Harrop missed point

To the Journal editor:

Every time (national columnist) Froma Harrop ventures into the subject of economics, she demonstrates how little she knows.

She should be listening to economist Peter Morici instead of dissing him because he sometimes appears on Fox; (I have seen him on many business shows besides Fox).

In her latest column, she questions why the Federal Reserve’s policy of low interest rates and higher taxes on foreign investments is characterized as throwing seniors under the bus?

In short, Froma, in order to keep interest rates low, the Fed has run the printing presses on overdrive therefore cheapening the dollar; (quantitative easing). Seniors on fixed incomes can’t go back to work now so it effects them disproportionately as their retirement shrinks in value. As per higher taxes on corporations, being a stealth tax is because corporations don’t pay taxes; they collect them. Only people pay taxes. If a corporation pays taxes there is less to be distributed to employees and share holders. Then the distributions are taxed again.

As an aside the Feds scheme for jump starting the economy is showering low interest money on the business community hoping it will expand and hire.

The last six years has proved that won’t work if the business community is uncertain of the future. With an increase in health insurance costs and proposed higher taxes there is a lot of uncertainty out there and a business always has an element of risk.

Finally Froma points to the stock market as a bright spot; no not really. First off with the feds inflationary policy the stock market is the only game in town where the assets are liquid and adjust for inflation. Secondly, a stock can be considered a hard asset. To make the point, consider a $4 loaf of bread which now costs $5; the loaf isn’t any bigger; just your money won’t buy as much.

The stock market increase represents the instrinic value of a share of a company in cheaper dollars. My stocks have not shown any growth spurt to justify the higher price. It is the cheaper buck.

To top it off if I sell any stock, the tax I pay is on the inflated value not on real growth.

In this environment holding a CD or bond to maturity will almost certainly result in negative return.

Froma, please stick to something you understand.

George I. Geikas

Munising