If you listen to as much Bloomberg as me without screaming, one of the things you'll notice is that there are different attention spans in the various guests. I am getting to the point, after several months of being able to differentiate them. Here's one of the things I've just recently noticed.
One of the premises of stimulus has to do with the solvency of the banking system and therefore the economy. But where this runs into a big problem is that to justify bailing out the banks, you have to be in fundamental agreement that more credit is what the economy needs. This is very easily illustrated when you talk about the stunningly low number of 9.1 million new cars sold on an annual basis. That's the rate today. Just last year, the figure was 13.2 million. That's a horrible drop, and the industry is freaking out. But of course they will say that part of the reason that not many cars are selling is that there's no financing. So a bailout of banks anticipates an increase of lending supply which we hope will generate more demand for auto loans which will float the number of new car sales and thus indicate a turnaround.
Except that's not going to happen. People are simply going to drive their current cars into the ground.
I have a problem with the TARP. To the extent that I understand it, it seeks to stimulate the economy by getting banks to lend. Well how much lending is enough?
I forget who said it brilliantly that Credit Default Swap market was like buying four fire insurance policies for the same house.
The bottom line here is that we Americans are going to eventually wise up and recognize that Obama and his crew are powerless to change the arc of the economy in such a way as to obviate our need to tighten our belts. The hedge fund industry is over and it's not coming back. Done. Finito. And when such other inevitabilities make themselves known in our culture, then we will adjust. Business as usual will be less business, we will do without the things we know we can do without. That means 9.1 million new cars instead of 13.2. It means maybe being a one car family instead of two. It means driving the beater, the beat up car just a little longer.
What I hear is that the average 401K has lost all of the gains made in 12 years. Ouch. So we all go back to 1997. How were you doing then? Suffering? Were any of us happy in 1997? Could we stand to live at that standard of living once again, or would it kill us? It won't kill us, it only makes us weaker.
The bottom line here is that we Americans are going to eventually wise up and recognize that Obama and his crew are powerless to change the arc of the economy in such a way as to obviate our need to tighten our belts. The hedge fund industry is over and it's not coming back. Done. Finito. And when such other inevitabilities make themselves known in our culture, then we will adjust. Business as usual will be less business, we will do without the things we know we can do without. That means 9.1 million new cars instead of 13.2. It means maybe being a one car family instead of two. It means driving the beater, the beat up car just a little longer.
What I hear is that the average 401K has lost all of the gains made in 12 years. Ouch. So we all go back to 1997. How were you doing then? Suffering? Were any of us happy in 1997? Could we stand to live at that standard of living once again, or would it kill us? It won't kill us, it only makes us weaker.
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