keithofrpi

CNBC's Santelli Speaks for All of Us

When Reagan emptied the insane asylums, it appears that the inmates were so grateful that they joined the Republican Party en masse, and have been formulating its policies.

Obama's 'Bad Bank' Plan Is a Turning Point

Just because a future value is unknowable doesn't mean that it's worthless. Consider the transactions on eBay. Do you own "frozen" morgage-backed securities? I would gladly buy them all for $1, even $100, and maybe more! Outside of such extremes, private parties want neither the risk of selling for too little, nor of buying for too much. But it is appropriate for the gov't to take on such risks, because its concerns go well beyond P&L.


On Jan 28 11:30 AM Larrysyr wrote:

> On Jan 28 11:01 AM keithofrpi wrote:

Obama's 'Bad Bank' Plan Is a Turning Point

The fallacy in the sour comments about a "bad bank" is that all the "bad" assets are worthless, or nearly so. The problem is not that these assets are worthless, but that in frozen market conditions their value is impossible to determine. A contingency sale, as some have proposed, would not solve the balance sheet problem since it would be no easier to value than the assets now. A sale based on a reasonable and agreed-upon model, however, would both provide the banks with a clearer balance sheet, and give taxpayers a reasonable chance of getting their money back.

What Will Happen If America Returns to an Historical Savings Rate?

Thank you for this good effort at visualizing the future. I do not agree, however, that the economic trends you identify since 1980 "just happened" or result from globalization. They are the direct result of Reaganism, an ideology that strips the government of powers and resources, while leaving the top executives of business free to take what they can. In other words, our political choices shape the economic environment. Note that the trend was interrupted and somewhat reversed under Clinton, but resumed with a vengeance under W.

Why the Financial Markets Haven't Responded

True, the lack of leadership from Bush has made it very hard for Paulson and Bernanke, even though they are trying to do the right thing. After listening to both McCain and Obama, it seems to me they are proposing virtually identical solutions to the credit crisis. Nor are their economic advisors very far apart. I would like to see them get together, agree upon and jointly support Paulson/Bernanke and a set of principles for going forward, and stop debating this particular matter. That might provide the leadership that's missing right now.

A Proposed Admirable Response to the Crisis

This is an intelligent article, but I think you overlook one key advantage that the government has, and could use to solve the valuation problem. Very simply, it is to buy the "bad" assets at a price that is partly determined by the long-term value. Pay something now, perhaps 25% of the cost of the asset, and promise to split--in some equitable fashion--the increase ultimately realized. Few if any other entities could be trusted to make such payments, but the government can. In the meantime, the government holds and works to unwind the assets, freeing the financial market to return to supplying credit. Ultimately, everyone wins.

I do not agree with your idea of eliminating taxes on repatriated profits. We do not suffer from a shortage of funds; we suffer from a shortage of trust that investments will be profitable. Relieving firms of tax burdens does not change that trust; it simply hands the firms another windfall profit.

How Elections Affect the Stock Market

Your comments about the likely economic effect of an Obama presidency are weird. Returning taxes on the richest 1% to their pre-Bush rate does not raise marginal taxes to 60%, especially for those well-sheltered people. Nor does it inhibit investment: where are those people going to put their money? Obama would significantly lower taxes on 95% of the public, a fact verified by independent analysts. How do you think our economy could prosper if 95% of the people remain financially strapped? Well your favored 1% buy all the goods and services? Even Henry Ford knew better: to grow sales and business activity, you need a prosperous population. That's what Obama's economic policies would aim for. Nobody wants to deprive the rich, but the rich won't remain so for very long if they're the only ones with disposable wealth.

An Oil-Driven Paradigm Shift?

The ideology that clouds this discussion is breathtaking to me. Why call conservationists "back to moccasins and bone needles"--FourBrane? Why provide false information about ANWR--"Even if it takes ten years from day one, ANWR is capable of 2.1 million BPD"? Why blame the government for wiping out fish species--"It is when government conservationists get involved that entire species get wiped out."--buyitcheap? Hard to have a reasoned discussion when such nonsense gets retailed. The basic problem for the US is that our entire economy is built on the assumption of cheap oil. Here's the problem, in a nutshell, and if it isn't happening today, it will tomorrow: The guy commuting 30 miles one way in his SUV can't afford to run it. He can't sell the SUV for as much as he owes on it. He can't sell his commuter house for what he owes on the mortgage. Under the new bankruptcy law he can't declare bankruptcy and escape all this debt. How many are in this predicament, and what can be done about it?

Market Bottom Already? I Don't Think So

Consumers power the market. If the dollar stays low or continues to decline, export sales will ramp up and prevent great job losses. Although high prices for commodity necessities plus housing value losses are crimping consumer spending, and will continue to do so for some time, a 6-12 month timetable for production adjustments to reduce those prices does not seem to me unreasonable. With our population growth, aggregate spending will resume its rise even if per capita spending does not. Combine exports with flat to slightly improved consumer spending within the year, and you get a resumption of sales and profits.