Wednesday, January 30, 2008

Here he comes to save the day

By Capt. Fogg

The last time we had a simultaneous decline in U.S. household wealth and income was in 1974. One might suspect that the printing of dollars to pay for the Vietnam war had something to do with the inflation and stagnation that ensued and that we might be facing a seriously frustrating repeat of a situation that launched an anti-government philosophy and gave us Ronald Reagan and the "debt doesn't matter" idiocy.

But I digress. Today's rate cut by the Fed, following close upon the heels of another panicked attempt to avoid a stock market crash has had an effect so far this afternoon, but as Robert Shiller, a Yale University economist says,
"The Fed is going to have to keep slashing rates, probably below inflation,''
and that may fuel a continuation of the consumer borrowing and spending frenzy that got us into this mess; a frenzy that mirrors the myth and machismo driven borrow and spend Bush philosophy.

I've already had e-mails from friends today that seem to be some kind of sigh of relief that Bernanke's "bailout" will, like Mighty Mouse, save the day. I'm not so sure we can look to cartoon characters for redemption, as we have been doing since George took office. When interest rates are at the level of inflation, a level to which this latest reactionary rate cut may bring us, a repeat of the housing bubble seems likely. According to Craig Torres and Simon Kennedy writing for Bloomberg yesterday:
"The last time the Fed pushed real rates so low was in 2005, in the middle of the three-year housing bubble, when consumers took on $2.9 trillion in new home-loan debt, the biggest increase of any three-year period on record."
But I guess that's what being a Reaganite conservative today is all about: endless repetitions of a failed formula and attacks on any suggestion of any actual fiscal conservatism.

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10 Comments:

Anonymous rockync said...

Too little, too late. If the government had really wanted to do something meaningful, they would have enacted constraints on predatory lending practices and 100% financing. But that would have involved telling the finance industry what to do.

3:56:00 PM  
Blogger Capt. Fogg said...

And that would be - like - socialism.

5:30:00 PM  
Anonymous rockync said...

Not really, it'd be more like setting limits like our laws do. You can drive, but there is a speed limit. You can own a gun, but you can't shoot random strangers. Most everything we do has lawful limits. So why not you can borrow money but not until the bank makes the fine print in readable size. Or you can borrow money only if you are creditworthy enough. What's a crime here is the fact that me and many others will be paying the price for others' irresponsibility and recklessness.

6:35:00 PM  
Blogger Capt. Fogg said...

I was being facetious. Somehow they are still trying to make us afraid of a "communist takeover" and try to sell any instance of the government doing anything as the first step down the road.

Unregulated capitalism benefits very few and the results are well documented.

Speed limits? They'll never take me alive.

9:01:00 AM  
Anonymous lester said...

the would never have enacted regulations because the whole point of the initial rate cut was to create a potemkin "economy" anyway possible.

the rate cuts are nothing more than another way of stealing from americans. try to buy some euros or, heck, food and you'll see it for yourself.

10:30:00 AM  
Anonymous rockync said...

LOL, Fogg, I should have known! And you're right, the right wants to scare everyone into believing that any restraints on big business will amount to some sort of communist society and yet, the way things stands people are losing their homes, their job; let's see, just about all the things the wingnuts have been yelling will happen with regulations. I do not want a lot of government interference in my life but there are instances when government should intercede for the benefit of the people.
"Speed limits? They'll never take me alive." Where in FL can you drive over the speed limit?! Last time I was down there I spent hours on the parking lot ya'll laughingly call Interstate 95! I used to love Florida, but it has gotten too crowded for me; I haven't been there in years now.

10:44:00 AM  
Blogger Capt. Fogg said...

Yes, I agree Lester. It's all been a flim-flam fantasy for the benefit of a few.

Surely you jest about Florida - unless you think Miami is typical. The state is mostly wide open spaces and the average speed on the highways near here is 85-90. I've been passed by SUV's when doing over a hundred.

I once hit 165 driving back from St Petersburg, but don't tell anyone.

1:38:00 PM  
Anonymous rockync said...

Fogg, you are NOT going to look too good upside at tree at 165 mph! What's your hurry, man? I've been talking to hubby about a trip to the Keys to see if anything of old Florida is left.

2:19:00 PM  
Anonymous lester said...

My pathetic porfolio won't make any difference in the grand scheme of things, but for my own protection i am taking everything out of dollars and wall street and putting it into euro and pacific funds. the dollar is CRAP.

4:20:00 PM  
Blogger Capt. Fogg said...

I've been out of dollar investments for the last few years.

Open road, fast car - things just happen. I haven't had an accident since 1969.

11:57:00 AM  

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