Your Questions Answered

Gary Kaltbaum
This week Gary Kaltbaum, president of money management firm Kaltbaum & Associates, answers YOUR money questions. Ask FNC's business team your questions by e-mailing and check back each week. Plus, tune in to "The Cost of Freedom," Saturday starting at 10am ET.

1) Why does Mr. Greenspan believe that raising interest rates is a more effective way of controlling inflation than by removing liquidity from the market by selling bonds? — Michael (New York, NY)

Mr. Greenspan has a history of raising rates to quell a potential inflation problem. Unfortunately, a few times in the past he has gone too far and caused economic slowdowns, as well as recessions. My big problem with what he is doing is that there has never been a direct correlation between a slowdown in the economy and lower inflation. I hope he doesn't go too far this time.

2) Why does it cost $700 a day to live on a cruise ship at dockside in New Orleans when it only costs $700 a week to live on the same ship when it is underway? Are they saving fuel when they are underway? I don't get it! Please explain the answer to the American public in terms that make sense! Thank you. — Don (McCormick, SC)

The federal government is forking out $3500 per week per person — or more — to house Katrina refugees on luxury cruise ships. It would be cheaper for the government to house evacuees in some of the highest priced hotels in New York City. But that's just the beginning. On September 4th Greece offered to donate two cruise ships to the United States as part of humanitarian aid for Katrina evacuees. DONATED! This would have cost our government not one red cent, but to this governement getting something for free is too easy. They would rather pay someone.

The next problem is the government did not realize that many just did not want to live on the ships. The ships are housing fewer evacuees than FEMA originally planned. The current government head count shows: 625 aboard the Ecstasy, with a capacity for 2,544 passengers; 820 living aboard the Sensation, with room for 2,579; and The Holiday has but 342 people with full capacity of 1,486.

Senator Tom Coburn (R-Okla.) did some math and noted Wednesday that if the ships were full, with 7,116 evacuees for six months, the price per evacuee would be $1,275 a week. That in itself would be a ridiculous number. A seven-day Caribbean cruise could be bought for about $600 a person. With the cruise ships less than a third full, the cost per passenger each week is north of $3,500.

FEMA had early warnings that evacuees would not take well to the cruise ships. They were told on numerous occasions that evacuees needed to get out and get jobs and not sit on ships. After getting negative reaction, the agency, amazingly, still had been on the verge of ordering up yet a fourth cruise ship. FEMA finally announced that the whole "decision is on hold" owing to the fact that "evacuees are declining to move to cruise ships." Thanks a bunch!

I hate to say it, FEMA has been run by the Keystone Cops, and that's being nice. This is just another example of why I wouldn't let government officials run my kid's lemonade stand. There is just no accountability on how money is spent because, simply put, it is not their money. If it was, they would be thinking twice.

3) I am interested to find out more about the Russian energy company Gazprom. Will they be traded on the stock market? — Arny S.

Gazprom, Russia's largest company, produces 94% of the country's natural gas, controls 25% of the world's reserves, and is also the world's largest gas producer. The company is engaged in gas exploration, processing, transport, and marketing. It operates Russia's domestic gas pipeline network and delivers gas to countries of the former Soviet Union and Europe. Gazprom relies heavily on Western exports and partnerships. It also holds stakes in Russian financial institutions and a polypropylene plant, and has its own telecom network. The Russian government increased its stake in Gazprom from 38% to 51% for a reported $6 billion. The company currently trades on the Moscow Exchange.

4) If Greenspan and his gang of calculators hadn't run the interest rate down at such great speed and then kept it down, would we have had the "froth" of extreme overpricing of homes across America? There are cities in America now that almost no one can buy a house in, except the top one percent of the wealthy. Wages have not gone up. So what happens when the rate is unsustainable? — Steve (Tampa, Florida)

I am in your camp. I do believe Greenspan will have to take some of the blame as, inexplicably, he took rates almost down to zero. I believe he sowed the seeds of problems in the future as many people are buying houses at unsustainable prices. There will be heck to pay for some.

5) I've been reading a lot about how the hurricane disaster has caused unemployment claims to jump. How do you think this will affect our economy in the long run? Thanks — Raymond (Memphis, TN)

I do not believe it will affect the economy in the long run at all. Without minimalizing what has occurred, this is more of a regional event, not a national one. You also must remember that what has come down will be built back up, and that will offset any drop in near-term economic growth.

Gary Kaltbaum is president of money management firm Kaltbaum & Associates. He can be heard nightly on his nationally syndicated radio show "Investors Edge" on over 50 radio stations. He is a regular on FNC's Business Block. Visit Kaltbaum's Corner on for more.