VIEWPOINT: RR could be the Fall Guy



G O G A T A Reports: Here is the complete original of the letter by
David Cohen of Los Angeles a GATA supporter -- that is to appear in
the March 8 issue of Time Magazine. The letter is in response to the
February 15 cover story featuring the "Three Marketeers", Fed Chairman
Alan Greenspan, Treasury Secretary Robert Rubin and his deputy Lawrence
Summers. It will be interesting to see what Time leaves out and what
changes are made, if any, to the original in the name of necessary
editing and reduction.

- - - - -

Dear Editor:


Your recent cover article, "The Committee to Save the World," is the
most egregious example of mainstream propaganda on behalf of Wall Street
interests to the exclusion of reality. As such, I have sent it to
various friends with the admonition to cancel subscriptions to your
magazine immediately rather than suffer the tendentious idiocy you
disseminate to the American public in such a bold fashion.

Firstly, the title is inappropriate. It should read, "The Committee to
Save Wall Street Institutions Through the Subversion of the Free Market
Process." After all, the last time I looked, Wall Street was doing fine,
the rest of the world STILL going to hell in a handbasket.

There is nothing more disturbing, if not sickening, than sifting
through an article devoted to a trio of men who hypocritically preach
the merits of free markets and the evils of crony capitalism, yet have
done more to subvert the American free market and uphold cronyism than
any otherAmerican economic navigators to date.

In the Fall of '97, after the stock market fell some 500 points, did
these men simply "let the market work" and find its proper equilibrium
point? No, rather, there is evidence of Treasury intervention in a
massive purchase of S & P futures the next day that sent the market
roaring back, thereby erasing the entire day's previous drop. In doing
so, TIME's vaunted trio introduced the first major moral hazard into the
market, suggesting that, despite any economic problems, the average
American investor could always count on his government to intervene and
preclude investor losses. Emboldened by the government intervention,
American investors proceeded to pour billions of dollars more into the
stock market, despite their already extremely high levels of stock
exposure and relatively low cash levels.

Then, in the Fall of '98, with the LTCM hedge fund crisis unfolding in
the marketplace, did TIME's three saviors of the world once again "let
the market work" and find its natural equilibrium point? No, once again,
Greenspan specially arranged for all his "friends" in variousWall Street
institutions to bail out LTCM and preclude the hedge fund from realizing
its well-deserved losses. The public was told this intervention (along
with several subsequent interest rate cuts) was necessary to prevent
financial systemic breakdown... yet there is NO evidence to suggest any
potential losses suffered by the affected Wall Street institutions would
have resulted in any notable catastrophe EXCEPT, that is, for the Wall
Street creditors of LTCM and their respective shareholders.

As a result of Greenspan's LTCM shenanigans, he turned a stock market
bubble into a SUPER-bubble, as now investors are fully convinced that
the government will ALWAYS intervene to preclude financial loss. What is
the net result? The highest per capita debt levels coupled with the
lowest per capita savings rate in American history! Record amounts of
home equity loans.... billions of dollars of credit card debt... much of
the monies now funneled into the stock market by a public categorically
certain that it is impossible to lose money there because the Fed and
the Treasury will never allow it!

No, Greenspan, Rubin, and Summers are anything but saviors of the
world... not even saviors of America. By undermining the free markets on
behalf of Wall Street special interests, they have destroyed the once
level playing field and removed the essential element of risk necessary
to keep markets rational. Even worse, they have exacerbated the cynicism
of those Americans who have NOT benefited from this past decade's Bull
market on Wall Street.

For example, long suffering domestic commodities producers have
experienced huge losses this past decade owing to collapsing prices.
Many have gone bankrupt. Why has The Mighty Trio failed to intervene on
their behalf and preclude their losses? Why do the Fed and Treasury's
salvation efforts only apply to the paper pushers on Wall Street? Why
should afflicted commodities producers play by the rules if the
government will not?

At some point in time, market forces must surely overwhelm the concerted
interventionist efforts of these Three Musketeers. If so, America will
likely experience a most disastrous deflationary/ stagflationary debacle
with horrible consequences to all those over-exuberant Americans seduced
into placing their entire life savings into the bubble stock market.

I only hope that Messrs. Greenspan, Rubin, and Summers are still around
to accept the blame they will most certainly deserve! If TIME is still
in business then, I trust they will provide a NEW, more appropriate
cover story: "The Committee That SCREWED the World."

David Cohen

Los Angeles