GROUND FLOOR: It's a Republican principle to cut taxes as much as possible, I suppose, but in all my time at the coalface of financial markets I never heard of anyone suggesting the complete elimination of taxes on shareholder dividends before.

Even Charlie McCreevy never went this far!

Certainly over the past few weeks there was talk about lowering taxes on dividend payments to 20 per cent or allowing a certain amount of dividend income to be earned tax free, but no one had expected Dubya to say investors should just take the money and run.

Naturally most people would expect market participants to greet this news with wild enthusiasm - surely this will persuade Americans that the equity market is now the place to invest your dollars again and earn a bit of tax free income? Well, perhaps.

Although everyone thinks of the US as a country where much of the population owns stocks, actual share ownership is narrower than you might expect.

True, many US citizens hold dividend-paying stocks in funds that are part of their retirement plans but they do not pay tax on those dividends anyway so the current proposal won't make the slightest difference to them. The benefits of this cut will accrue to people who receive taxable dividends and they tend to be the wealthier section of the population.

Presumably George W is working on the trickle-down economic view that if the wealthiest people get more income from their dividends they'll re-invest it in the market and prop up shaky equity prices. It's a gamble, I'd have thought, because most of those people have advisers who'll tell them exactly when they should put a bit of faith in America's finest again and it'll have nothing to do with having your dividend income tax-free and everything to do with the relative strength of the company concerned.

Mind you, most firms which pay dividends are old economy, since the new economy ones relied on an ever-spiralling share price to reward those who invested their money. And who can blame the president for supporting those firms, especially when the ones doing the best are the oil/energy companies. Remind me again of the Bush family oil history.

Of course, he's doing this as part of the whole fiscal stimulus thing which has beset him almost since the day he took office.

Getting rid of dividend tax is only part of a $674 billion (€637 billion) plan (which also includes bringing forward personal income tax cuts) to get America on the road to economic growth again. The Republicans think the plan is great. The Democrats are calling it reckless.

The problem is that the $674 billion is going to have to be found somewhere else and my ex-colleagues in bond markets argue that the Treasury will have to issue bonds to raise the cash.

But if people think equities (given the tax breaks) now offer potentially better returns than bonds (and there's a lot to say that those energy companies should do well in the next few months and so may well spike up in price) then the government will have to pay more for its borrowings to entice investors back into bonds. It's a head-spinning circle.

Matters weren't really helped by the publication of the unemployment figures last week when the news that 101,000 jobs were lost in December hit the headlines.

A few pundits said this wasn't as bad as it might look at first glance because there are "seasonal adjustments" but I'm bemused as to what they might be.

A lot of commentators, however, are now saying we should wait and see what the revisions will be like next month because it might change our perspective.

I doubt that it will be for the better, though, because November's job losses were revised up to 88,000 from 40,000, which is not the kind of revisions that the markets, or the policy-makers, want to see.

Somewhat amazingly (and very worryingly), much of December's losses were in the retail sector where you would normally expect to see temporary hiring.

Given that markets have performed better since the beginning of this year (though everything is relative) many pundits are insisting the US is in recovery.

But because of the unemployment numbers they're calling it a "jobless recovery", which to me is complete nonsense. What good is knowing that things may be improving if you don't have a job to go to - and how can they really be getting any better if the number of people out of work is rising?

Meanwhile, of course, the dollar has continued the decline that so many of us had been expecting for so long. Leaving aside the fact that a more lacklustre economy would have fewer people holding dollars anyway, there's another issue that buyers of dollars have to face, and that's the prospect of war with Iraq. Normally the dollar is considered to be a safe haven in times of war but people are feeling less inclined to consider the greenback as any kind of safe haven right now.

And if there isn't an overwhelming desire to hold dollars as there was back in the 1990s, then maybe investors will look to see where their money can provide a better return.

Europe has been singularly woeful in that regard but the euro has certainly benefited from the dollar's decline, though that in turn has caused problems for exporters now finding themselves getting priced out of the market.

On the flipside, of course, American manufacturers are welcoming the decline because they're finally finding themselves competitive in world markets again and Latin American countries whose currencies are linked to the dollar will be relieved too.

The more you think about it the more head-spinning it gets. And it's only January.