U.S. must tackle debt after economic crisis: Summers
Once the debt crisis is over, we must then tackle the debt crisis. Genius!
Thwack! That's just my forehead hitting my desk. Sorry.
Summers: Obama's Plan May Have Stabilized Consumer Spending
He said there was "one ineluctable lesson of the history of financial crises: They all end."
Ineluctable
Not to be avoided or escaped
Why would anyone be trying to avoid or escape the ending? Hold on. How will this crisis eventually end? He seems to have left that little detail out. I sure hope it doesn't involve me hauling money to the grocery store in a wheelbarrow just to buy a loaf of bread. Thwack! Thud! Thud! Thud!
They should also "remember this central paradox of financial crisis: that while the problem was caused by excessive complacency and excessive optimism, what we need today is more optimism and more confidence."
Optimism
1. ...to expect the most favorable outcome.
Confidence
1. full trust...
I'm looking at my desk. Oh man, this one is seriously going to hurt. *whimper*
"I sure hope it doesn't involve me hauling money to the grocery store in a wheelbarrow just to buy a loaf of bread."
ReplyDeleteHahaha...I feel your pain, it would be a pain in the ass to have trillions in my wallet. I am curious though when this crisis will end and what will the consequences be. I doubt they will be harmless though.
Take care, Lorne
Mark, you might want to oil the bearings on the wheelbarrow it'll be easier to roll. We all know how this story is gonna end.
ReplyDeleteLOL
Kevin
Canada Life Insurance (Lorne),
ReplyDeleteI am curious though when this crisis will end and what will the consequences be. I doubt they will be harmless though.
I'm willing to put $2 on your horse to show in the 7th, although I must say he's got one heck of a long name! ;)
The Crisis Will End When We're Up to Our Ears in Unintended Consequences
Oh crap. It's the serious favorite right now. It seems everyone loves your horse. I was hoping to strike it rich. It seems all I'm going to get is $2.10 once the race is over. Hey, maybe I can use 40-1 leverage like an investment bank though. That could turn this sure thing into a longshot! I'll either make out like a bandit or lose everything I've got and a lot more I don't have!
Kevin,
ReplyDeleteMark, you might want to oil the bearings on the wheelbarrow it'll be easier to roll. We all know how this story is gonna end.
There's nothing more tragic than first having to use a wheelbarrow of money to buy wheelbarrow bearings oil so that you can safely sneak past the looters on the way to the grocery store to buy a loaf of bread.
Okay, there is one thing more tragic. Trading a loaf of bread for the money needed to buy the wheelbarrow oil would certainly add insult to injury.
You offer sage wisdom. Buy the wheelbarrow oil now in case the price eventually goes up. Genius!
He said there was "one ineluctable lesson of the history of financial crises: They all end."
ReplyDeleteWhat a pollyanna. Sure they all end - in tears. And many end in total catastrophe.
Just ask the Nauruans about how ALL financial crises end. (Incidentally, I prefer "Nauruianites" - it has a better ring to it).
http://en.wikipedia.org/wiki/Nauru
Or you could ask the Japanese. Especially the Japanese with multi-generational mortgages on 900 sf apartments that have lost 90% of their value over the past 15 years. That crisis should definitely end in another generation. Two generations at the most!
And if you bump into any Romans, I'm sure they could verify that all financial crises end. Heck, even the dark ages ended.
Imo, all these statements by "experts" are useless without context. And I'd really like to see all these "solutions" discussed in the context of the huge amount of debt hanging around the neck of our eCONomy. Recently it took like $5 in debt to produce $1 of GDP. As bad as that was, we're now massively increasing debt against a shrinking GDP.
As best as I can tell, the Great Depression did not end until the excessive debts had been expunged from the economy. The massive growth in government debt during the GD was small compared to the amount of private debt that defaulted. Arguably WW2 was a contributing factor in ending the GD, especially since our country was not bombed into oblivion and we were left as the world's largest gold holder. But I think the smaller debt load and a propensity to work hard and save set the stage for decades of growth in the U.S.
Japan is the closest parallel to our over-indebted economy. Last time I looked, Japan's financial crisis had not ended.
Like you said: So many fears have sound fundamentals these days.
mab,
ReplyDeleteNauru...
Motto: "God's Will First"
It makes me think about our currency's In God We Trust.
Perhaps God is actually an acronym that just needs to be expanded.
In Government's Overleveraged Depression We Trust
We could also replace "Federal Reserve Note" with "Federal Stockpile Notice". "Legal tender" could be replaced with "legally breakable". That wouldn't change the meaning. They are just synonyms after all.
Arguably WW2 was a contributing factor in ending the GD, especially since our country was not bombed into oblivion...
That certainly gave us one heck of a competitive advantage. In sharp contrast, we're the ones being debt bombed into oblivion now.
Like you said: So many fears have sound fundamentals these days.
That's the beauty of being a bear these days. I could probably be wrong on 80% of my predictions and still end up being right overall, or at least enough right.
Take deflation. I never actually bet on it. Maybe I should have, but I never left inflation hedges. It sure hasn't hurt my IRA much though. I owned GLD for a bit, then I had some nice income off of TIP (still have it, and it's in a dividend reinvestment plan). Lately my IRA has been beaten up a bit but it is still up 25% since I turned bearish in 2004. Further, now that oil has mostly stabilized it seems, the beating might be coming nearly to an end. Even if it isn't, I'll most likely be taking flesh wounds compared to others' mortal injuries. I doubt oil can drop from here unless the world's economy continues to deteriorate (bad thing #1) faster than borrowed money can be created (bad thing #2.
Here's an economy analogy, at least as I see it.
It's like adding a hoard of zombies into the game of Clue. Colonel Mustard is most likely going to die. So is Miss Scarlet, Mr. Green, Professor Plum, and Mrs. Peakcock. You know why? There are no exits. I might be wrong picking the exact rooms and the murder weapons, but it sure beats the heck out of predicting their neverending prosperity. Sigh. Historically, of course, only one person died when playing that game. History did not account for the freshly added zombies though.
Stag,
ReplyDeletemy IRA has been beaten up a bit but it is still up 25% since I turned bearish in 2004.
I'll most likely be taking flesh wounds compared to others' mortal injuries.
Take heart. "Qualified" investors in "funds of fees" have been given the red headed step child treatment. It's okay though. In most cases, to be "qualified" they had to demonstrate the ability to be able to lose > $1 million.
http://www.wealth-bulletin.com/home/content/1053596556/
Perhaps hedge funds of funds should be called "funds of fools." As in: "a fool and his money are soon (de)parted." That's like adding insult to (mortal) injury.
"Qualified!" Now THAT is funny. Fog a mirror AND have lots of money to lose. Who says bankers didn't do proper underwriting?
The best and the brightest! They deserve each other.
mab,
ReplyDeleteFrom your link...
Natarajan added: "The multi-manager approach and professional selection of hedge funds is still very much essential for the creation of a healthy hedge fund portfolio...”
I'm surprised that financial innovation hasn't evolved into a Fund of Fund of Fund of Funds yet, allowing even more managers to manage the managers of managers managing other managers. Just think of the profit potential.
The Fund of Fund of Fund of Funds model could be combined with an advance-fees model, since the economy is on such shaky ground these days.
http://en.wikipedia.org/wiki/Advance_fee_fraud
An advance-fee fraud is a confidence trick in which the target is persuaded to advance sums of money in the hope of realizing a significantly larger gain.
Perhaps the investors could simply give the managers all of the money upfront on the hopes of bigger returns later. Oh wait. That's what they do now. Nevermind.
During the courses of many schemes, scammers ask victims to supply bank account information.
How else could the Fund of Fund of Funds of Funds managers depsosit the winnings, um, I mean dividends?
Victims, in addition to having lost tens of thousands of dollars, often also lose their ability to trust.
http://www.bloomberg.com/apps/news?pid=20601087&sid=azc_RY_g3jj8&refer=home
March 13 (Bloomberg) -- Confidence among U.S. consumers in March held near a 28-year low, reflecting mounting job losses and a deepening recession.
I think the way to get around this is to base the Fund of Fund of Fund of Funds managers in Nigeria. There would be so many managers that it would most likely be cost effective to build them a state of the art 50-story office building complete with an olympic-size pool. Here's a thought. Perhaps a large portion of the advance fees could be used as a downpayment on the construction loan? By using 40-1 leverage, there might be enough prosperity to install granite countertops on every desk.