Friday, October 10, 2008

*Flew into Miami Beach, BOAC ...

Unlike the Chimp & Paulson, et al, the Brits have a pretty decent plan for shoring up the markets. Krugman wonders if the rest will get it:

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Why do we need international cooperation? Because we have a globalized financial system in which a crisis that began with a bubble in Florida condos and California McMansions has caused monetary catastrophe in Iceland. We’re all in this together, and need a shared solution.

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What should be done? The United States and Europe should just say "Yes, prime minister." The British plan isn’t perfect, but there’s widespread agreement among economists that it offers by far the best available template for a broader rescue effort.

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While I'm no economist, nor anything resembling a money guy, I do have a little common sense. I'm also old enough to remember the crash of '87 and the dotcom bubble and the resulting failures. it seems to me, watching the market for the better part of 30 years, that markets don't like artificially inflated values on anything and try to correct themselves. Unfortunately, a lot of debt had been leveraged on loans for real estate that was/is woefully overvalued.

Sorry, but much as I love my home, much as I work to make it nicer and more comfortable for us, I know damn well it ain't worth a half-million. That's what it was 'worth' 2 years ago and my bank would gladly have given me a mortgage for that amount. The amount of people who are 'underwater' (their houses are now worth less than their mortgages) today is unbelievable, thanks to this wave of over-valuation. It's just like the Dotcom Days when everybody with a web page attracted capital like flies to one of Shayna's deposits in the back yard on a hot summer day. There was a correction then too and the herd was culled; only those with a reasonable, workable, business plan survived. Shit, Amazon just started showing a profit a couple years ago. The only internet business to show a profit from the get-go was the porn industry.

As I said a couple weeks ago:

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Coming out of a bubble of over-inflated home prices (artificial) and inflated stock prices, I get the feeling that if nothing is done the market will stabilize in the 7000 - 9000 range, probably where it should be. The only reason action is so "imperative" is to relieve the fat cats of their losses without pain to them. It does nothing for us.

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And I still stand by that. I don't think anything done so far (and at the rate the markets are approaching terminal velocity Earthward, it would bear that out) will make much of a difference until the markets are comfortable with home values first; thus establishing a value for all the pieces of Shitpile all these banks and mortgage brokers own. Until we know what exactly all of Shitpile is worth, we won't know how to go about paying for it.

Throwing money at the greedy idiots who perpetuated this mess, who propped up this artificial 'bubble' (because they had to prop it up or risk the bottom falling out) using dubious investment instruments and practices, will only prolong it.

If we're going to spend taxpayer money to soften the blow, the taxpayers have to have a stake in the outcome. If we're going to bail out a bank or an investment house, the taxpayer, in the persona of the U.S government, must have a controlling interest in said institution. There is no confidence in the bunch of infidels (and imbeciles) who have been running the show and that confidence won't return until investors know all are playing with the same rulebook, a rulebook (yet to be written) that doesn't allow for shady deals using questionable instruments, leveraged 100:1.

Until the 'Wild West' atmosphere on Wall St. is put to bed, none will have the confidence to hand their money over to this current generation of Gordon Gekkos and keeping them solvent with taxpayer funds (without strict management oversight) will only prolong the agony. Without real change and reform, no amount of cash will help.

And an addendum before I go to work: This is what the 'Bush Economy' will be known for. When the nation went to war, the people were told to shop, to live large on the (over-inflated) value of their homes. It will be known as a time of nearly free, unlimited credit for anyone who had their hand out. As the government has been run (record deficits, a war that's not even on the books), the American people have also been encouraged to engage in 'deficit spending'. I've said it many times; if I ran my personal finances the way the government did theirs, I'd be living out a refrigerator box under a bridge somewhere. It seems many of my fellow Americans did.

*Apologies to the Beatles.

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