The Economic Cycle (Theatrical Version)
Using the benefit of hindsight, I think you can see that our cat Tigger and our dog Honey clearly did a pretty darned good job acting out the future back in 2007, but conditions have changed. They now offer you an expanded director's cut version of the show.
Cast of Characters
"Fat Cat" corporations played by Tigger
"Happy Dog" consumers played by Honey
"The Taxpayers" played by Tigger and Honey
"The Fed" played by Alan Greenspan and Ben Bernanke
"Treasury Secretary" played by Henry Paulson and Timothy Geithner
"President" played by President Obama
"Congress" played by Congress
"House Speaker" played by Nancy Pelosi
Act I
The economy is broken. All eyes are on the Fed.
The Fed slashes interest rates. The fat cat continues to watch the Fed as the happy dog begins to show some signs of life.
As business begins to pick up the fat cat is more than happy to offer cheap products to the happy dog and a certain balance is achieved.
Cost pressures begin to mount for the fat cat and are transferred directly to the happy dog in the form of higher prices. The Fed, seeing the struggle, opts to raise interest rates.
Cost pressures continue to climb for the fat cat. Portion sizes are reduced on happy dog's food in hopes she won't notice. Unfortunately, she notices. The Fed raises interest rates further.
As prices continue to spiral higher, so does the happy dog. The Fed panics and continues to raise interest rates to contain the problem.
The happy dog has had enough and begins to lose her brand loyalty. She calmly explains to the fat cat that she will be buying generic food instead. In response, the fat cat rushes off to explain to the shareholders that the unseasonably warm winter has caused the company to miss its numbers. The Fed, upon seeing the cost pressures begin to recede and noting the warmer winter, is satisfied that the economy is once again in balance. Meanwhile, the economy crashes.
The economy is broken. All eyes are on the Fed.
Act II
The economy is broken. The Fed slashes interest rates but nothing happens. All eyes are frozen on the Fed.
The economy is broken. Treasury Secretary Henry Paulson announces a Troubled Asset Relief Program (TARP) that doesn't actually end up buying many troubled assets. All eyes are frozen on the Treasury.
The economy is broken. We finally elect a new president. President Obama tells us that if a stimulus package is not passed "our nation will sink deeper into a crisis that, at some point, we may not be able to reverse." All eyes are frozen on the President.
The economy is broken. We finally have a new Treasury Secretary. Treasury Secretary Timothy Geithner unveils a cunning plan to fix the economy that was months in the making but ends up being amazingly short on details. All eyes are frozen on the Treasury.
The economy is broken. Congress finally passes a massive stimulus program that borrows massive amounts of money from the taxpayers to bail the taxpayers out. All eyes are on frozen on Congress.
The economy is broken. President Obama tells us that although we clearly can't restore fiscal discipline right now, restoring fiscal discipline at some point in the future will be very important. All eyes are frozen on the President.
The economy is broken. House Speaker Nancy Pelosi tells us that Congress needs to "keep the door open" to another stimulus package. It may be necessary to borrow even more massive amounts of money from the taxpayers to bail the taxpayers out. All eyes are frozen on Congress.
The economy is broken. All eyes remain frozen.
This concludes Act II of the play. There will be a brief intermission to finish the production of Act III and rest the eyes of the actors. That "frozen in the headlights" look takes more energy than it might otherwise appear. In the meantime, cocktails will be served in the lobby. As part of the current stimulus package, all drinks are on the house!
You say alcohol isn't actually a stimulant? It's a depressant? Look buddy, if it's in the stimulus package then it is a stimulant. Okay? Stimulants cannot lead to depressions. Don't go looking for trouble.
Stag,
ReplyDeleteThe economy is broken. All eyes are on the Fed.
http://en.wikipedia.org/wiki/Sleight_of_hand
http://en.wikipedia.org/wiki/Misdirection
Everyone is watching the fed (including me). Finally an easy solution that I can believe in. Whew! Thank goodness. My skepticism was becoming a major drag - I was losing faith in the system.
But that's changed now. While everyone is watching the fed, I just know that deals are being cut behind closed doors. And this time, they'll be "good" deals. This time, I'll get a fair shake. Finance is finally going to own up and make amends for their fraud.
It's really comforting to know that TPTB provide us with entertainment while they work for OUR interests.
Lately, a lot of people have expressed concern over fed/treasury secrecy. I now take comfort in knowing that the fed and financial industry recognize that I need to be shielded from the whole truth - it's in my best interests. Blind faith is the only way we will ever get recover OUR money. And the losses are huge. We definitely need recovery.
Good grief, another rant. And a bad one at that. My apologies. Seriously, don't let me drag you down.
One more thing. Where are those WTO protesters when you need them? You'd think this massive CON would be their Super Bowl.
mab,
ReplyDeleteGood grief, another rant. And a bad one at that. My apologies. Seriously, don't let me drag you down.
There's no down today! Money flowed into anything that moved.
My TIP fund bounced back 1.52% today. Wow.
The stock market is way up.
Commodities were the winner though. The CRB rose 4.08%.
I think we're finally in the sweet spot. The government is finally making a dent in deflation. Hurray! It is assumed that inflation will lead to growth, just like it has done in the past. Hurray! There are just a few of us who think that inflation might lead to little growth though. Call us stagflationists if you will. We're the minority. We can't affect market pricing much. So let the party continue! Hurray!
I sound like a broken record when I say this, but I am not a believer that a commodity bull market can lead us to a new level of prosperity, any more than it did the previous times we tried it (1970s, 2003-2007). In order to have sustainable fake prosperity, we need to channel all of that money into things that don't have inflation as a side effect. For example, think of the fake prosperity we would have if the money went into the stock market and only the stock market (think dotcom bubble). No inflation! Massive fake wealth effect!
One more thing. Where are those WTO protesters when you need them? You'd think this massive CON would be their Super Bowl.
Stuck in China?
In China, Would-Be Protesters Pay a Price
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/10/AR2009031003725.html?hpid=topnews
In the end, official reports show, China never approved a single protest application -- despite its repeated pledges to improve its human rights record when it won the bid to host the Games. Some would-be applicants were taken away by force by security officials and held in hotels to prevent them from filing the paperwork. Others were scared away by warnings that they could face "difficulties" if they went through with their applications.
Hey, just a theory.
Stag,
ReplyDeleteYou say alcohol isn't actually a stimulant? It's a depressant? Look buddy, if it's in the stimulus package then it is a stimulant.
Alcohol is a somewhat unique drug as it is both a stimulant AND a depressant. When first CONsumed, alcohol has a stimulating effect. After the initial period of stimulus, the alcohol then acts as a depressant. Happy AND sad!
In that sense, alcohol is an excellent metaphor for debt in our eCONomy. However, the notion that you can cure a hangover (un-poison your body) with yet more alcohol (poison) is bogus. I've tried that exact remedy on several occasions. It DON'T work!
mab,
ReplyDeleteLOL!
Perhaps there's a Murphy's Law? In order to cure a hangover you will need twice as many hairs of the dog that bit you as you think you do. If you factor this in and double the hairs, you will still need twice as many.
I think someone sheared the dogs of the dow. They then went swimming just as the tide went out!