Jewish World Review July 26, 2002 / 17 Menachem-Av, 5762

Jack Kelly

Jack Kelly
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Journalists are making sure Americans can't differentiate between the stock market and the economy | The economic news tells us more about the foolishness and depravity of journalists and politicians than it does of the foolishness and depravity of business leaders.

In recent months, we have learned that stocks go down as well as up, and that greed is as intertwined with Wall Street as lies are with politics, publicity-seeking is with Hollywood. This was news only to those who were born yesterday.

Many Americans do not understand the difference between the stock market and the economy. The financiers and brokers on Wall Street are the lubricants of the great engine of commerce, but they are not the engine itself.

There is currently a profound - but not unprecedented - disconnect between the stock market and the economy. Stocks have been tumbling. But the economy this year has been growing at a solid, even an impressive, rate.

What has happened is that a stock market "bubble" has burst. Stock prices rose to dizzying heights, far above their underlying value. The bubble was driven by the greed and gullibility of us investors, who thought we could get rich quick without having to pay attention to price/earnings ratios.

This is hardly a new phenomenon. The best book ever written about investing is Charles MacKay's () Extraordinary Popular Delusions and the Madness of Crowds (), published in 1841. It describes the South Sea bubble, the tulip mania, and other precursors of the bubble.

As air began escaping from the bubble, firms like Enron and WorldCom cooked the books. So chastened investors have two reasons for being cautious: We don't know if all the air is out of the bubble yet, and we don't know if ceos are telling us the truth.

The corporate safeguards we rely upon to protect the interests of investors failed us. Accounting firms which act both as bookkeepers for and auditors of corporations acted more like employees than watchdogs. Boards of directors, which are supposed to monitor ceos, became their pets.

There were some, like Arthur Leavitt, head of the Securities and Exchange Commission during the Clinton administration, who warned of the dangers of these cozy arrangements. But neither President Clinton nor Republicans in Congress were much interested in fixing them.

Enron, WorldCom, Global Crossing, etc. are business scandals, not political ones. But journalists and Democrats are twisting the truth in their efforts to politicize them.

Journalists and Democrats argue President Bush is too cozy with big business to represent the public interest. Bush has a $14 million fortune he would not have amassed were he not the son of a famous and influential man. But how does that make him different from Sens. Ted Kennedy (D-Mass) or Jay Rockefeller (D-WVa), who inherited their money, or from Sen. John Kerry (D-Mass), who married it?

House Minority Leader Richard Gephardt (D-Mo) blames a 1995 bill liberalizing accounting rules for the accounting scandals. This is the fault of the Republicans, Gephardt said. But the author of the bill was Sen. Chris Dodd (D-Conn).

Senate Majority Leader Tom Daschle (D-SD) relies heavily for economic advice on Sen. Jon Corzine (D-NJ), former chairman of Goldman Sachs. The brokerage firm has been accused in two lawsuits of manipulating stock prices. Two of the most influential lobbyists in Washington are Linda Daschle, wife of Tom, and Anne Bingaman, wife of Jeff, chairman of the Senate Energy and Natural Resources Committee. Would these women be as rich as they are if their husbands weren't who they are? And why have Tom and Jeff never recused themselves from voting on bills their wives have lobbied for?

In 1997, the New York Times Co. engaged with Enron in a newsprint swap, the kind of "accounting shenanigans" it has been denouncing on its editorial page. Last year the Washington Post Co. boosted its reported income by $3.6 million by not counting stock options as cost of doing business, a practice, the Post said in an editorial in April, that "make(s) a mockery of corporate accounts."

We need to fix the problem, not the blame for it. There is plenty of that to go around.

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07/23/02: Iran's is on the verge of a social and political explosion. So why is media ignoring it?
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07/12/02: The ICC tramples on rights Americans take for granted
07/09/02: Was LA International Airport shooting, in fact, good news?
07/02/02: What the "intelligence community" can learn from Alexander the Great
06/28/02: Muslim link in Oklahoma City bombing revisited
06/25/02: A good environmental scare needs two ingredients - an impending catastrophe, and someone to blame for it
06/21/02: Stirring the security pot
06/18/02: Why the military is so messed up
06/14/02: Vast majority $68.7 billion proposed for weapons will be spent on systems of little use in the war on terror
06/12/02: Bush saw them and raised them, and he's holding the aces
06/10/02: Some heads need to roll
06/04/02: A new draft for the 'war on terror'?
05/31/02: So the FBI has finally caught up to our priorities?
05/29/02: Taking on common sense
05/23/02: Political terrorists
05/21/02: There is a great deal to fret about, but I've never been more optimistic
05/15/02: If there is a way for America to lose the war, Gen. Tommy Franks can find it
05/13/02: Impartial justice against Americans by the UN?
05/07/02: Want to win the 'war on terror'? Reinstate the draft
05/03/02: An expanded NATO is needed as a counterweight to the UN and the EU
04/29/02: Islamic 'smarts'
04/26/02: Did Bush play his Aces with Abdullah wisely?
04/23/02: Why peace in the Mideast is closer than ever
04/19/02: What the Arabs of Gaza and the West Bank gained from the "peace accords"
04/17/02: Logical Muslim allies
04/10/02: How to guarantee an infinite Mideast war
04/08/02: Saddam's American friends
04/05/02: Arab winners and sinners
04/01/02: Why is the commander of U.S. Central Command not coming clean to the American people?
03/31/02: Dubya under attack by conservatives
03/26/02: Saddam watch coming to an end?
03/21/02: Get the Jews!
03/19/02: It's time pols and gov bureaucrats be held to the same standard of accountability we insist for corporate execs
03/15/02: Khaki Throat
03/12/02: Making foreign cheaters pay
03/08/02: Timidity and indecision by senior American commanders
03/04/02: Why 9-11? Ex-CIA officials come clean
02/25/02: Don't rule out a quick victory --- even if prez says otherwise
02/21/02: Saving our military from itself
02/19/02: Front Page fiction
02/15/02: Our European allies are like the fat kid who wants to play quarterback
02/13/02: Is the Army in danger of becoming "irrelevant"?
02/11/02: So, I "propagate hatred"
02/06/02: Bush whacking the media
02/04/02: Why serious folks disregard the European Union --- and why Bush must, too
01/30/02: Give economy pneumonia in order to protect it from a cold
01/28/02: Media is its own worst enemy
01/25/02: Journalists making road to peace a bumpy ride, or: A case study in stupidity
01/23/02: Toward a stronger defense at a lower cost
01/21/02: How Bush could be Generations X and Y's Kennedy ... and guarantee a GOP victory in the midterm elections

© 2002, Jack Kelly