Now Cough

Sunday, October 26, 2008

Fi Fo Fo Frum


David Frum, a former Bush speechwriter, told The Sunday Telegraph that Republicans should now concentrate all their fire on "the need for balanced government".
"It's hard to see a turnaround in the White House race," he said. "This could look like an ideological as well as a party victory if we're not careful. It could be 1980 in reverse.
"With this huge new role for federal government in the economy, the possibility for mischief making is very, very great. One man should not have a monopoly of political and financial power. That's very dangerous."

Oh really, Mr Frum? And where have YOU been for the last 8 years?

Full article

Sunday, October 05, 2008

Madding Crowds



My financial advisor wrote an urgent email this week and for the first time used the word 'disaster' in a communication. He said, the so-called bailout is not the end, not by a long shot, and the impact of the mortgage mess combined with consumer credit card debt has yet to be realized.

When I produced Marketplace we covered many real estate stories and the growing push toward home ownership..and the move by banks to lend to less-than-qualified lenders. You didn't need to be Alan Greenspan to wonder about a) the exposure of banks and mortgage lenders b) the under-education of first time mortgage holders (did they really know what they were getting into?) and c) the shaky house of cards this was built on IF the economy stumbled. Greed covers up a lot of common sense. What struck me then is that the movement toward shaky mortgages came within a few short years of the S&L collapse. The so-called ownership society means assuming more debt.

Remember when the term Master of Universe was equated with genius? I have worked with people who thought they could defy the laws of supply and demand, who really believed they had crossed over into a new reality where unending growth was possible. These same people saw gravity reassert itself when the first Internet Crash occurred. There is no perpetual motion machine. Laws of nature cannot be defied. Things run in cycles, not hockey-stick lines on a graph.

The bailout is not communism. I have heard some well-educated people in the last two weeks who think it is. They betray a lack of history and an ignorance of what is happening here. The US government has always been the banker/lender of last resort -- to raise the money for wars, for the bailout of a depression (John Keynes anyone?), for subsidies for uncompetitive enterprises, even for the mortgage tax deduction. The government is a co-investor (owner) in all parts of the economy. There is no pure market.
Communism is an ideology about state control and ownership by the broadest of working classes. As an ideology, communism is to be applied across the board on all government actions. The bailout is an extension of government borrowing...but a last resort. If we're lucky, it'll be short-lived. I wonder if in four years when the market has turned around the federal government will auction off its portfolio of holdings to the highest bidder, like what was done with the auction of the broadcast spectrum. If time were no matter, there would be no need for the bailout. But the credit crisis is real, and the bailout is one step toward slowing the bleeding. But it won't be the last as long as we have the mortgage crisis still playing out.