Craig Brown

Obubblomics: Prepare for Markets to Get Worse

I apologize for not commenting on what should be done so much as what has been done wrong. As I see it, it is time for Americans to take our medicine. No more replacing one bubble with the last. We have too much debt and it has to be reduced, whether we like it or not. This is a long and painful process but it is the first step - only possible first step - in working our way to a sustainable economy. The government's role needs to be an orderly wind down and dissolution of the too big to fail institutions that helped to create this mess. They got themselves into the mess and it is not the taxpayers obligation to do anything more than to make sure their demise does not cause too much pain or panic to the rest of us. This has to be done with as little new government debt as possible as new government debt replacing private debt is not the answer.

Now as I write this I realize that we have already gone past the point of no return and what I am recommending is a moot point. So what can we do going forward?

We can avoid giving multi-billion dollar tax breaks to the financial institutions we saved just so that they can repay TARP money sooner and get out from under our goverment thumb. We can insure safeguards, real safeguards, are in place to prevent the financial games of the past from being repeated or, alternatively, these games can only be played by entities that have no systemic risk tied to their failure. We can strengthen regulations and liability laws to insure that the executives are there to serve the interests of their shareholders and not themselves. We need to hunker down as a nation, pay down our debts and pay the price for the foolishness of the past decade or so. We made the mess, we pay the price, so our children do not have our mess to clean up.

Instead, Obama is incurring massive debt supporting Wall Street moreso than Main Street. He is propping up unneeded financial institutions - probably illegally in some instances. He is letting the games begin again in the financial sector despite the rest of America still in a world of pain. And he is paying lip service to beating up the executives of these companies to try to make Americans content he is doing his job.

I have plenty more that should be done, but why waste my breath on someone who will not even listen to his most knowledgeable advisors, like Paul Volcker.


On Dec 10 03:37 PM user396040 wrote:

> When I read something like this, I wonder exactly what the author
> thinks the government should do. If the situation is this dire, surely
> more drastic stimulus and easing is suggested. On the other hand,
> there is an implication that this would be futile and so a sense
> that our decline is inevitable which leads to a feeling that we have
> no responsibility to design sound policy because we are going over
> the cliff no matter what we do. This is simply nonsense. Our future
> is our own responsibility. We can get out of this; it is not easy
> and for that very reason we need a searching and intelligent debate
> about public policy together with a willingness to experiment and
> abandon things that don't work as well as doubling down on things
> that do work.

Why Is Paul Volcker Being Ignored?

No pain no gain. We need to take our pain today and get it over with. I am not saying all at once as that would be way too much, but we need to over the next 5 years or so take down some soured banks, allow (encourage) consumers and commercial entities to reduce debt and hope to get on with it on a much lower but economically sustainable level. I say endure the pain now.


On Sep 21 08:24 PM CES wrote:

> People who had money back in Volcker's day loved the high, 15 or
> 18%-I forget which, interest rate on savings and they thought he
> was fine. He put untold number of businesses out of business, the
> unemployment rate skyrocketed and it was a hard time. He broke inflation
> and nearly broke the economy doing so.

Bloomberg Reports Extreme Recession: I'm Shocked

I agree that the program, which touted its prime objective as gas mileage/environmental, needed a much wider differential between the clunker gas mileage and the new car mileage. I am thinking at least 7 miles per gallon and perhaps as many as 10. Seriously, if you have a clunker at 17 miles per gallon, you can have good impact moving up to 27 or so, combined. And so goes most compromises between Democrats and Republicans. Two competing objectives, when compromised to achieve resolution, achieve no well defined result. Sad but true - though sometimes we like it that way.


On Aug 04 01:45 PM delta 777 wrote:

> Cash for clunkers is hardly a fair or equitable use of taxpayer dollars-people
> usually own clunkers for two reasons: either they are too poor to
> buy a better car (and therefore are too poor to buy an new car),
> or-if they are wealthy- they have kept the clunker as a secondary
> back-up car because it was worthless to sell or trade it in. Cash
> for clunkers selectively rewards the second group, while providing
> no benefit for those owners who were either prudent or sufficiently
> conscientious to dispose of a clunker as soon as possible. A possible
> third group: those who are wealthy enough to have given/sold their
> clunker to their kids, and now are wealthy enough to arrange an upgrade.
>
> In all cases, despite the immediate gratification boon this gives
> to auto makers, this program will quickly reflect in future lower
> auto purchases.
> It is also obvious from actual sales information that, in general,
> the new vehicles purchased under this program are far from being
> true economy cars.
> Cash for Clunkers constitutes investment of taxpayer dollars to a
> select few individuals for consumable items; as opposed to using
> this taxpayer money to create infrastructure that will be of lasting
> benefit to the taxpayer that pays for it. (in addition to the obvious
> immediate creation of broad-based jobs)

Mixed Messages from the Markets

Keep reading and you will learn something disturbingly different. Focus on sites that focus on facts and data. Find reliable blogs and follow them. I cannot give you better advice. I agree it will eventually recover, but I do not think we are to that point yet. And when we get there, expect us to take a decade or two to get back to where we were. Just my take. so read more to see if I am right.


On Jun 18 03:27 AM Sovestor wrote:

> Economy is recovering slowly. Focus on the long-term and keep it
> simple.

Mixed Messages from the Markets

Despite our two party system, people can vote however in the world they want. I believe Vermont recently had a Socaialist governor. If enough people vote for it, ironically, we can decide to turn our Democracy into a Communist state. Those that want to fulfill the requirements to get on the ballot, which are not that difficult, can get their for a vote. Go for it. Yet if you want a state exempt from federal regulaion - move out of the country

Debt, Debt, and More Debt in Store for the U.S.

Sorry the first link is not working. Something must have gotten lost in translation between my blog and Seeking Alpha. Try this link:

english.caijing.com.cn...

If that still does not work, the link is working on my blog, which is linked above below the picture.

Even Warren Buffett Isn't Perfect

I agree. I pray every night to only have Warren Buffet's fiscal problems. Then again, my prayers are said with a wife and daughter that make my life what it is and it is wonderful, so in many respects I still prefer my life to his. The uncontrollable laughter out of my daughter during play today (on multiple occassions) cannot be bought with Warren' money. Today, folks, was a very good day! I played with my daughter, hugged my daughter, wife and several friends, and had loads of fun. Nothiing better than family and friends. Not even money. Go figure.



On May 10 11:02 AM notsosmart wrote:

> @ 78 yrs buffett is not worried.some of these folks have little to
> write about

More Correction on the Way in This Bear Market

The economic growth has now been wiped out and then some. The markets are back to where they were in the 1990s and housing prices are back to where they were before the Goldilocks economy you note. Talk about a lost decade.


On Apr 08 05:22 AM Cetin Hakimoglu wrote:

> True some people were living beyond their means and the deficit ballooned,
> but inflation was tame and economic growth was steady, which meets
> the criteria of a Goldilocks economy.

It's Not a Recession, It's Reality

That is not what I was intending to suggest. Even two-earner families are resorting to eating at home to save money. In any event, the economy is leading to a host of single-earner and no-earner households whether we like it or not.

It's Not a Recession, It's Reality

I think that if you look at AIG, Fannie Mae, Freddie Mac and the like you will find the Bush Administration - the bastion of laissez faire economic policy - was ironically one of the most Socialistic administrations we have ever had.


On Feb 15 10:33 AM PrudentMan, CFA wrote:

> How fast they forget the "Japanese Miracle" of the seventies and
> eighties. Obama better learn that his "ratings honeymoon" will be
> just as ephemeral as this economy is now his as he got his confiscatory
> bill.. He had all of the answers during the campaign and now he,
> like Geithner who just had to get appointed at Treasury quickly regardless
> of his tax fraud, had all the answers but are now proven they are
> empty suits with oratorical skills - a dangerous combo.
>
> Never had I heard Bush whine about the recession and terrorism problems
> he inherited from horny Bill, who put his sexual appetites above
> National Security!
>
> As long as government crowds out the private sector for money and
> awards incompetence this economy will stink. Why pay your bills?
> Why buy a car when Obama preaches you may not have a job next week?Why
> expand plant and equipment when the Administration preaches Depression?
> Why invest in a country that has a Socialistic President and Congress?
> Why get health insurance when the government will pay your bills?
>
>
> Because of the greed of Capitalism, with their monopolistic, too
> big to fail mantra are we going to allow our Free Enterprise System
> to be destroyed by the Socialists now controlling confiscatory politics?
>
>
> Congressional Term Limits are long overdue. Pass the word and support
> (use your browser) those who are taking action to get legislation
> passed on Congressional Term Limits.
>
> You, your children and/or your grandchildren will have to pay the
> price of the Disaster on the Potomac we are seeing now. I you irresponsibly
> don't want to stop it who should?

It's Not a Recession, It's Reality

Basically, yes. I do think the government needs to spend some money to control the process a bit, but at the end of the day allowing the economy to readjust to reality is the right thing to do. It is going to happen anyway so spending vast sums to slow it down does nothing but prolong the pain.

Obviously, the government needs to make sure people have food, shelter and other basics. And I know politically the government has to be preceived as doing something; doing nothing is not politically tenable. So I can see the government spending on needed infrastructure, alternative energy and the like. Not that it will turn us around, mind you, but we will at least be spending money that gets us some bang for the buck. If we are spending the bucks either way, we might as well get some bang. How much bang have we gotten from TARP?


On Feb 15 06:28 AM CautiousInvestor wrote:

> I'm a little puzzled and not at all clear at what point you are trying
> to make.
>
> You first state we are dangerously close to following the Japanese
> experience which comprised a series of ineffectual policy initiatives.
>
>
> Then you go on to say that we should allow the market to simply correct
> itself. Are we to read into this that we would just as well off without
> ZIRP, TARP and the recovery package?
>

2009 Predictions I Hope Are Dead Wrong

visit my blog site and you will see I do not profess to be an expert in any of this. The experts never agree anyway. Just calling it like "I" see it.


On Jan 02 05:56 PM mrgeneric wrote:

> I suppose it's no different than real estate agents being "experts"
> in their fields.
>
> On Jan 02 08:41 AM prudentinvestor wrote:

2009 Predictions I Hope Are Dead Wrong

Orlando appraisal asked how far commercial real estate is lagging behind residential. I recommend going to Calculated Risk and searching the archives for CRE related articles. I know they have discussed this there and it is at least a six month lag, but I believe it may be enen a bit longer. Calculated Rick follows reports on activity by architects, which is a good way to anticiapte what is happening down the road on CRE. You have to design it before you build it.