This article tends to worry me somewhat, as it should worry any historian of the 1923 German Panic. Traders and Investors seem desperate to cover their positions, and willing to create false Intel rumors in order to generate the Run-ups. Market Insiders are transferring Risk from themselves to the small Investors operating through Investment Funds. They are doing this not only to protect themselves, but to pressure the Fed to effectively increase the Money Supply through lower discount rates. The Fed should make a clear Statement that rates will remain at their current level until the current Market losses are accounted. The Question remains if Bernanke and the Fed Board have the experience to understand this high Inflation impetus.
I read this Post after I had read and written the previous paragraph. I feel more comfortable knowing that Others understand the basic Problem. There are major Losses all over the financial world and Markets, and Market forces are trying to transfer these Losses elsewhere, saving their positions at the expense of uninformed small Investors; most of Whom are elements of Labor who expect their Hedge and Fund managers to protect their interests, rather than the Fund managers own personal interests. The Trouble resides in the fact that the poor performance will be shunted from the actual commission of the poor performance, to Those who trust the poor performers; a practice sure to initiate heavy inflationary pressure.
Greg Mankiw provides this good Description of the current raging Tax Debate in Congress. I have long been of advocate of elimination of Tax preferences, while lowering Tax rates. The dissonant element in both the Rangel Bill, and the alternate Republican proposals, lay in their refusal to force the Corporate world to accept the elimination of Tax preferences Cold Turkey. The advantage of this route would cut the greatest Cost of Accounting procedures, stop the Windfall Gains of the major Corporate entities, and engender almost no Tax impact difference to small Corporations–even without any reduction of Tax rates. This relates to the Above paragraphs, where the major Players tie themselves to the small Players to gain Windfall advantage. lgl