Jan-Martin writes from Germany …
"Very telling if you have to watch the "Comedy Central" to get good business news coverage and someone who is willing to ask the obvious."
Heaven help us.
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John, Jan-Martin-
I was thinking as I watched this that this was as reasonable an explanation as I’ve seen- until he started claiming how you couldn’t measure fear or euphoria, and how you can’t predict what is going to happen.
Jack Kennedy and the shoe-shine boy would be the classic example. Just because you don’t know what day [or sometimes even what year]everything falls apart,that doesn’t mean that you can’t read the handwriting on the wall.
twist -
It was actually JFK’s dad. This from a soothing Fortune piece from early 1996, a few years ahead of the tech bust.
Not sure he was refering to bubbles on the Daily Show. I am reading his book (like looking behind the curtain) and he refers to bubbles and their pathology. He also discusses how people can make irrational decisions in one aspect of their lives, buying a big house with little money, and be perfectly rational in other aspects. Note that the tulip bubble was accompanied by a very strong Dutch economy. Sure some lost money but the economy kept going. This was a purely psychological bubble as there was no artificially cheap money (gold standard) back then. The tech bubble was similar as money was fairly priced in the late 90′s early 00′s. He does seem to agree that the lower interest rates accompanied by irrational risk assesment by the lenders contributed to the housing bubble, but points out that most of the lending through the end of 2004 was perfectly acceptable and that low interest rates were global not just local. Interesting read thus far. Makes me want to rush out and buy gold.
John-
Thank you for the correction- I knew that, but was rushing to get to the home starts report. : )
Moin,
maybe John and the Daily Show will win an Emmy for best business coverage (if there is a category)…….
He easily beats CNBC & CO….
Cramer should win the Emmy for best “comedy”
I was actually disappointed by Jon Stewart. He stated that the rate cut was for the hedge funds, and that working people would be hurt by the rate cuts because their savings accounts would earn less! (As if jobs were created by magic.)
http://news.bbc.co.uk/2/hi/business/7003304.stm
“Mr King’s refusal to flood the banking system with cash over the past few weeks is being blamed as the cause of the humiliation of their industry”
Man the BBC is now a shill for the London’s wall street fat cats??
The Bank of England has always maintained that to bail out banks is to create a moral hazard for the wall street fat cats to be irresponsible with their banking practices. Mr. King was doing the RIGHT THING at the beginning. The fact that he CAVED and bailed out the fat cats is what that is worrying – just like Bernake caved to the hedge fund cronies in wall street.
This wholesale mortgaging of the public’s money to help the irresponsible players in the credit and housing industry is shameful and deplorable.
I love how John Steward summed it up to Greenspan saying “So cutting rates in a way is to screw the folks who have savings and help those who invest in wall street?”
I love Jon Stewart. The guy grew up a few miles from me and has the same Jersey no nonsense about him. I am bummed out too!
Wazzoo-
I do try and not break out my tin foil hat real often, but given what King and Bernanke have done, I picture these guys in some back room reviewing the data and saying “Kay’s” line from Men in Black:
Obviously these guys are spooked to be moving as aggressively as they are- I just don’t how the Street can get euphoric about it. Being on life support a little longer isn’t going to save the patient.
Speaking of Corillian Death Rays, looks like George’s good ole BBQ buddy His Majesty King Abdullah II bin Al Hussein just fired one off over there in the Oil Gulf (good old Ambrose is on the case, and a big hat tip to V). I’m going to line up my loonies over the weekend and have a nostalgic goodbye par-party. Best guess is the Amero by Monday’s close-of-business now.
“Fears of dollar collapse as Saudis take fright”, by Ambrose Evans-Pritchard, Telegraph, September 19, 2007.
I think Greenspan’s point is that nobody can predict the future. You go with the best information you have at the time and decide what’s credible. If it doesn’t work out you go to Plan B. That’s what life is. Everybody has an opportunity to do some educated speculating in the markets, and become wealthy. If the government must intervene to save the economy than so be it. You are the same people who are counting on Social Security and Medicare to carry you through retirement. I guess you don’t have a problem with government when it suites you. When people invest in stocks, companies expand and can hire more people at higher wages. Don’t buy the crap that interest rate cuts don’t bnefit the working poor. And please “Don’t Tase me, Bro!”. T.
Tomaski-
I agree that no one can predict the future- to a point. One of my least favorite questions is “So how far do you think the Phoenix market will fall, and how long will it take to recover?”
I don’t know how long builders will keep overbuilding, I don’t know how severely the credit crunch will impact sales, etc. That said, I know that prices will fall, and will continue to fall for awhile. I don’t believe for a minute that Greenspan or anyone else at the Fed had no clue we’d have these sorts of problems.
Twist-
I think the Central Bankers knew something was going to happen back in 2005 but they chose not to act on it (if that would have even had an effect). The builders (overbuilders) I think have gotten the message. I remember standing in line for a lottery number just to place an order for a home. Now, they’re knocking $100K off the price. It was ridiculous. It seemed everyone was at a big party and didn’t want to think about the hangover tomorrow. Well it’s here. Let’s take an aspirin, get some sleep, and get through this. Absorption will occurr, credit will become available, and buyers will equall sellers once again. As long as the job market stays bullish, I think Phoenix will come out O.K. When, is anyone’s guess but I hope it is within the next 12-18 months. T.
This time is different.
Things may not ‘just stabilize’. The entire world’s money system is a ponzi scheme. Thats not an irresponsible statement, its a fact backed up by the nature of money. Money is always in all cases a loan someone else took out. To pay your debt back 2.5X after interest, you have to get money that 2.5 OTHER people have created as their debt. Unless we grow in population exponentially, the scheme must end like any pyramid scheme must end. Only the developing world is keeping this ball rolling thus far.
A good reply to Greenspan’s lesson on the rise of the central banks would have been “Oh, I get it. This is all a rather new experiment and you guys dont REALLY know how it is going to end!”
Twist -
“Obviously these guys are spooked to be moving as aggressively as they are- I just dont how the Street can get euphoric about it. ”
I guess Bob Toll said it best with his
“it signals were in deep doodoo” quote