Buckle Up!

A comment from here:

“They have been unable to increase lending. Our fiscal operations have been largely targeted on the same markets – the lending markets. Unfortunately, the crux of this problem does not reside at the banking level, but rather the consumer level.”

True, and while I prefer tax cuts and small business targeting (if the government has to have a hand), I am afraid no one or no group can force this economy to spark for some basic reasons:

1. Too much capacity across all aspects of real estate. Not changing any time soon. We overbuilt for a gold rush that was only here as long as some bubble (any bubble) stayed in place. Pop.

2. Since 1995 two bubbles (dot con and real estate) gave everyone the belief that they could get rich overnight. That motivation was huge! It’s gone. What could possibly get the animal spirits of millions gearing up again to get rich? What new bubble? Time travel? Life extension? It sure as h*** is not alternative energy.

3. Our greatest invention, the internet, is arbitraging away typical ‘jobs’ at breathtaking speed. Can’t stop it. Genie is out of the bottle.

Now what? No central planning from whatever group can fix what ails us and if you are waiting for a fix — you are going to lose many years off your life. In terms of getting ahead, it’s every man for himself — whether we admit it or not.

10 thoughts on “Buckle Up!

  1. Very true, Michael. We have to break away from the mindset that we have to depend on a “job” or depend on the government for our well being. As far as loans go the Fed Funds Rate is only geared towards helping banks. The U.S. government and Federal Reserve policies of printing money for banks and negative interest loans are only for the purpose of helping banks. You are right. It is every man for himself.

  2. The Fed cannot force businesses or individuals to borrow. They have learned (or are learning) that they can get along without so much “stuff”. Also recognize that while employees are sometimes referred to as “assets”, their costs are in the expense section of the income statement. The US is the only country in the world that has a major industry whose business is built on providing citizens with off-site real estate to store their excess “stuff” when they run out of room at home.

  3. I recently completed a video shoot in LA. Facility was owned by Persian family who came here after the Shah fell. We talked about how last year Iran’s effort to suppress information — had failed. Info. still got out. Obama’s kill switch is idiotic police state talk dreamed up at academic jerk off sessions. It will never fly!

  4. Just looking at broad trends, it’s hard to believe this is the same America as ten years ago.

  5. America is fortunate that it has the reserve currency for now, europe have had the bond vigilantes attack them, and bond yields rose, especially greece and spain. Hence their cost of borrowing went up, as the market wants an extra risk premium to buy their govt bonds..hence markets have forced europe to reduce budget deficits, otherwise other countries bond yields’ and hence thier borrowing costs rise.
    For now USA has some space to print more, as the $ has stregthened, and i believe thats what it will do. Of course trend followers catch fat tail events the best, and when markets delever again, or inflate, once again the trenders will capture those moves!

  6. Reply to argument 2:
    For the last 20 years China (and Asia) have been seen as the new economies. China being a manufacturing nation, what good is their production capacity if the west is unable to buy their good. In my opinion China is the next bubble to burst. Take a look at the Shanghai composite. Looks like a rounding top since last august waiting to break down below the 2500 level.

  7. As someone who spends significant time in Asia I can say that China will be an economic monster.

    Yes, they will have their corrections and downtimes, but combined with India and the rest of Asia you have a whole new middle class forming consisting of about 3 billion people. That’s 10 times the population of the US. These are pople who are graduating from walking, to scooters, to cars, to houses, TV’s, and all the other things we take for granted. And, for now at least, they are willing to work and save 7 days/week to get it. Not unlike America in its prime.

    If things go well, in 20 years the US will be a knowledge economy exporting its expertise to the manufacturing countries, somewhat like Japan has been doing for 20 years. If things don’t go well, in 20 years the US will be cleaning Chinese toilets and working on their Mandarin.

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