Around the holiday season people think about what they have to be thankful for and also make wish lists. I have done the same, regarding our economy and capital markets.

 

  The reasons I am thankful for the following things may not seem obvious at first, but upon a little reflection, maybe you'll agree.

 

  GRIDLOCK - I am thankful for gridlock, even though many people complain that Congress is not getting anything done as a result of it. But this country is a democracy in which the majority rules, and if legislation cannot be enacted, it means that its proponents cannot muster a majority. We can decry gridlock, but gridlock is what prevented President Bill Clinton, elected by roughly 42% of the voters, from enacting incredibly expensive and unworkable healthcare "reform."

 

  THE FEDERAL RESERVE - I am thankful for the Federal Reserve, which is our country's central bank, and that it is an independent entity and is not controlled by Congress. Many politicians and voters would like to be able to control the Fed because it has a nasty habit of increasing interest rates and slowing down the economy, which stifles job creation.

 

  I am thankful that the Federal Reserve controls our money supply, because in those nations where the central bank is controlled by politicians, they literally print money to fund government spending. The result often is hyperinflation. The Russian ruble, never really worth very much, is now worth much less because the government is financing its spending by printing rubles as fast as it can. In many South American countries in the 1970s, inflation was running at the rate of 1,000% per month. We can thank the Federal Reserve as we complain about our inflation of 4% or 5% per year.

 

  HIGHER INTEREST RATES - I am thankful for higher interest rates, even though they are considered "bad," and many people believe that only banks benefit from them. But the current rise in interest rates reflects a growing economy, and as the economy grows, the demand for capital grows, pushing up its price. Bear in mind that a major beneficiary of higher interest rates are senior citizens, who have nest eggs they have invested in low-risk certificates of deposit to provide stable sources of retirement income.

 

  We can long for the lower interest rates of just a few years ago, but remember, those low interest rates were a function of a weak economy and rising unemployment.

 

  NAFTA - I'm thankful for the North American Free Trade Agreement, even though there was supposed to be a giant sucking sound that we would hear as all the jobs in America went to Mexico. This did not happen at all, and American jobs could easily have been sucked into Mexico before NAFTA. While it is true that America is now importing more goods from Mexico, we are exporting even more to them. The American economy and American workers on the whole are better with NAFTA than without it.

 

  The U.S. LEGAL SYSTEM - I am thankful for our legal system, even though most everyone else complains about it. But even though our system is slow, expensive and sometimes unfair, it is far superior to most other legal systems. In France the defendant is guilty until proven innocent. ("But of course you are guilty, monsieur, for if you were innocent, we would not be charging you with this crime!")

 

  In Russia there is virtually no legal system: Conflict resolution typically is handled with bribes, guns, or violence. We can complain about our legal system, which is not perfect, but it is much better than many of the alternatives.

 

  DUMPING - I am thankful for "dumping," which is the term used by American companies to complain about a foreign company selling their goods in the U.S. below "cost." American companies hate dumping because they supposedly cannot compete against it. If dumping is allowed to continue, they argue, the American company and its entire industry will go out of business, throwing millions of people out of work and probably even threatening our national security!

 

  Wait a minute. While an uproar is made about who is suffering from all this dumping, everyone is overlooking who is benefiting: the American consumer buying these goods below "cost." If Japan wants to subsidize all its automakers and chipmakers so that the day comes when only the Japanese have the skills to make cars and semi-conductors, let them try. It will never happen for two reasons. The Japanese taxpayers who ultimately are paying for this subsidy will want it ended and human beings are very intelligent: those skills needed to make chips and cars will be reacquired. (I just wish the German government would start a subsidy program and encourage Mercedes-Benz to start dumping cars in America.)

 

  Now let's turn to my wish list.

 

  REVISE OUR LEGAL SYSTEM - America has been such a litigious society because our legal system is structured to encourage lawsuits.

 

  Party A has a complaint against Party B and brings a lawsuit. B retains legal counsel and prepares to defend itself. Attorneys for A and B have no incentive to quickly resolve the dispute because they are being paid on an hourly basis. A and B then go to trial. If the suit is not frivolous, and the judge rules party B is innocent, A and B go home. But A and B have incurred legal expenses and incurred other real costs as a result of the lawsuit. B was found innocent, yet was still forced to incur costs because A chose to inflict those costs by filing a lawsuit. How often do you hear about someone settling out of court for some amount of money because it was cheaper than going to trial?