Friday, February 27, 2009

Nationalization the "Atlas Shrugged" Way

I am posting this from Austin, Texas. I traveled here yesterday to participate in a panel discussion at the CFA Society of Austin. The panel was moderated by Vincent Catalano. Other panelists included former Fed governor Bob McTeer, David Abramson from BCA Research in Quebec, and Tim Hayes of NDR.

The discussion focused on the growing role of government in the private sector. The United States, which is supposed to be the model for free market capitalism, is taking a big step toward socialism. The budget put forth by our new president is a repudiation of the Reagan revolution. It seems our government is trying to outdo other governments in nationalizing some of our biggest companies. It's a good time to reread Atlas Shrugged by Ayn Rand.

So I guess it was fitting to awake this morning and find out that our government is about to hold a huge stake in Citigroup. If this is not evidence of nationalization, I don't know what is.

The latest GDP report was also disconcerting. The preliminary estimate for fourth quarter contraction was revised down to 6.2% from the 3.8% advance estimate. That's what I call a revision. This means the 8.1% unemployment rate projected for 2009 in President Obama's budget looks laughable. The employment situation will not improve until private sector investing improves. Don't hold your breath for that to happen now that Obama wants to raise taxes on the so-called rich. With higher taxes on the way, there is little chance the economy will revive enough to slow down the acceleration in the unemployment rate.