We could cushion the impact of another big downward shock by a lot more deficit spending--unemployment, after all, goes down whenever anybody spends more (even though sometimes falling unemployment comes at too-high a price in rising inflation), and the government's money is as good as anybody else's. But the centrist Democratic legislative caucus has now dug in its heels behind the position that we cannot undertake more deficit spending right now because we have a dire structural health-care financing proble afrer 2030. The Republican legislative causes has now dug in its heels behind the position that the fact that unemployment is 10% shows not that policy earlier this year was too cautious but rather that it was ineffective. And the Obama administration has not been able or has not tried to move either of those groups out of their current entrenchments. We could cushion the impact of another big downward shock by recapitalizing the banks again. But the failure of the Fed and the Treasury in the aftermath of Lehman to grab a share of the upside from its capital injection and purchase operations for the public in the form of warrants means that there is no coalition anywhere for a repeat or anything like a repeat of propping-up the banking system: the right thinks it is an unwarranted intervention in the free market, the left thinks that it is a giveaway to the undeserving and feckless superrich, and the center is bewildered because it is an enormous and poorly-structured intervention in the market, it is a giveaway to the undeserving and feckless superrich, and the optics are terrible. So if another big bad shock hits the U.S. economy, what could the Obama administration possibly do?
We could cushion the impact of another big downward shock by recapitalizing the banks again. But the failure of the Fed and the Treasury in the aftermath of Lehman to grab a share of the upside from its capital injection and purchase operations for the public in the form of warrants means that there is no coalition anywhere for a repeat or anything like a repeat of propping-up the banking system: the right thinks it is an unwarranted intervention in the free market, the left thinks that it is a giveaway to the undeserving and feckless superrich, and the center is bewildered because it is an enormous and poorly-structured intervention in the market, it is a giveaway to the undeserving and feckless superrich, and the optics are terrible.
So if another big bad shock hits the U.S. economy, what could the Obama administration possibly do?
the perfect crime, the sequel is inevitable, the future's treasury is theirs for the taking, until the regular joes and janes have had enough of the 'treatment'.
the dollar will be worth 30 eurocents and pols swinging from the lamp-posts within 2-3 years unless reason returns to finance and they come off this drug of illusionary power peoples' sustained support and most importantly trust has given them these last decades.
meanwhile the machine just grinds on... while we we mentalise about how to try to put in a new tranny. hard to see how to do this till it comes to a shuffling or shuddering halt?
how much of the castle foundation of the world economy is built on bedrock, how much on sand? ~"When an inner situation is not made conscious, it appears outside as fate." Karl Jung~
Governments could decapitate them by just cancelling their operating licences, but the chances of that happening are rather slim... In the long run, we're all dead. John Maynard Keynes
... the system is set up right now they will only die after having killed us all.
Somebody has it RIGHT !!!
Enough of this "the system will change ... the bad guys will die" senseless optimism. How many times do I have to say this ... now pay attention ...
You are nothing but CATTLE to them !!
Dangerous cattle if you ever got organized but still cattle. In the end, might makes right. Nothing has changed since the caveman.
we've greatly increased the chance of a Japanese-style lost decade, with I would now give roughly even odds of happening. Why? Because bank-friendly policies have squandered public trust in all government action: try talking to the general public about stimulus, and it's all confounded in their minds with the deeply unpopular bailouts.
That's OK, Sarah Palin will come along and start World War III. We'll either have a recovery with that or the world will be obliterated. Either way, it is a win-win situation. "Beware of the man who does not talk, and the dog that does not bark." Cheyenne
:) ~"When an inner situation is not made conscious, it appears outside as fate." Karl Jung~
Like widespread debt defaults by companies bought by private equity firms:
Joshua Kosman, Predicting The Next Credit Crisis : NPR
Joshua Kosman: Private investors this decade, for these private equity firms, used the same cheap credit that caused the housing bubble to buy 3,100 U.S. companies. Those companies employ one out of every 10 Americans, about seven and a half it was 10 million people. They've resold some of those companies, so say today it's about seven and a half million people. So private equity firms are the largest employers in the country when you combine the companies they own by a mile, bigger than Wal-Mart, bigger than anybody. The cheap credit that was used to buy these companies, a lot of the debt on that is starting to come due just now, and it will do so over the next few years. The Boston Consulting Group, a pretty conservative organization, predicts that half of those companies will default on their debt by the end of 2011. If that comes to pass Terry Gross: That's half of the companies that were purchased by private equity firms? Joshua Kosman: That's right. That's right, so half of that exactly. So if half of those companies, so roughly 1,500 U.S. companies, end up filing for bankruptcy, and those companies fire about 50 percent of their workers, not the most aggressive estimates, you've got about 1.9 million people unemployed. That's a huge hit. Now, beyond that, you know, and that obviously reduces consumer spending, means more home foreclosures, all sorts of problems, the companies that are will be falling into will be defaulting owe about $1 trillion in debt. And if a significant amount of those loans become worthless, that'll cause a freeze in lending. <...> Terry Gross: So has there been any problem yet? Have people lost money on their CLOs, or is this something that you think might happen sometime in the future, maybe? Joshua Kosman: I think mostly this is something that very likely will happen and is starting to happen but has not happened yet. I mean, this year kind of quietly, for the last 12 months, we've had an 11 percent default rate in this country. That's near-historic highs. And half of the companies that have defaulted, it's about 175 companies so far, have had private equity involvement. Those are companies like Chrysler, like Reader's Digest, like Simmons mattress that we talked about before. So unfortunately, the tsunami of defaults is already starting.
Joshua Kosman: Private investors this decade, for these private equity firms, used the same cheap credit that caused the housing bubble to buy 3,100 U.S. companies. Those companies employ one out of every 10 Americans, about seven and a half it was 10 million people. They've resold some of those companies, so say today it's about seven and a half million people.
So private equity firms are the largest employers in the country when you combine the companies they own by a mile, bigger than Wal-Mart, bigger than anybody.
The cheap credit that was used to buy these companies, a lot of the debt on that is starting to come due just now, and it will do so over the next few years. The Boston Consulting Group, a pretty conservative organization, predicts that half of those companies will default on their debt by the end of 2011. If that comes to pass
Terry Gross: That's half of the companies that were purchased by private equity firms?
Joshua Kosman: That's right. That's right, so half of that exactly. So if half of those companies, so roughly 1,500 U.S. companies, end up filing for bankruptcy, and those companies fire about 50 percent of their workers, not the most aggressive estimates, you've got about 1.9 million people unemployed. That's a huge hit.
Now, beyond that, you know, and that obviously reduces consumer spending, means more home foreclosures, all sorts of problems, the companies that are will be falling into will be defaulting owe about $1 trillion in debt. And if a significant amount of those loans become worthless, that'll cause a freeze in lending.
<...>
Terry Gross: So has there been any problem yet? Have people lost money on their CLOs, or is this something that you think might happen sometime in the future, maybe?
Joshua Kosman: I think mostly this is something that very likely will happen and is starting to happen but has not happened yet. I mean, this year kind of quietly, for the last 12 months, we've had an 11 percent default rate in this country. That's near-historic highs. And half of the companies that have defaulted, it's about 175 companies so far, have had private equity involvement. Those are companies like Chrysler, like Reader's Digest, like Simmons mattress that we talked about before. So unfortunately, the tsunami of defaults is already starting.
