Re: OT Since we live in a blogocracy...
- From: Bob Giddings <bobg@xxxxxxxxxxxx>
- Date: Wed, 07 Mar 2007 09:28:54 -0600
On Wed, 07 Mar 2007 08:59:27 -0600, Mike Hendrix
<mikehendrix@xxxxxxx> wrote:
On Tue, 06 Mar 2007 22:37:53 -0600, Bob Giddings <bobg@xxxxxxxxxxxx>
wrote:
Here's a blog with strong opinions on the economy. I invite the---------------------------------------------------------------
commentariat of RORT to do their thing.
IMO, a lot more relevant than guns.
http://globaleconomicanalysis.blogspot.com/
Here's an excerpt:
"We've created an unproductive asset," says Joe Carson,
director of global economic research at AllianceBernstein. "A
house doesn't produce income." Mortgage debt rose by $4.7
trillion from the end of 2000 through the third quarter of 2006,
according to the Fed's Flow of Funds report. "We created as much
debt in housing in the last six years as we did in the prior 50,"
Carson says.
Bingo! Austrian economists would call this malinvestment. For all
this artificial boom, we did not create any productive capacity,
we did not even improve infrastructure. All we did was pile on
debt. That debt will not be inflated away, wages will simply not
rise fast enough, and jobs will become harder to find in the
upcoming recession. That debt will be deflated away via
bankruptcies. The process has started and it has a long, long way
to go before it's over.
Instead of spending money on productive assets we are actually
selling assets to foreigners to finance our reckless spending
habits. We have also wasted what will eventually amount to
trillions of dollars to blowing up Iraq, and since no one else is
willing to say this, I will: Every life lost in Iraq was wasted
as well, every single one of them.
Compare and contrast how we have been wasting dollars to what
China and India are doing with their dollars. Yes, China has
built tons of overcapacity, but unlike us they at least have
capacity, and unlike us China and India have massively improved
infrastructure while we have allowed ours to go to waste. Proof
of that statement is easy. Schwarzenegger needs $500 billion to
rebuild California and that is just California! Other states are
in similar messes with both infrastructure and pension plans.
The market is in the process of repricing those malinvestments
right now. That is why subprime lenders are blowing up, home
prices are falling, defaults and foreclosures are rising, and
credit lending is imploding. In attempting to prevent deflation
the Fed has essentially guaranteed it. Congress played right
along giving the banks and credit card companies exactly what
they wanted: A bankruptcy reform act written to make people debt
slaves forever. This fostered risky credit card lending in the
belief that those loans will be paid back. They won't.
Instead of taking a hit in 2002, Greenspan and Bernanke made
matters worse by creating the mother of all housing bubbles.
Instead of allowing people to go bankrupt, we passed laws making
it harder, and those laws have already started to backfire.
Instead of stopping subprime lending earlier, institutions
repeatedly dropped lending standards to meet growth requirements.
Instead of taking writeoffs now, lenders are refusing to admit
mistakes hoping on a wing and a prayer that these bad home loans
will cure themselves. Those loans will not be paid off either.
We are following in the footsteps of Japan except that our
consumer debt loads will make it worse. The Fed has learned
nothing every step of the way.
Mike Shedlock / Mish
Bob, he throws some interesting theories on the table. He may be
correct, who knows.
I suspect we will all know within two years.
Currently the housing market around Pensacola is flat, depressed, not
moving ------------------ stinks.
Hundreds if not thousands of people have been paying monthly mortgage
notes on condos at Pensacola beach that have been offline for going on
3-years after hurricane Ivan severely damaged them. I can tell you
that those people are hurting for sure.
mike
Shedlock's into blame. Inherent in that is the assumption that
there was one right policy, that would solve all the problems.
I'm not so sure... except that it would have been an unqualified
bonus not to have spent those trillions in Iraq.
I'm a small fry. I'm into escape, if I can.
We've had a good 4 years by lowering interest rates to levels
that sent credit sloshing around the world. Taking a lesson from
the Japanese response to their own long deflation since the early
90s. That's the upside.
The effect was a series of bubbles - industrial materials,
metals, oil, and most especially housing - which are beginning to
burst. That's the downside. Or the beginning of it.
So what's the next bubble, that's going to save us from having to
take the cold bitter pill?
Staying solvent now is a little like walking across a lake on
bits of ice, none of which is quite large enough to bear your
weight. If you move quickly, and you don't run out of ice, you
won't even get your feet wet. If you stop, you drown.
But man, we're waaaay out in the lake. And what's this I hear
about global warming? woops. sorry. gotta keep moving.
I remember seeing a bumper sticker in Midland Tx, years ago.
"Please God - Send us just one more oil boom - I promise not to
screw it up this time."
Right.
Bob
http://www.arcatapet.net/bobgiddings
.
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