Dennis Smith
I have many friends and former co-workers who are firefighters and police officers, and until recently they have been delighted with the returns of their IRAs and 401Ks.
Indeed, when the technology sector began to climb rapidly, eighteen months ago, most of them who chose a moderate path in their self-directed investment choices. They believed they were getting a leg up into a sound economic future. They believed they had chosen well from those few mutual funds pre-approved by their employers and unions.
Indeed, they did not go into those investments to get rich quick, but rather because they saw that the changes in the way we do business in America was more and more being determined by technological innovation and change - ask any firefighter or cop how the computer has changed his life in the firehouse or precinct house.
Now, the so-called speculative bubble has burst, and many of my friends have lost from a third to more than half of their self-directed investments.
These firefighters and cops are not speculators. Far from it. And, their financial decline is a rotten thing to happen to people who risk their lives every day in the service of their community.
One thing these men and women know better than anyone is what constitutes an emergency. If flames are coming out of a window in a multiple dwelling, or if a car is accordioned against a telephone pole, there is an emergency.
Certainly, everyone knows that, but the difference is that the first responders know exactly what to do in those situations, while the general population in confronting an emergency would think of many options, including doing nothing.
This is how we in the emergency services see the current economic picture: The house of Wall Street is on fire, and the fed doesn’t seem to know the difference between a hose and a shovel.
Importantly, it doesn’t know that the most important thing in an emergency is to do something that will work as the metaphor for the right thing.
Everyone, including the victims, will feel immediately reassured by that, and reassurance is the first step in an emergency. That is why the siren is a symbol for coming relief if you happen to be in a burning building.
Here is how we in the emergency services see the current economic picture. The economy was doing well, and then Alan Greenspan went before Congress and publicly worried about inflation.
He raised the rates six times, the last time a full half point, the straw that broke the camel’s back.
Of course, no one can prove that, particularly since the field of economics is the only one where two people holding diametrically divergent opinions can win the Nobel Prize.
But, as Remarque asked, "what matters Goethe in a foxhole?" The firefighters, cops, nurses, EMTs, teachers, and most other workers have already lost too much of their hard earned dollars.
As the tough guys on Wall Street say, without an ounce of empathy, "They are hurt and bleeding."
Why didn’t the congressional committees in charge of banking, insurance, securities and interstate commerce protect these good men and women? And, not only these workers, but also all Americans?
Why didn’t the political celebrities, financial stars and corporate chairmen find a way to convince the Fed that "irrational exuberance" in the stock markets was just one way to look at a changing economy, and that "sound and optimistic support" might be another?
The stock market, after all, is just one gauge of our economy, but all economic gauges are built on the strength or weakness of consumer confidence.
And, why haven’t we all been asking how it is that just one man has the command of this economy? Alan Greenspan is a great man and has the highest reputation as an economist. Still, why do we permit just one man to go before congress to explicate his views?
There are supposed to be seven governors on the Federal Reserve Board, though there are just five now sitting. Why aren’t the other two appointed? And, in any event, why should Mr. Greenspan go before Congress and the American people by himself? Why don’t the other board members, Ferguson, Kelly, Meyer, and Gramlick, join him?
Who are these men, and what are their opinions, at least those economic views they would be willing to share before congress? Why are we letting them get away with acquiescing to someone else’s words?
The Congress demands that the Federal Reserve Board, and not just the Chairman, maintains the stability of the financial system. Yet, those in Congress, when interviewing Chairman Greenspan, accept at face value everything that the Chairman says about our economy.
He is treated like a person with awesome power, something like a fire chief who with one word can save a building or let it burn.
We are not used to judging awesome power in the United States, but this act between Congress and the chairman of the Fed is like Saints Augustine and Thomas Aquinas questioning God on the nature of ontological truth - underlying all is a presumption of final authority.
But, here, the Congress is supposed to be the final authority. To those of us in the emergency services this smacks of doing nothing in a fire, and is an abdication of congressional authority and responsibility.
It is laughable to hear our politicians postulate, often in the most heartrending and dramatic manner, reasons to vote for or against a $1.6 trillion tax cut, when the loss to Americans in the past year on the Nasdaq alone is nearly $4 trillion. This is more than 20 percent of our nation’s total stock valuation.
Sure, some of this $4 Trillion loss is a paper loss, but most of it is a loss of real and well-earned dollars, and it comes out of the pockets of decent, hard-working people. Remember that people were still buying stocks with real dollars when the Nasdaq was at 5000. The tax cut pales in comparison to these losses.
What is happening at Nasdaq is a much more serious problem than that conveyed by television’s talking heads who continually use words like "capitulation" and phrases like "searching for a new bottom." The problem is one of substance, for the new diminished wealth among average Americans beats severely at the wobbly-kneed horse of consumer confidence. This horse could fall to the gutter, and it could take the Dow-Jones Industrial Average with it.
Thursday’s drop in the Dow below 10,000 is the first indication. Before a Dow slide happens, we would be well advised to remind ourselves that Japan’s economy sank with its consumer confidence ten years ago, and it is still trying without much success to regain a stable economic footing today.
Chairman Greenspan said that our employment rate is strong enough to hold interest rates where they presently are. One rule of thumb in economics says that for every loss of a manufacturing job, 4-5 associated service or support jobs are lost as well.
This would also be true in the technology sector, and we should start to calculate the total lost jobs potential when we read of the layoffs at companies like Cisco and Sun Microsystems.
We have a very short window at this time to save our economy from a hard and firm recession, and Mr. Greenspan and the Congress must act now to reassure the markets and revitalize the firefighters’, and all other workers’, confidence in our economic future.
There is no other way of doing this than lowering rates immediately. We need a fast, full point reduction, and half that should come tomorrow, and the other half at the Fed meeting next week.
The country first needs a symbol of concern by our awesome power, and then action.
If the proverbial genie bottle ended up at my door I would pop the cork and ask just one question: What would the founding fathers think of Alan Greenspan?
Like most of America’s workers I believe that Samuel and John Adams, Hancock, Hamilton, and Jefferson would shake their heads, throw out their fists, and point their thumbs to the ground.
"Imperial" would be the word that would come to their minds when considering the chairman of the Federal Reserve Board. That one man has the power to control the destiny of a nation flies against every idea of freedom, choice, and the balance of powers that American children are taught in their high school civics classes.
In our economy, as in every street emergency, things can get better or worse with each passing second. We need that sound of the siren to reassure us.
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About the Author - Dennis Smith
Dennis Smith is the founding editor of Firehouse Magazine and the best selling author of
Report From Engine Co. 82 and other books. He has completed the federal Series 7, Series
63 and Series 65 exams and is a licensed financial advisor. Dennis Smith will be providing
some financial insight beginning with the January issue of Firehouse Magazine, as well as
authoring regular on-line commentary for Firehouse.com.
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