What's the Deal?
This is when I wished I was a real expert on the Great Depression. Is this what the average person felt in those lonely days of October (October eh?)? Did they not see the real pain coming? As of right now I know the market is tanking and everyone at the top is either running around foaming at the mouth or sprinting with their heads lobbed off while their head babbles on the ground. But, and I hate to use this term, Main Street has not yet felt the pains. Gas is tumbling, which is good. I bought $2.99 gas yesterday and it felt fantastic. Ford stock is below $2 a share and that seems like a real good deal. I assume many others in 1929 and 1930 might have felt the same way then looking at RCA stock. Ford can't go away can it? Not Ford. Buy low when everyone else is selling like Warren Buffett always states. Hmm. Should I? Or should everyone panic?
Panic would be really bad. Everyone must keep their head and believe in the system. Because if not, what is the alternative? It's not like the USA is the only one on the chopping block. We're all in this together. Even the Communists will get whacked to some degree. What I fear most is war, especially as oil prices drop. Sweet irony, eh? Iran, Russia, and Venezuela only stay above water because of oil money, but if that dries up will that make they more or less aggressive? They could take it out on their neighbors to prop up their failing regimes.
I hope the parallel goes no further. I can't wait to see my next 403b report, ouch! The last 5 years gone. I can't help but feel a little bad for the boomers who put most of their retirement eggs in the stock market. Let's see what comes next.
Post note: Both candidates should only talk about this situation. With all their advisers you can't tell me they can't lay out first the problem and second the possible solutions in a clear and succinct manner? And do it without fear or sophomoric hope? Whoever shows their resolve and calm on this issue will win the election.
Related Articles
*A Short Banking History of the United States: John Steele Gordon
When Fortune Frowned: The Economist
The End of American Capitalism: Washington Post
We Have the Tools to Manage the Crisis: Paul Volker, WSJ
Moment of Truth: Paul Krugman, NYT
Crisis Marks Out a New Geopolitical Order, Financial Times
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3 comments:
The Obama for President ad on the right side doew not make me happy.
The following is a comment from Jeff, sent via email.
1-The government will takeover a few key banks that it doesn't want to fail and will not tell us how close they are to failure. They will let many others fail, strategically, to try to clean out the swaps as much as possible.
2- In the next few years, youwill see those swaps go away and there is really no other way to do that without causing a tremendous amount of inflation to decrease the value of that debt. In perspective, as a net borrower, inflation can be your friend. What cost you a dollar today will only cost you 50 cents tomorrow when inflation kicks in.
3- Probably around 2011 or 2012, you will see things return to some sort of degree of normalcy unless some wise-ass decideds to raise taxes. A tax increase and the removal of money from the supply-side of the equation will prolong this issue until 2015.
4- The stock markets will see periodic bounces but nothing really sustainable for at least a couple of years. For you personally and your 403b, remember it is a long-term investment. You want it to be low during these years of buying and then to increase in the future. For those closer to retirement, they shouldn't have had more than 10% to 20% exposed to the equity markets anyway and the prices on fixed income are at significant highs, thus presenting a good selling opportunity.
Regarding the politicians, they either don't understand the issue or they do and realize that the cure is extremely painful. I do wish that McCain would describe the issue because part of the real cure is a decrease in government spending. You want to see this recovery happen before 2012, balance the budget and cut government spending by 10% to 15%, across the board. That will also help control inflation.
Jeff
ok. I guess I'm a couple of days late over here... but here is the piece I heard on "Day to Day" from an economist at the U of Chicago - who said Friedman would likely have supported some government action in this situation. That made my head spin a bit. http://www.npr.org/templates/story/story.php?storyId=95557342 "Can U.S. Still Claim It's A 'Free Market'?"
And Re: Jeff's comment on wishing McCain would describe the real issue - He won't. For the same reason Obama won't, and for the same reason they both immediately supported the initial bailout bill. They are both stuck on "reacting." (Which is all you get, I guess, as a candidate.) Neither are capable, IMO, of explaining this particular situation without causing greater panic.
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