Mike K

What If What Economists Taught Us Is Wrong?

Greed and status quo following are responsible for the crisis, not doctrines of economics, which are as straightforward as math can be.

Case in point: Banks are liquidating homes in the low end right now below 2000 prices in the very low end in southern california, despite the higher end not having come down enough. I actually believe this is below where the market will stabilize. Furthermore, their minimal carrying costs combined with a booming rental market put them in the perfect position to become landlords and actually *not loose* any more on these properties without liquidating.

So why aren't banks in the business of becoming landlords? Status quo. There is an arbitrary rule that banks blindly follow that is keeping them out of the business. The same arbitrary rules misrated subprime debt (rating agencies' fault), with banks blindly following suit (bank manager's faults). When there is no one with common sense nor initiative driving the car, of course it will crash. Perhaps one could blame the corporate shield for this - no otherwise intelligent individual would have taken the risks personally that banks were taking this past 5 years. But the corporate shield allows behavior that goes unchecked -- a firing is in no ways a meaningful threat when decisionmaking can be levered to have downside that in no way equates with the punishment.

So let me propose: It is greed, the corporation, and sheepish herd mentality that got us into this mess. Not laws or doctrines of economics. Fundamentally, people are stupid? Take a look below.

www.youtube.com/watch?...

VIX Is Complacent, Despite New 2008 Dow Low

Everyone is already *short* (look at CFTC COT), and the system has considerably delevered since last year.

Right now the 'if crude > yesterday price, sell S&P' program is running the show.

I think the market assumes the fed has no possible tricks under its sleaves, so is not buying puts, instead is getting short directly.

When Central Bankers Clash, Stock Markets Can Crash

I'm absolutely convinced world coordinated *aggressive* energy policy can do the job better of solving this 'supply side crisis' better than the blunt instrument of aggregrate demand destroying interest rate policy.

In other words, dropping a nuclear bomb onto developed economies will achieve the same thing as hiking: dropping aggregrate demand, thus lowering prices. Its a zero sum game guys... People suffer just the same thru lost jobs from declining economic activity from tight interest rate policy as they do thru inflationary moves.

Now if you fix the energy problem (which is doable if we divert our outrageous defense spending to alt. energy spending and subsidization), you fix the food problem at the same time, and end this cost push driver.