Posted on 03/23/2009 5:40:16 AM PDT by Nervous Tick
Policy-makers not only misunderstand the economic crisis, they continue to underestimate it. Consequently, solutions to date have not only failed to “fix” anything, they have made the problem worse. The problem isn’t falling asset prices, it’s not rising foreclosures, it’s too much debt. With an assist from mark-to-market accounting,* too much debt inflated the asset bubble in the first place. Yves Smith has it exactly right that the only “solution” to this crisis is price discovery, to allow asset prices to fall to whatever level they need to in order for markets to clear. This is bad news for over-levered balance sheets, but there’s nothing else to be done.
And yet American policy-makers appear convinced that more debt can rescue an economy already drowning in it. If we can just keep the leverage party going, all will be well. $787 billion to fund “stimulus,” another $9 trillion committed to guarantee bad debts, 0% interest rates and quantitative easing to drive more lending, new off balance sheet vehicles to hide from the public the toxic assets they’ve absorbed. All of it to be funded with debt, most of it the responsibility of taxpayers.
(Excerpt) Read more at seekingalpha.com ...
I found this a clear-headed (although dismal) look at our current economic situation. Hope y'all find it useful.
My favorite quote:
"Bottom line….We can bankrupt ourselves propping up a system that is collapsing anyway, or we can dig ourselves out of debt, if not with higher interest rates then certainly with fiscal austerity. That would be a hard sell to the American people, I know. But deep down, Summers and Geithner know it is the right thing to do. It is, after all, the prescription they wrote for emerging markets facing financial crises."
(Emphasis is mine.) I reckon this refers to Geithner and Summers' positions vis a vis the IMF, and it's a darn good point.
markets are going up fast. We’ll see what the rest of the week looks like.
“And yet American policy-makers appear convinced that more debt can rescue an economy already drowning in it.”
....yep, so called “easing of the credit markets” just means letting people spend more money they don’t have....this is government sponsored madness.
Yeah, there is still money to be made from government mismanagement of the economy.
B-U-M-P everyone’s accusing me
In other words, instead of trying to second guess Mr. Market, which is impossible, and bankrupting the US, the “Feds” should let Mr. Market do his job.
Finally, somebody’s making sense.
RENEGE on the debt! It’s our only hope!
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