Our government wastes a lot of time on the soap box about issues that really have nothing to do with solving the problem. They spend very little time solving the real problem.
Housing prices are a symptom, not the problem.
Executive pay was a symptom, not the problem.
Madoff was a symptom, not the problem.
Sports advertising produces a ROI, it is not the problem
How did people get so damn stupid? Everyone started acting on emotion instead of facts, that produces stupid responses. They are like a bunch of ants that seem organized as long as they can go through the drone motions of everyday life and not have to think, but the second someone steps on the anthill they run around hysterically like chickens with their heads cut off.
You talk about new housing sales? Where do you think the new buying is going to come from, Mars? People who were in a position to buy in the next 5 years were enticed to do so a few years ago. Many of those who had the sense to wait till prices dropped are no longer in a position to buy due to the economy. Where do you think the excess buying came from to create the bubble…FUTURE DEMAND. Demand has to drop below historic norms before it can totally correct. What new buyers do you think are going to be enticed by lower rates? Once the facts are acknowledged, the solution will become clear.
People bitch about what happens to TARP money. You can’t take your new center fielder and give him a 10 million dollar bonus, and then put a ball and chain around his ankle to keep tabs on him and expect him to perform at peak levels….same with companies. We either gave them the money because we think they are viable, or we don’t. Next we’ll tell them they can’t pay their creditors with TARP money.
Our current problem stemmed from having priced risk out of speculative markets and taking excess leverage as a result. You can’t solve that problem by lowering interest rates to get people to continue taking excess risk and expect the problem to go away. When rates are appropriate for risk, money will start moving again.
Madoff was given an estimated 10-17 billion to invest. Not 65 Billion. The S&P lost about 65% from its 2000 highs. After considering the currently recovered funds, Madoff lost about 90% of investor funds. That may drop as other funds are recovered. He lost investors about 25% more of their investment than they would have lost in an S&P index fund anyway. He is certainly a criminal and deserves to go to jail, but he didn’t steal 65 Billion dollars. He lost an excess of about 3-4 billion of investor funds. If they recover some more funds, Madoff investors may be no worse off than if they were in the general market and never liquidated their positions.
The USD dropped over the past decade due to the extreme leverage and how it was created, which worked like a multiple to increase the money supply. The money the Fed is injecting into the system doesn’t come anywhere near offsetting the deleveraging and the USD money supply is actually shrinking, not expanding.
You can’t price risk back into the markets by lowering interest rates, you just shift the excess risk to other markets….and a bond bubble is going to hurt a hell of a lot worse than a stock or real estate bubble. A large portion of bond buyers think it is a riskless asset and have no idea how much they can lose if they need to sell bonds before maturity when rates rise.
Protectionist measures have almost always been reciprocated 10 fold and cause more economic harm…why even consider it. Times of better globalization have always fueled growth, times of decreasing globalization have always stifled it.
China isn’t in a recession and they have tons of cash. You think they are going to stop buying commodities for their infrastructure because the prices are too cheap? No, they are going to take the opportunity to increase their infrastructure and create commodity demand….it will create global inflation.
Regulation can never prohibit problems in a capitalist economy. Companies will always find the loophole in the regulation and start doing business through the loophole. In order to compete, all other companies must start using the loophole to alleviate the other company’s competitive advantage. The loophole then becomes a necessary and accepted business practice, until it escalates to the point of crisis. Then we hastily add new regulation to fix that loophole, after it is too late and usually creates further problems or drives companies to find another loophole….and it starts all over again. We’ll never be able to devise regulation in advance that removes every single loophole. Pressure heads toward the area of least resistance…
We have to stop reacting to the emotion and melodrama with knee jerk reactions, and start drilling down to the real facts of the situation. If scientists acted like the investment community, we would be making human sacrifices and think the Earth was flat. The fallacious logic and resulting melodrama is out of control.