A Capital Idea
For those of you who are unfamiliar with the name - Sam Antar is an former-felon-white-collar-criminal turned-crime-fighter. During the 1980's, as a Chief Financial Officer of the east coast based Crazy Eddie home electronics franchise, Sam actively participated in a corporate conspiracy to defraud investors. At the time the SEC moved against Crazy Eddie and it's officers, it was one of the largest stock fraud cases ever filed.
These days, with the Crazy Eddie saga behind him, Sam Antar devotes much of his energy to traveling the country giving talks to law enforcement and accounting professionals on how to detect accounting fraud, and also to discuss regulatory issues related to accounting and financial disclosures. He also seeks out and exposes suspect accounting/reporting practices of publicly traded firms - to their great dismay.
So, Sam Antar knows a thing or two about how Wall Street works.
Which leads us to Sam Antar's blog. In his latest blog piece Sam has some thoughts on how to get things going again:
http://www.whitecollarfraud.blogspot.com/
Our allegedly "conservative" led government seems hell bent for leather to nationalize the U.S. economy, and in significant measure, dismantle capitalism (whether temporarily or permanently remains to be seen). It is ironic that as President Bush, Secretary Paulson and others call for calm, the Federal Government seems to be in full panic mode. Indeed, just to see the government trying to get ahead of this crisis - where usually government lags seriously behind - is extraordinary all by itself. Some of the actions taken by the Federal Government may be a necessary evil, but there are big invasive government solutions of radical intervention, and there are capitalist solutions that help the markets work out it's problems without throwing out the baby with the bathwater.
Right now gargantuan amounts of capital have flowed out of the market, and this is placing massive strain on the entire global financial system. Of course the catalyst of this historic event was the credit market collapse, which we have discussed in previous posts (and has been discussed by others more authoritative than us and in greater detail). Now we are dealing with a ripple effect in the markets, as loss of confidence, and outright fear are the primary drivers of what's going on now. So on the one hand, huge amounts of capital evaporated in the credit collapse, and now huge amounts of capital are flowing away from the markets when it is vital that they flow in. This is our Cracker Jack Box Economist view, as oversimplified as it may be.
No one wants to see another Great Depression, but as we see it, the Federal Government is trying to net replace the capital outflows with taxpayer dollars rather than trying to get capital investment flowing back into the markets organically. Sam Antar suggests a simple solution to getting the capital flows turned back in the required direction: A capital gains tax holiday. Suspend the capital gains tax for investments made today and liquidated in 36 months or more. Capital will start flowing back.
The massive infusion of government cash into the financial system is a stop gap. Regulators hope that the time these measures buy through attempting to stabilize markets artificially will be enough for spooked investors to return to the markets. If they don't, the true collapse has only been delayed, and will be all the more horrible when it happens.
We need calm, deliberate, thoughtful Congressional action consistent with capitalist principles to help right the markets. Throwing capitalism out with the rest of the bad debt trash is not the answer. The world is littered with failed socialist states, and the graveyards of Europe and Asia are chock full of the victims of socialism and it's hideous derivatives. Some deregulation may have played a part in this confluence of horrid events, but we maintain that it was big liberal government meddling in the mortgage market which is the epicenter of this calamity. Without disastrous Government intervention, the sub-prime market would never have been able to become the monster that swallowed the world.
Call or email your Congressman and Senators and demand a Capital Gains Tax holiday to get capital investment flowing again. It's far more important to the US and world economy than another pissant stimulus package.
Just do it.
These days, with the Crazy Eddie saga behind him, Sam Antar devotes much of his energy to traveling the country giving talks to law enforcement and accounting professionals on how to detect accounting fraud, and also to discuss regulatory issues related to accounting and financial disclosures. He also seeks out and exposes suspect accounting/reporting practices of publicly traded firms - to their great dismay.
So, Sam Antar knows a thing or two about how Wall Street works.
Which leads us to Sam Antar's blog. In his latest blog piece Sam has some thoughts on how to get things going again:
http://www.whitecollarfraud.blogspot.com/
Our allegedly "conservative" led government seems hell bent for leather to nationalize the U.S. economy, and in significant measure, dismantle capitalism (whether temporarily or permanently remains to be seen). It is ironic that as President Bush, Secretary Paulson and others call for calm, the Federal Government seems to be in full panic mode. Indeed, just to see the government trying to get ahead of this crisis - where usually government lags seriously behind - is extraordinary all by itself. Some of the actions taken by the Federal Government may be a necessary evil, but there are big invasive government solutions of radical intervention, and there are capitalist solutions that help the markets work out it's problems without throwing out the baby with the bathwater.
Right now gargantuan amounts of capital have flowed out of the market, and this is placing massive strain on the entire global financial system. Of course the catalyst of this historic event was the credit market collapse, which we have discussed in previous posts (and has been discussed by others more authoritative than us and in greater detail). Now we are dealing with a ripple effect in the markets, as loss of confidence, and outright fear are the primary drivers of what's going on now. So on the one hand, huge amounts of capital evaporated in the credit collapse, and now huge amounts of capital are flowing away from the markets when it is vital that they flow in. This is our Cracker Jack Box Economist view, as oversimplified as it may be.
No one wants to see another Great Depression, but as we see it, the Federal Government is trying to net replace the capital outflows with taxpayer dollars rather than trying to get capital investment flowing back into the markets organically. Sam Antar suggests a simple solution to getting the capital flows turned back in the required direction: A capital gains tax holiday. Suspend the capital gains tax for investments made today and liquidated in 36 months or more. Capital will start flowing back.
The massive infusion of government cash into the financial system is a stop gap. Regulators hope that the time these measures buy through attempting to stabilize markets artificially will be enough for spooked investors to return to the markets. If they don't, the true collapse has only been delayed, and will be all the more horrible when it happens.
We need calm, deliberate, thoughtful Congressional action consistent with capitalist principles to help right the markets. Throwing capitalism out with the rest of the bad debt trash is not the answer. The world is littered with failed socialist states, and the graveyards of Europe and Asia are chock full of the victims of socialism and it's hideous derivatives. Some deregulation may have played a part in this confluence of horrid events, but we maintain that it was big liberal government meddling in the mortgage market which is the epicenter of this calamity. Without disastrous Government intervention, the sub-prime market would never have been able to become the monster that swallowed the world.
Call or email your Congressman and Senators and demand a Capital Gains Tax holiday to get capital investment flowing again. It's far more important to the US and world economy than another pissant stimulus package.
Just do it.
I've been thinking about this issue, and agree totally w/ the idea. This has to be in combination w/ existing plans to recapitalize banks and to go in and put a floor on mortgage paper, but there are complications - mutual funds or asset allocation plans.. and what will happen when everyone flips their portfolios to take advantage of the temporary tax credit?
The idea of congressional approval would perhaps spread that wild volume swing out, but it would be interesting to see how brokers would handle the volume.
I'd say the holiday should last until we have a GDP uptick, likely at least 6 months. This all would have to be done in consideration of serious reforms on mortgage lending and leverage.
Reply to this