23 responses so far ↓

• 1 David Adams // Jan 30, 2009 at 9:41 pm

  Thanks for spelling my name correctly, Jake. Yeah, look. GDP growth was positive for 2008, according to official reports out today. Even including the fourth quarter of death. Things look fairly rough right now, but I’m funny about not declaring recessions over and over until one finally appears. We have now had two quarters of negative growth. It is officially a recession. Even so, there is nothing broken in the economy except for the out-of-control government entitlements. Change is always hard and it is harder this time around because so many people followed the lead of government and financed lifestyles they couldn’t afford with borrowed money they can’t repay. The current downturn will be fun and profitable for those who were prepared for it. For many others, it will a painful education in the School of Hard Knocks. The downturn may well pick up steam. If the Keynesian fanatics would just let the price level go where it is supposed to, the path back to growth would be shorter than it is going to be. That is the great shame of the circumstances in which we find ourselves.

• 2 Bimbeau // Jan 31, 2009 at 1:35 am

  Well we all know about David’s judgement and values – especially after declaring his love for me.

  Yeah David, your thinking is so full of shit – I’m not sure any even laughs at what you write any more.

  We just read the first & last sentences to see how many grammatical and syntactical (or is the term syntaxial) errors you made going in and coming out.

  Who can waste time paying attention to lies, more lies and more damn lies.

  .

• 3 Bill Adkins // Jan 31, 2009 at 8:07 am

  If you don’t like the Recession, you’re going to hate the Great Depression II. “…the Standard & Poor’s 500 Index suffered its worst year since 1937. ” I saw this coming, others saw this coming. I’ve been attacked repeatedly for commenting upon it for years. Truth hurts.

  “At the World Economic Forum two years ago, Nouriel Roubini warned that record profits and bonuses were obscuring a “hard landing” to come. “I really disagree,” countered Jacob Frenkel, the American International Group Inc. vice chairman and former Israeli central banker.

  No more. “Roubini was intellectually courageous, and he called the shots correctly,” says Frenkel, whose AIG survives only on the basis of more than $100 billion of government loans. “He gained credibility, and he deserves it.”

  This week, New York University’s Roubini returned to the WEF and the Swiss ski resort of Davos as the prophet of the worst economic and financial crisis since the Great Depression – - joining the ranks of previous “Dr. Dooms” who made their names through contrarian calls that proved correct.

  Even as he wins plaudits for his prescience, Roubini, 50, says worse lies ahead. Banks face bigger credit losses than they realize, more financial companies will require state takeovers and the world economy will keep shrinking throughout 2009, he says.

  “The consensus is catching up with me, but it’s still behind,” Roubini said in an interview in Davos. “I don’t know what some people are smoking.” ”

  Whatever they’re smoking, they’re doing it during their cruise on Denial.

• 4 David Adams // Jan 31, 2009 at 10:48 am

  Bill, I am relieved to hear you prepared yourself for tough times. Good move.

  My problem with the current discussion is that we are limiting our economy’s ability to return to sustainable growth with horrible fiscal policies.

  Denial is looking at the permanent dependence on government we have established since FDR and thinking we can avoid further damage by stepping on the accelerator.

• 5 David Adams // Jan 31, 2009 at 10:55 am

  Bimbeau,

  I love you more.

• 6 E // Jan 31, 2009 at 11:00 am

  This subject is so complex and metastasized so much…it simply cannot be sorted out blog style, but what the hell…we’re here.

  First and foremost, I could give a shit less what the friggin official definition of a recession or depression is. If your hurting, your hurting.

  The first point that has to be agreed upon, before any blame can be assigned or solution derived, is that we do NOT operate in a free market. What we have is a system much more akin to the mercantile system that Adam Smith lamented.
  That being said, the problem has hybrid roots, which extend deep into government mismanagement (for six decades), corporate mismanagement (for just as long), and personal mismanagement (for something like the last 30 years). Everyone leveraging, no one saving or really investing. Money changing, as has been the preoccupation of Wall St for the last few decades, is NOT investing…as the traditional definition of capital is not money.

  That being the case , unfortunately, the free market cannot alone solve the problems, nor can the government. As the condition of being over-leveraged permeates ALL aspects of society, business, and government.

  To allow for a free fall/free market solution is untenable, the fact is, the mercantile system we have been operating in for so long has rendered us, for the most part, unable to survive a pure free market. It would appear as chaos to us…most would starve. Ironically, those who have black market experience would thrive.

  Just as untenable, is the notion that more mercantilism/socialism, in the form of government intervention will solve the problem…as government mis-manipulation of finances and economics is (in my opinion) one of THE major causes of the problems we find ourselves in today.

  The worst does lie ahead, and politicians will prove inept at dealing with the problems, as they cannot get past being politicians, and they have no real courage to do the right things.
  Politicians are THE masters of the universe when it comes to unintended consequences that are a result of their lack of foresight.

  A few things I’m going to look for:

  - a dollar collapse, most other world currencies will collapse too, we’re simply trying to monetize too many of our problems away…it won’t work.

  -look for world wide inflation to follow, obviously, this will have the unintended effect of diminishing the impact of any capital investment projects the government will initiate. This will manifest itself in the form of HUGE cost overruns in this government reinvestment undertaking.

  -much higher debt servicing costs will result, exacerbating such things as the national debt, this will either result in higher taxes, or decreased government ‘investment’ (I’d bet on taxes going up)…it will however probably be a good time to buy bonds.

  -In an effort to stem inflation, interest rates will go up dramatically…this will kill any recovery.

  I did see our current meltdown coming, over three years ago, and adjusted financially to prepare for it.

  We might have had a better chance had the previous administration and congress had the balls and foresight to deal with the crisis in a more timely and effective manner…but they failed miserably.

  In rugby, we call what Obama inherited, a ‘hospital pass’. It’s where someone passes you the ball at the last minute so they don’t get tackled , only to set you up to REALLY get plowed . If anyone is interested, I can next post a link of some awesome rugby hits, many of which are hospital passes!

  I always qualify my dire predictions with “I hope I’m wrong”.

• 7 David Adams // Jan 31, 2009 at 11:30 am

  I disagree, E, with the idea that we couldn’t survive a free market. The switch to from our current system wouldn’t be any rougher than what we are headed for anyway. And coming out the other end we would have more freedom. The chaos ahead is a great opportunity for Americans to decide who they really are. If we require a government caretaker, then that’s what we will get in a much bigger way. I’m under no illusion that the dust would settle and we would find ourselves living in an Ayn Rand style utopia; but we need to be pushing in that direction or we will keep moving fast in the opposite direction. Either way, I think we will be better off ten years from now than we are now. Make it five or less with some free market reforms.

• 8 E // Jan 31, 2009 at 11:51 am

  I think the failure of our education system has rendered us as a people, unable to function autonomously and responsibly.
  That’s not to say that a solution that incorporates real free market ideals is not optimum, but to end the mercantile/quasi socialist system currently in place cold turkey, and charge unabated into a free market would result in wholesale collapse and breakdown.
  It took the better part of the last century to create this system, this addiction…it will take a while to recover.

• 9 David Adams // Jan 31, 2009 at 12:40 pm

  Given the current political environment there is no likelihood of going to a completely free market economy right away. And you are right that our education system doesn’t help matters much. The statists are advocating and pushing as hard as they can for more government control. I’m merely suggesting some of should push in the opposite direction.

• 10 David Adams // Jan 31, 2009 at 12:40 pm

  … some of US …

• 11 Bruce Maples // Jan 31, 2009 at 12:49 pm

  Two quick comments –

  (1) We should raise the cig tax a dollar. Beshear is considered to be “brave” to suggest 70 cents, but even with that increase we would only be in the middle of the states. And where do we stand in rate of lung cancer in the US? Why, 1st, of course.

  (2) “Out of control government entitlements” is an interesting example of “dog whistle” phrases. For most right-wing true believers, it is a stand-in for any form of public welfare, including Medicare, Medicaid, WIC, AFDC, and possibly also S-CHIP and Social Security. Use the phrase, and the true believers know exactly what you mean.

  If, Mr. Adams, you would care to include the following in your list of OOCGE, then we might find some common ground:
  – Profitable corporations that pay no taxes
  – Job-creation giveaways that never create jobs, or create so few that their payback period is decades in the future
  – Tax shelters for wealthy individuals that enable them to avoid paying taxes
  – Taxing capital gains (money made without working) at a lower rate than wages (money made by working)
  – Spending the public’s money without full and complete transparency

  I could go on, but I think you see the point. Government welfare for poor and minorities is bad; government welfare for rich and business is good. And of course, always privatize the profits but socialize the risk.

  The interesting thing is that on some things, you and I could probably agree. As long as you persist in using dog-whistles, though, I shall persist in pointing them out.

• 12 Novena // Jan 31, 2009 at 12:54 pm

  “School & Society”

  E, historically education has reflected the larger society. Too often, teachers cannot control the myriad variables (i.e., problems) handed to them (e.g., economic, social, political, familial, religious, moral, physical, nutritional, etc.). Too often, the wider society doesn’t want to face up to these issues head-on (especially see our health care system in the world’s richest country and the only advanced one without universal coverage). KY has one of the worst health records in the nation. Too often, we leave too many problems to our schools, leaving teachers to play the role of scapegoats (a favorite ploy of politicos on both the right and left). Too often, our culutre is loudly anti-intellectual (vide Limbaugh, Coulter, O’Reilly, Hannity, etc.), supremely materialistic and excessively greedy (vide Madoff). In short, lay off the teachers who try their best in a society that hardly cherishes their children once they are born. We have proven that too often, too.

• 13 E // Jan 31, 2009 at 1:14 pm

  Bruce, the things you included in the list are exactly what make the current system not free market, but mercantilism.
  Make no mistake though, the list of ‘public welfare’, you presented are also very much part of the bastardized mercantile system too.

  If only people could get past the polarization of such things. I’m doubtful that will ever happen though…there’s simply too much power and money to be had by politicians and their cronies by playing the polarization game. Anyone who aligns themselves with either side is only solidifying the polarization and power consolidation.

• 14 E // Jan 31, 2009 at 1:34 pm

  Nov…
  Please note I did use the word ‘system’. For me that includes all of the above. At no point did I single out teachers. I didn’t single them out, but that does not absolve them either.

  “Anti intellectual”…I guess that depends on what your definition of intellectual is. Are we talking about being anti dogmatic intellectual elitist (who are polarized in their beliefs and push an agenda), or are we talking about being anti-education…which would be more of an empirical endeavor, as such the three R’s (I also would add the fourth “R” of responsibility).
  I’m seriously pro education!

  You left out the entertainment and news media.

  Our society too often doesn’t cherish children before they are born either…(that falls under responsibility too).

• 15 David Adams // Jan 31, 2009 at 1:50 pm

  Thanks Bruce. When I refer to out of control government entitlements, I am not just painting with an overly broad brush. I’m talking about the ones we employ to affect change but that either have grown unaffordable, will grow unaffordable, and/or just don’t accomplish what we hoped they would. In that list I include Social Security, Medicare, Medicaid, and SCHIP. I also include corporate welfare, our wildly counterproductive tax code and secretive government spending practices. Indeed, we have some common ground.

• 16 Novena // Jan 31, 2009 at 3:30 pm

  “Helluva Task to Put Society Together”

  E, I get your points–thanks. Though “school systems” are often picked out as a whipping boy due to the neglect of larger societal ills, it is the teachers (though you did not single them out) who take the brunt of criticism. I’m all for responsibility and accountability–so long as it is fair and reasonable, and not an impossible standard (it would be immoral to expect well-nigh impossibilities from anyone or any institution). (By what standard should we hold the tremendously irresponsible and unaccountable Bush administration?) And you are right to include the entertainment and media industry (they are fast becoming one) in making us so much a “tinsel” culture.
  David, good point to add corporate welfare (it is often purposely left out by the power elite that largely defines societal rules).

• 17 E // Jan 31, 2009 at 5:21 pm

  “By what standard…Bush administration”
  With regard to the economy/recession, which is where this thread began, the Bush administration is no more responsible for the economy/recession than any other individual or institutional entity. As noted in an earlier post, our predicament is systemic.
  Culpability ranges from the lower income subprime borrowers who defaulted , to the billionaires at investment banks that bought and sold exotic and risky financial products tied to those subprime loans….to the government regulators who let things get away from them, to congress and the executive branch that failed to empower or direct those regulators properly.

  To be painfully honest, cuplability also very much resides with anyone and everyone who had a negative real dollar savings rate.
  Our problems have their roots in systemic overleveraging (borrowing) at every level of our society, corporate, government, and individual. When consumption (not production) represents 70% of an economy, and the primary consumers habitually overleverage for years…sooner or later the borrowing ends, the payback begins, and the pyramid collapses.
  Conspicuous consumption at all levels will prove to be our undoing.

  I fear the deleveraging will go on for years. I fear that government tinkering will only exacerbate the pain by stoking inflationary pressures by trying to inflate or monetize their way out of this mess, which will then lead to a paralysis induced by much higher interest rates.
  Ultimately we will be faced with either higher taxes or a shameful debt to be passed onto the very kids we fail to educate properly.
  As it has been the practice for the better part of the last 5o+ years, I think our politiciians will take the short term least painful way out and roll everything into the debt to be passed on, with shame, to the next generation.

• 18 Novena // Jan 31, 2009 at 6:00 pm

  “E for Commerce Secretary?”

  E, you might be a better choice than Sen. Judd (R-NH), who is rumored to be the next selection. But it would be a shrewd move by Obama to put him in (i.e., Democrat majority of 60 in the Senate, with the NH gov. nominating a Dem). However, you ceratinly make many good points, particularly the one about both individual and institutional responsibility and excessive consumption and piling on credit and debt beyond reasonable levels.

• 19 E // Jan 31, 2009 at 6:12 pm

  Me in DC would be akin to a pit bull in a hen house. But thanks for the nod.

  Politics being what they are, I wouldn’t think Judd will take the offer unless there is an iron clad assurance that a Rep will replace him. It wouldn’t be fair to the voters of NH either…they elected a Rep, a Rep they should be able to retain.

• 20 David Adams // Jan 31, 2009 at 9:39 pm

  E,

  Pit bull in the hen house, indeed.

• 21 Republican // Jan 31, 2009 at 10:55 pm

  If Judd has any common sense, he’ll say no to any Obama offer. We need as many R’s in the Senate to filibuster his “porkulus” package as we can muster.

• 22 Rob Mattheu // Feb 1, 2009 at 1:57 pm

  Here are the problems as I see them:

  1) Stocks became baseball cards and Beanie Babies. Rather than a long term investment in something tangible, they became an instrument of trying to make a quick buck. Companies are no longer concerned about making wise decisions for long term growth, but rather taking steps to move that daily stock price.

  2) The refusal to let our failures truly be failures. We keep trying to spend our way out of failure which just makes the inevitable failure worse.

  3) Refusal to create and enforce fuel standards. Let’s face it, the world came crashing down when energy prices forced us all out of our comfort zones. Most of the middle class lost $100 or more a month in disposable income to energy costs alone, and then saw the resulting inflation drive the cost of other necessities up 20% or more. When you see $100 to $300 or more taken out of your monthly income, it has a devastating effect. If you were living on the edge before, it could push you off the edge.

  4) Housing lenders, home appraisers, and government cheerleaders. Honestly, it did not take a rocket scientist to understand supply and demand and see the devastating effects a housing crash could have. Easy money and gimmick loans led to people buying homes they couldn’t afford, and would be guaranteed to walk away from if the terms of their loan changed, which they did. With a hefty supply of homes out there, foreclosures began to have a domino effect as house prices continued to drop and even those who could afford their loans suddenly saw themselves upside down by tens of thousands of dollars in their house.

• 23 E // Feb 2, 2009 at 12:22 am

  All good points.
  All of your points have their roots in everyone and everything being overleveraged.

  It gets scary when you try to think of where the next source of perceived wealth (a.k.a. bubble) is coming from. I could be wrong, but the long running negative savings rate has resulted in the well running dry.
  From what I see and hear, people won’t soon forget this bubble burst like they did the dot com collapse…the price collapse in housing has rightfully scared the crap out of a lot of people.
  I think no matter how hard the government tries to play cheerleader and get people to spend and borrow more and more …people are going to focus more on deleveraging, and stabilizing their finances.
  Government should take their queu from te people, control spending pay down debt…but as I lament often, that would take foresight and courage…two qualities sorely lacking in the modern day politicians.

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