Over the limit… Hyped up on debt, the US consumer
can’t handle more
Geithner / FDIC plan to take long term ownership of the poorly performing loans has been well received by the market today. I don’t know why, I don’t really think it will help.
Why? Two basic reasons. One is that it rewards the people who got us into this mess. Put another way, it doesn’t change the underlying causes of the problem.
The second reason is that the plan assumes the problem is that banks aren’t lending. But that isn’t true. The problem is that people aren’t buying things other than ammo, guns and cheap houses, and thus people aren’t building things to be sold.
Our economy was high on debt, and the junkie’s system can’t handle anymore.
Stimulus, when it becomes the norm, ceases to work after a while and that is what happened to us. Henry Blodget covers this in detail in his article “Geithner’s Three Big Mis-Conceptions”.
What does this mean?
Any plan that tries to stimulate the un-stimulatible won’t work. We ain’t and can’t buy more of your crap.
So I fall back on first principles. If we are going down, I want the people who caused it to feel the most pain. That ISN’T people who paid their bills and pay the bulk of taxes.
But guess who they are aiming at? With higher taxes and inflation they are aimed squarely at the people who DIDN’T cause these problems, didn’t want banks to be forced to lend to un-credit worthy borrowers, and wanted the problems fixed when first identified 8 years ago.
March 24th, 2009 at 8:39 am
Anyone who agrees with me can’t be all bad? “Henry Blodget is an American former equity research analyst, now barred from the securities industry, who was senior Internet analyst for CIBC Oppenheimer during the dot-com bubble. He was later employed by Merrill Lynch. In 2002, then New York State Attorney General Eliot Spitzer, published Merrill Lynch e-mails in which Blodget gave assessments about stocks which conflicted with what was publicly published. In 2003, he was charged with civil securities fraud by the U.S. Securities and Exchange Commission. He settled without admitting or denying the allegations and was subsequently barred from the securities industry for life. He paid a $2 million fine and $2 million disgorgement.” – Wikipedia
We could all stand a giant dose of humility in declaring the best course for solving the present economic dilemma. The economics combined with the politics makes a too complex picture for anyone to confidently analyze to the point of a certain solution path. For one, we simply have no precedent that includes all the pertinent conditions of the 21st century financial world. Second, I have seen far too many solutions proffered by people with some vested interest in a particular solution, such as lower taxes for the higher incomes or government purchase of toxic assets at what price the banks carry them on their books. And that is all complicated by the interests of politicians playing for votes from people who have nearly no understanding of the economics.
Note: principles are rules or laws
March 24th, 2009 at 8:49 am
Ad hominum, this early in the morning? Blodgett got caught but nobody denies he knows finance.
I’m pretty sure the best course doesn’t involve pleasing unions. When Obama doesn’t do that, maybe he will be on the right course.