Friday, September 14, 2007

Ballpark Estimate on Length of Our Economy (satire)

Our economy can be thought of as a car. In it, there are two windows. One is the front window and the other is the rear window. We can estimate the length of the car (our economy) if we can determine the time it takes for something visible in the front window to be seen in the rear window. Once we know the time, we can calculate the length if we simply know how fast we are going.

I believe we now have enough information to do the calculation.

In 2004, Warren Buffett said, "TIPS [Treasury Inflation Protected Securities] are not a bad investment for people worried about inflation heating up, which we're seeing signs of." (
Buffett's Wit and Wisdom)

Hindsight clearly shows that Warren Buffett was looking out the front window.

In 2004, Alan Greenspan said, "American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home." (
Remarks by Chairman Alan Greenspan)

Hindsight clearly shows that Alan Greenspan was looking at the rear view mirror.

So how long is the car (our economy)? We need merely wait for Alan Greenspan to see what Warren Buffett sees. That day has come. Alan Greenspan is now seeing what Warren Buffett saw three years ago. We now know it takes three years for things seen out the front window to be seen by those looking out the back window. All we need to know now is how fast the car is moving and we're done! How fast is the car moving?

4 Reasons to Be Upbeat About the Economy
Yet there are some reasons to think that while the economy may slow through the rest of 2007, such as today's iffy retail sales report, we may yet avoid a recession.

Slowing? How can I do the math if the car doesn't keep going the same speed? I must apologize. I thought for sure I'd be able to give a ballpark estimate on the length of our economy, but clearly I can't.

Maybe I can still be upbeat though.

One reason is that our exports are booming.

Yeah, booming. We keep shipping China one thing and they keep shipping us four things. (Trade Deficit, Trade Deficit, Part 4)

There are some signs of improvement in the credit crunch.


So far at least, employers don't seem to be panicking.


The stock market continues to hold up despite the blizzard of bad housing and credit news.


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