Optimism about the Bull
Jude Wanniski
September 14, 1998


There are so many things to worry about these days that I decided last week to stop worrying and start thinking of all the good things that might happen in what remains of 1998 to keep the Wall Street bull market in motion. The idea came to me in Las Vegas, where I was invited to speak to the Western Mining Conference, a dispirited group among the hardest hit by the Federal Reserve’s monetary deflation. When I finished my talk to the several hundred assembled in the Mirage ballroom, several dozen trooped after me and I spent another hour and a half answering questions. No one else had told them the Fed had caused the $100 decline in the gold price that has crippled them, so they were all ears, and cheered a bit, with my comments that Wall Street’s selloff was actually a good thing, a kick in the pants to Fed Chairman Alan Greenspan, that should help commodity prices in due time. Here are some of my other flights of fantasy that would spur the sluggish bull I predicted two weeks ago:

CLINTON: The optimum path for Wall Street would be the quickest possible closure of the issue, with the President being formally censured by the Senate and finishing out his term so rebuked. The risks posed by either a Gore presidency or a lengthy impeachment process that carries into 2000 would not be optimal for the market or the economy. In a memo I posted today on our website, I suggest to House Minority Whip David Bonior that the President not resist an impeachment vote in the House, but take the initiative of conceding those points where guilt has been established. This would free all Democrats to join in the censure and turn the proceedings over to the Senate, which would have to determine the punishment. By putting himself at risk of being voted out of office, the President would prove his contrition and encourage a vote of censure instead of removal. Wall Street’s Friday rally clearly indicated a preference for the President’s survival, in which I concur at the moment, although I would sour on Clinton if he decided to fight punishment, dragging out the process, thereby indicating he would do anything to avoid removal. I reminded Bonior, a fellow Catholic, that when a sinner confesses and says the Act of Contrition, he is in no position to tell his confessor that he will say the ten Our Fathers but will not say the ten Hail Marys. 

GREENSPAN: A thorough reading of the Fed Chairman’s speech at Berkeley ten days ago persuades me that he remains in denial and thinks he can finish out his term without ever having to admit any role in the world’s monetary turbulence. How nice it would be if instead Greenspan entered the confessional booth, told the nation he knew he shouldn’t have allowed the price of gold to fall below $350 early in 1997, that he is in fact the culprit in the international monetary crisis that began in Asia, and that he is really, heartily sorry for having offended us by pretending otherwise. As penance, he would BEGIN to make amends by asking the Federal Open Market Committee when it meets two weeks from now to cut the funds rate by 75 basis points and to keep cutting until he gets gold back to $350. Then he would confess the Fed is incapable of deciding global monetary policy and that he agrees with Jack Kemp on the need for a new Bretton Woods conference to design a new international monetary system around a gold anchor.

 GINGRICH AND LOTT: We trust you noticed last Thursday’s selloff on Wall Street was accompanied by the GOP announcement of tax cuts that would not include any reduction in the capital gains tax. The NYTimes Sunday reported that the Republican leaders decided not to give the Democrats any reason to complain that they are favoring the rich! In my fantasy, Attorney General Janet Reno appoints an independent counsel to investigate House Speaker Newt Gingrich and Senate Majority Leader Trent Lott’s abdication of political leadership. What we now can wish is that the House passes its teenie tax bill and sends it to the Senate, where Chairman Pete Domenici of the Budget Committee confesses that he put the chill on capgains and wants to make amends with an amendment to cut the rate to 15% from 20% forthwith, in order to speed the flow of capital from the rich to those who would like to become rich. In my continuing fantasy, Domenici’s confession would move Rep. Charlie Rangel [D-NY], to confess that he believes he has had an improper relationship with his party’s Ph.D. economists, and as ranking Democrat of House Ways and Means has misled the Congressional Black Caucus by characterizing a capgains cut as a giveaway to the rich when in fact it benefits most people without capital, i.e., inner-city folks. He promises to make amends in the Senate-House conference by acceding to a Senate cut, by saying ten Our Fathers and ten Hail Marys, and by urging the President to sign the bill.

RUSSIA: With the Russian people teetering on social upheaval, wouldn’t it be fantastic if Prime Minister Yevgeni Primakov heard about my op-ed in the September 7 European and Asian editions of The Wall Street Journal? In it, I urged Moscow to check out Jack Kemp’s letter to President Clinton of August 31, in which he suggested a gold ruble. It actually was bullish news to me that the Duma rejected Boris Yeltsin’s “heavyweight” nominee for PM, Viktor Chernomyrdin, a heavyweight crook with a heavyweight Swiss bank account, and chose Primakov, who is suspected of being an honest man. I’m even more cheered by Primakov’s choice of Viktor Geraschenko as head of the central bank. The U.S. news media uniformly describes Geraschenko as a Communist responsible for the 1994 inflation. He’s actually the fellow who invited me and former Fed Gov. Wayne Angell to Moscow in 1989, when he headed the Gosbank in the Gorbachev government. Nobody knows and appreciates my arguments for a gold ruble better than Geraschenko, who was muscled out by the Harvard/IMF “shock therapy” crowd, the real culprits in the inflation. His sidekick, Oleg Mozhaiskov, was a fan of Milton Friedman when we first met, but I won him over with gold. His daughter Julia translated The Way the World Works into Russian. Wouldn’t it be nice to buy Russia at the bottom?

JAPAN: Can the Nikkei get lower than it is without spiraling recession, unemployment and a collapse of confidence in the institutions of government? Probably yes, but in this 13000 range, maybe they will begin to get some good advice from the U.S. Treasury and Fed Chairman. We notice a general chorus of praise for Treasury Secretary Bob Rubin, who is supposedly holding together Wall Street by his mere presence. My fantasy is that Rubin goes on national television and confesses that he does not know what he is doing, and that he has had an intimate relationship with his Deputy, Larry Summers (who has been whispering sweet nothings in his ear since Rubin arrived at Treasury in January 1995). In this bull-market fantasy, Summers in turn goes on national tv and confesses that I warned him a year ago about the Fed’s role in causing the Asian crisis and also advised him on how to get Japan rolling by having it cut the capital gains tax on real property. 

MORE HOPED-FOR BULLISH CONFESSIONS: Robert L. Bartley, editor of the WSJournal, confesses that he has been too easy on his friend Alan Greenspan. Outgoing UN Ambassador Bill Richardson confesses that he knows we have been acting in bad faith with Baghdad for years. Defense Secretary Bill Cohen confesses he has been covering up a boo-boo by bombing a pill factory in Khartoum that killed eight Muslims. NYTimes editpage editor Howell Raines will confess he should not be supporting Israel’s assassinations of suspected terrorists who are surrounded by soldiers, without giving them an opportunity to surrender. Truth is always bullish.