Bernanke, Ridin' That Train, Lowers Rate 75 Basis Points

"Ridin' that train. High on cocaine. Casey Jones you better, watch your speed. Trouble ahead; trouble behind. And you know that notion, just crossed my mind."--The Grateful Dead

Money News on Newsmax reports that the Fed has lowered interest rates 75 basis points (from 4.25 to 3.5 percent), "the biggest one day move in recent memory".

Gold stocks continue to perform well, but at 11:40 the Dow is down 138 points to 11961, the S&P 500 is down 23 points to 1302 and the Nasdaq is down 55 points to 2285.

The Fed is concerned is concerned about recession fears and the recent sharp stock market declines. The interest rate cuts should boost stock values but will also continue to depreciate the dollar. The Fed reduces interest rates by printing money. Lower interest rates enable unproductive firms to remain in business because their costs of borrowing are reduced. Firms that do not create a market-determined value that would enable them to exist are subsidized by increasing the money supply, which reduces wage earners' inflation-adjust salaries. Thus, the Fed is taxing the productive sectors of the economy to subsidize the unproductive ones. The unproductive sectors are centered on big business, the financial sector and Wall Street, who have (1) extracted excessive CEO and investment banker salaries; (2) repeatedly made terminally stupid business decisions; and (3) and now go to the Federal Reserve welfare trough for a bail out.

Meanwhile, the dollar will depreciate and inflation will escalate.

Although the markets are cool now, they likely will heat up in response to the reduced rates, but the response will be temporary.

Howard Katz's Poem

At the beginning of each issue of Howard S. Katz's financial newsletter, the One-Handed Economist, he offers a poem. Here is the poem from the January 11 issue, which is on his website:

In gold your wealth you now should park.
It hit 900 dollar mark.
Upon Filet mignon we sup
Cause price of gold is going up.

Oh, Ben Bernanake gets no thanks
He only wants to help the banks
He takes advantage of the rubes
And US dollar-down the tubes.

Yes, US dollar sinking fast
The other nations are aghast
The more they print, now don't you know,
The lower does its value go.

And as the dollar hits new lows,
Now into gold the money flows.
Yes, gold stocks, gold stocks, buy, buy, buy.
Gold stocks are going to the sky.

Model portfolio, good news
About our profits we enthuse.
And on this subject I can say,
This week we hit $200 K.

Oh Ben Bernanke he is bad.
He steals our wealth and makes us mad.
So people you must all be bold.
And buy those mining stocks of gold.

Individualist Ethics and Corporate Social Control

The history of human resource management has evolved from an individualist/conflictual approach where wage cuts followed by strikes were common. As employers started to realize that violent strikes were counterproductive, they implemented three approaches. One, scientific management and welfare capitalism, aimed for a "mental revolution" among labor and management whereby workers' aims were aligned with management's through incentives and employee benefits. A second approach was a bureaucratic approach whereby laws, rules and union agreements established a high degree of formal control through regulation and collective bargaining. However, by the 1930s employers had realized that a third approach, emotive manipulation or social control through managing workers' feelings, attitudes and ethical beliefs had the potential for a more complete influence. This theory was related to Progressivism, which, as McFarland has argued, followed an earlier attempt by the Mugwumps to establish professional standards, credentials and licensure in such fields as medicine, law, economic policy, public health and library science. The Mugwumps were most concerned with rationalization of the public sector.

The Mugwumps had earlier demonstrated that an organized movement, even if small in numbers, that utilized mass media to unify and focus the movement, could result in effective political action. The Progressives utilized this approach. The argument that labor relations could be improved through psychological methods followed the muckrakers and Herbert Croly's emphasis on the use of public power and mass movements to recreate democracy.

The shift to emphasis on psychological and social control, via the management theories of Elton Mayo and Chester Barnard, was a reflection of the Progressive movement's tactical application of the same principles for public influence. The Progressives emphasized moral relativism to combat the American religious tendency toward individual conscience. They utilized the groupthink approach that Mugwumps pioneered. They realized that to manipulate the public, understanding of the public's group processes was necessary. Thus, the progressives applied the welfare benefit approach that local political clubs had used for centuries, but nationalized it and rationalized it.

Sharad Karkhanis--Man of The Year

I just put up Phil Orenstein's press release concerning the Queens Village Republicans' award to Sharad Karkhanis as "Educator of the Year". I have decided that Sharad should also be awarded "Man of the Year". I am hereby designating him the first official recipient of Mitchell Langbert's blog's Man of the Year award. Who needs Time?