Lex Luz

Four Myths About the Free Market and Its 'Demise'

Marc, yours are the most intelligent comments I've read here in ages. Rigid adherence to dogma IS a prescription for disaster.

I generally believe that the best solutions are those that will arise through the mechanisms of markets left alone to function as they will. That said, I'm keenly aware that the orderly functionining of free markets depends on both buyer and seller having access to the same information - i.e., transparency and accuracy in reporting.

It is incredibly easy to see that at least some of the foundation of today's challenges stem from a lack of transparency in credit markets in particular.

Regulations aren't the boogeyman here; lack of transparency is. Typically, the best (not the only, mind you, but the best) intentioned regulations work to promote and enforce transparency and fair reporting in markets so that buyers and sellers can more reasonably establish fair prices and so that trust, over time, is bulwarked.

There will never be a perfect balance of information between buyers and sellers, nor will their be a market perfectly free of government intrusion at some level, and I for one don't believe there should be. We should err on the side of less intrusion than more in my belief, and all of our efforts ought to be aimed at increasing transparency while limiting burdensome rules. That's the genesis of SANE regulation, which is what has been missing for some time now.

Expect the Real Rally by Mid-2009

This is one of the most bizarre leaps of illogic I've ever read on SA. First, the secular trend in employment has been completely obfuscated by changes in the way the statistics are derived; there is absolutely no credible way to determine what the realistic employment numbers are in the United States (or if there is, I'm certainly not aware of it).

Employment could be extrapolated, perhaps, through income trends but goodness knows no one wants to examine THAT secular trend too carefully. If anything, the secular trend in income is down and headed lower. The consumer spending binge of the past 15 years has been financed entirely on debt and illusory asset inflation, cycling together.

Secondly the notion that retiring baby boomers will drive employment higher, and therefore spark the revival of the American Consumer, is suspect at best. To begin, boomers will likely find that they can't retire in the traditional sense and many will compete for low-wage jobs to supplement income. This will likely pressure wages lower, and in turn pressure consumer spending lower too.

We are entering a seismic structural shift. The entire economic establishment appears to be firmly attached to the cliff-edge of denial. Frankly, I think the American Consumer is comatose and will remain so for decades.

Wall Street Breakfast: Must-Know News

CCerenz - Our auto companies are uncompetitive because they are run by fat, lazy bureaucrats with no market savvy and neither the ability nor the willingness to innovate given their knowledge that no matter what happens, they will be bailed out by Uncle Sam as is happening now. Yes, they have high labor and legacy costs. This too is a reflection of poor management. Everyone loves to pile on to the unions and they certainly bear their share of the blame but at the end of the day there is SOMEONE running the company who must set strategy and execute against it. When that strategy fails, the CEO should either adjust or accept failure. Instead, American auto company CEOs go crying hat in hand to Congress and whip up a spectacular frenzy among the deluded that it's all the fault of someone else. Nonsense. We are a nation of whiners indeed - and there are no greater whiners than those who've led once-great businesses into the sewer.

Is Bernanke Hinting Something About the Fed's Rate Plans?

I'm curious - and freely admit to very limited knowledge here - about how the Fed's statements today help to strengthen the dollar. On their face these statements and the implied policy (in)action would seem in my view to weaken the dollar further. In essence, the Fed seems to be continuing to say, "we'll take your crap MBS in trade for treasuries." If this is the case, and if the dollar is as a result backed by near-worthless securities, and if furthermore the Fed intends to throw as many buckets of money out of their helicopters as possible now and into the forseeable future, how is it that the dollar gains strength?

I am quite sure that there's something I'm missing here and would appreciate some education on this. No sarcasm implied despite my strong language. Thanks.

John Hussman: Fiscal Policy Is the Key

When the Executive directs a cowed Congress to pay for a multi-trillion-dollar war, the Executive must share some of the responsibility for ill-considered fiscal policy. No question Congress could, in theory, draw a line in the sand, but to be fair responsibility for our disastrous fiscal policy of the past thirty-plus years must be spread much farther. It's your last sentence that to me has the greatest ring of truth: we are seeing the enemy, and it is us.