Just a commentary tonight.
Today was a very interesting day. We heard a lot from Paulson and Ben Bernanke today as well as a very passionate speech by Jamie Dimon. I thought all of their speeches contained many fine ideas for how to regulate the financial system in the future.
I thought their call for hope and belief in our financial system was very sincere and genuine. All three are doing the best they can in a very bad situation. I think after today's speeches, you can pretty much conclude that Fannie and Freddie aren't going anywhere.
The government will not let them fail, and they realize the housing market would come to a standstill if these GSE's were to go under. This rallied the financials and the markets as a whole. Alcoa beat earnings after hours so a follow through on todays rise in the markets would not be unexpected.
Ok back to the speeches. I noticed a common element in all three of these speeches. All of them described excellent ideas on how to regulate and control the financial system. this is all well and good. However, none of them gave us any answers on how to solve the problems we are in today. You know why? Because there are no good answers.
Things will never be the same in our financial markets folks. I suspect that the powers that be saw the economy staring off the edge of a cliff again yesterday after the Fannie/Freddie news hit. It was the same cliff we stared over when Bear Stearns collapsed.
They realize that they need to act now and act decisively or this house of cards is going to come tumbling down. The problem is I personally don't know what they can do to fix the current problems that we have. I think all three of them realize this as well.
As a result, they simply talk about what they will do in the future to avoid these problems versus fixing the current mess we got ourselves into. I mean lets be rational here. Whats your playbook on fixing the economy going to look like when you are facing the following questions/issues below?
How can you fix the fact that a person making $60,000 a year cannot afford the $600,000 house that he/she bought with a mortgage product that is no longer available?
How do you fix inflation without raising interest rates and destroying the financial system?
How do you help Americans pay off credit card debts that on average are $9000?
How do you stimulate an economy when your consumers have no money to spend as they face a deadly combination of ridiculous mortgage payments and high inflation?
The answer is you can't without having a severe recession and massive deflation back to affordable levels. Sadly, there is no playbook to get us out of this situation.
Today's speeches were like a vaccination against future financial catastrophes. However the problem facing us today is we need a cure for millions of very sick patients that are in dire financial straits. A vaccination doesn't do anything if you already have the disease!
So how do we get this patient back on its feet? Step 1 is Transparency amongst the financials!
No one wants to admit the mistakes they made during this moment of financial insanity because many financials would destroy themselves in the process. The government realizes this so they give us lip service about demanding transparency in the future. Well what about doing it NOW!
There will be a point where they realize that transparency has to start today not tomorrow. I felt like we took a step closer to this reality today based on what I heard in those speeches. You can tell they still aren't quite ready to pull the tranparency trigger. However, as this crisis continues, there will be a moment of clarity where the Fed realizes transparency must be done right now..
When this clarity hits, its going to be very violent and painful to watch.
We all must realize that our current disease needs to be treated today before we can get to the the other side where "the patient" can begin to recover. This is going to take a lot of pain, discipline, and sacrifice but it can and will be done.
I have always been someone who likes to "keep it real". What I saw today was a lot of damage control, ideas for the future, and hope.
What I am looking for is a cure for a very sick patient.
6 comments:
Well put. Unfortunately this is a sad commentary on our society in general. There is an absence of accountability and responsibility.
"In the future this will not happen again because of x new policy or regulation." If policy or regulation, or COMMON SENSE mattered none of this would have happened in the first place.
Until we can somehow pull it together and get our values straight this cycle will repeat itself in one form or another.
Rather than provide the greatest good for the largest number of people, we are fixated on diverting resources to those that we feel sorry for thereby wasting $ and further disabling whatever group we are pitying.
Let's keep people in houses they can't afford, in classes they don't understand, in jobs that provide nothing of value, in vehicles that are too big etc.
Imagine how full the wolf would be if that one pig decided to play rather than build his house of bricks.
Let the chips fall and then rebuild with a solid foundation for goodness sake.
Sorry for the rant, thanks for the blog.
The blogs of 2007-2009 will create a rich living history of these times for future historians, psychologists, economists and social scientists.
There were some incredible blogs and comments in late March as people reacted to Bear Stearns & the Feds and Jamie Dimon. I kept them in a file that’s now quite large. Thanks Jeff.
Check out the latest posts in the forum from our 'Canary in the Mineshaft', the Brits. Rather sobering to realize we're following in their footsteps.
Excellent report, very cool. Thanks.
I am glad everyone enjoyed the commentary tonight.
Oppor
Well said. I feel like I am ranting as well so let it all out. I felt better after typing this tonight!
avl
Heading to the forum now to check it out. You always find some great stuff on the net. I appreciate you sharing all of your finds with the rest of the HTB readers!
Hey Jeff,
A little off topic: I just want to say thank you for the blog and personally participating in the dialogue with us readers.
Other sites do not do as good a job explaining the intricacies of the market like you.
Best,
growler
Your welcome. I am glad you are enjoying the blog. I always enjoy the dialogue with everyone on here.
I am sorry I didn't get anything up yet today. Working on it right now. Quite a day and I was on the road and missed a lot of it.
It seems like the market tanks everytime I am out on business!
Catching up right now. I should have something up later
Post a Comment