly dire...
...Now he seems to be running for president and is focused on the future...
...The key variable to watch is any looming change in marginal tax rates on income and investment...
...Though the handwriting is on the wall, the memory is in the muscles...
...Perhaps 45 million Americans have 401(k) plans, in which a certain percentage of earnings can be set aside in a tax-deferred account...
...Then again, sometimes they are spot on...
...When 30-year Treasurys went on the market after five years' absence, "buyers fell all over themselves to hand over their money for three decades in exchange for what...
...One of the best remarks I ever heard about stockbrokers was made by a friend in England if brokers really knew which way the market was headed they would be able to make a killing with their own money and wouldn't need access to ours~ many years ago...
...He thinks that there has been some recent monetary inflation, reflected in the gold price, but it is being offset by deflationary pressure exerted by the new technology...
Vol. 39 • April 2006 • No. 3
