Tuesday, December 18, 2012

No matter what deal is finally agreed to by the politicians in Washington it will act as a brake on the economy. Reduced Government spending and higher tax rates for the wealthy will lower the national growth rate. This is not complicated, it is simple economics. One would hope the negotiators would be sensible enough to pick a target growth rate and try to craft an agreement that will start to solve some of our long term issues without suppressing the economy too much. The effects of misplaced aggressive austerity measures can be seen in Europe where there is bubbling civil unrest because the economies are contracting. The contracting economy decreases the opportunities for the unemployed and the young people entering the work force while reducing government tax revenues. The solution to massive budget deficits and runaway government spending will take a long time, it cannot be corrected in a year.

For all you fans of financial scams, next year should be a banner year. Pay particular attention to "crowd funding" and "non-publicly traded REITs". I believe both of these are "unborn sorrows ripe in fortune's womb" to quote the Bard. When these scams finally land we should think about going after regulators who should be on the case but once again are MIA. One of the regulatory bright spots in 2012 is the retirement of Mary Shapiro. Mary, who held significant positions at FINRA before moving to the SEC, proved just as ineffective at both agencies. I can't think of any financial scandal that occurred during her tenures that she had any clue was coming. If any reader knows of any, please let me know.

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