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Thursday, July 10, 2008

A Nation Of Bitter Whiners

Everybody made a lot of Obama's "bitter" comment. I thought it was off base too. And I concede without hesitation that Obama's "Americans can't eat all they want to" was just a major idiot moment; that was a major head-banging moment for me. But now cometh Gramm, and tells the old folks trying to get by on their monthly SS checks, which get effectively smaller every month:
Former Sen. Phil Gramm, a top economic adviser to presumptive GOP nominee John McCain, referred to the economic slowdown as "a mental recession" and called the United States “a nation of whiners.”
Granted, McCain promptly disavowed Gramm's remarks, but it's just one more stick on the bonfire of exasperation that Americans have with their political leadership. Really now, doesn't it just make you LONG to have the senators forced to live for one month in public housing with nothing more than the average Social Security check? Wouldn't that produce a note of reality in the debate?

McCain's the jerk who said he was going to balance the budget by 2013.

We're certainly justified for bitterly whining about the Washington disconnect. The Shrink claims that the decision to run for president is proof of insanity. Maybe he's right!

I was talking to my father a while back and had this fantasy of adding a fourth branch of government.

I don't have a great name for it, but basically, it would consist of 100 citizens plucked at random from the US. They would be flown to Washington DC, put up, paid something (more than jury duty), and vote on legislation for, say, 1 month. Then a different set of 100 folks would come in.

All this branch would do is vote 'no' on legislation that had passed Congress. Before the president could sign a bill, if 45 of the 100 members disagreed that the bill was needed, they could send it back to Congress.

Sure, there are many details to work out, but I fantasized that this would introduce some common sense back into the legislative process. In theory, since the citizens would only be present for a short time, they would not be subject to capture by special interests, and would have more contact with 'outside the beltway' people.
Voters are the fourth branch you are looking for. The mandate of this branch of government is to throw the rascals out. If the rascals are replaced by other rascals then throw them out, too.
Ah (this is the same anonymous who posted the first comment), but the difference is that the hypothetical 4th branch would be able to intervene and stop stupidity/cupidity immediately, while us voters have to wait for 2 years.

MoM I do not believe the USA has political leaders,we have a separate political class which is a different thing entirely.Tom Stone
Phil Gramm is one of the guys responsible for Gramm-Leach-Bliley, which repealed Glass-Steagall. Gramm, Bill Clinton and Geiorge Bush may be the people most responsible for the current state of the financial sector - which is on the verge of getting a whole lot worse.

The fact that he was McCain's economics advisor make me want to slit my throat on Nov 4.
Tom - when I read Gramm's comment that was my reaction. That's a man out of touch with reality. Our political class is insulated from fiscal, medical and many social issues. When it comes down to it, they often seem to be acting like a frat club - the only time they get together is to protect themselves.

Dan - or wait four years, or six years. It is an interesting and tempting prospect. Parliamentary systems can do the rollover quicker, but then you have to remember Japan's example. For a while there it was sort of the Prime Minister of the quarter. They really didn't get much done. The random veto panel idea would allow for continuity in government but maybe stop idiotic stuff like some of these farm subsidies from getting through. It might be one way to prevent pork proliferation, which is beginning to look more dangerous than nuclear proliferation.

Fred - the country was very negative on Congress before the last congressional elections and turned over the leadership there. Have things gotten better? I think that is why voters are frustrated. We try to send subtle, polite messages like voting people out, and then we get more of the same.

The voters sent a clear message to Congress about amnesty for illegals, for example, and we seem to have two presidential candidates who are still in that camp. Or at least they are when they are talking to an audience they think is in favor of the idea, which is infinitely more frustrating than a candidate simply opposing the voters on the topic. I do not get the feeling that either of these men are taking the voters seriously.
Bob - and Vader laughed at me because I said I'd puke after my stint. I don't want to vote for either of these guys.
I just realized Phil Gramm did have one thing right. There is indeed a "mental recesssion" - inside Phil Gramm's head. Definitely declining activity there.

I think I'm just gonna stay home in November. That way, when the inevitable catastrophe hits, I know I can say: "I didn't for for them!"
While we can certainly worsen the recession through our own behavior, Gramm was appallingly stupid to claim that the recession is all in our heads. It shows that he's lost contact with reality.

If I had the chance, I'd tell him, "Out here in the real world, ex-Senator, people are squeezed by fuel and food prices. But I suppose you don't notice so much from the country-club, do you?"

I guess he decided to remind us that the Republican elites can be just as unattractive as the Democratic ones.
I take a much more benign attitude toward Gramm and his comments. I saw him interviewed on Larry Kudlow's show. He did not make those comments on that show, What he did say was that the financial situation has been made much worse by the MSM constantly harping on how bad things are. Much of the action in markets is based on psychology. When someone spreads fear it tends to take on the form of a panic.

The so called sub-prime mess is just such an example. The CMOs were not structured so as to easily discern how much risk there was in each unit. When some investors discovered this they became suspicious not only of CMOs but of nearly all debt. High grade bonds, preferred stocks, and municipals have been dumped by investors who panicked and took flight to Treasuries. The volatility in investment grade debt has been almost as bad as in financial stocks. The financial sector has been savaged - the good, the bad, and the ugly with hardly any recognition of any differences in diffrent companies situations.

This fear has led in turn to the credit markets being extremely sluggish. Mortgage rates for high credit rating borrowers are in the 6.5 - 7% range when ten year Treasuries are at 3.9%. Interesting.

All of this indicates irrational fear and that is what Gramm was talking about. The MSM has been promoting as much fear as they can. His remark about whining was in reference to the fact that so many people are expecting the government to wave a magic wand and dispel the fear so things can get back to normal. The Fed has waved its wand several times but it has not succeeded in dispelling the fear that the world is ending as we know it. The short sellers are in the driver's seat as are the commodity speculators.

But, as MOM pointed out some people are starting to have a problem selling their oil. China and India are going to stop buying commodities in such huge amounts. In time there will be surpluses of commodities and businesses are going to be slowing dramatically worldwide. It will be then that the several trillion dollars that are locked up in Treasuries, CDs, and mattresses will begin buying all thos incredibly cheap bonds, preferreds, and munis. Later those same people will start scooping up beaten down stocks. (In fact there is a rumor that Buffet is buying again.) But most people will still be afraid to do anything because the MSM continues to tell them the world as we know it is ending. Many will still be whining and expecting the government to do something.

It's a business cycle and that is what Gramm is pointing out. Don't panic, don't expect the government to do anymore than what they have already done. You may not like what they have done or you may think they haven't done enough. Whatever, this too will pass.
Approval of Congress was at 18% last time I checked. But people never throw the bums out. They always figure their particular bum is okay. (Mine are Patty Murray and Maria Cantrell, and there's no question that they are clueless.)

I've spent a week getting yelled at by cranky people that seem to think they are so important that we will magically come up with an installer to get them online that very same day. Meanwhile, I did not make enough to have gas to get to work today, so I am playing hookey (fortunately, I do get paid sick leave.) My co-worker and I were discussing our customers yesterday. We think, when they complain, that we will hand out helpful hints on making ends meet, like buying pinto beans in 25 pound bags and making friend with your local grocer to get the discarded vegetables. Maybe I could pull together a few helpful hints for those serving in Congress too.

And maybe it's time to find a few new folks to work at the IRS as well, seeing as the tax rebate did not make it in on the scheduled day. Some of us are pretty bitter about that as well.
Jimmy J.:

I take a much more benign attitude toward Gramm and his comments.... What he did say was that the financial situation has been made much worse by the MSM constantly harping on how bad things are.

The MSM haven't even begun to talk about how bad stuff really is. We have witnessed the blowing of the most incredible credit bubble in history and it's coming unravelled in a fashion that is destroying inconceivable amounts of money.

The so called sub-prime mess is just such an example. The CMOs were not structured so as to easily discern how much risk there was in each unit. When some investors discovered this they became suspicious not only of CMOs but of nearly all debt.

How about the "so-called" Alt-A mess, the "so-called" Option ARM mess, the "so-called" GSE mess, the "so-called" CRE mess, the "so-called" auto loan mess and the "so-called" credit card mess?

How about the fact that the universal mistrust of all for all is caused by the colossal corruption and greed of the powers that be who will not reveal where all the toxic crud is? Look up Level 3 assets for the big IBs and tell me there is any way to have a handle on this, with those amounts of "assets" marked to fantasy.

The MSM has been promoting as much fear as they can.

The MSM have missed the big story every step of the way and are still calling bottoms. Until recently, they were calling for 2nd half recovery. "It's a great buying opportunity!"

It's a business cycle and that is what Gramm is pointing out.

This is nothing like a business cycle. Housing has already dropped more than during the worst year of the Depression. It willl not be right until price-to-income ratios drop back to where the aggregate household can buy the aggregate house with the available financing. Now that the "funny money" loans are gone forever, that is still quite a way to fall. And while the prices fall and the mortgages default, the credit crunch will continue to laugh at "containment".

And Gramm is a vicious corrupt slimeball, whose name is to be found at or near the center of most of this crap, from Enron on.
Oh my God!!! Buy a years worth of necessities, plenty of ammo, bury your gold in the back yard. The world is coming to an end! You are sure of it so I assume you have taken these steps.

I don't know how old you are, but I'm 75. I have seen several of these world's coming to an end stories since WWII.

I was living in San Diego in 1963 when the biggest employer in town went bankruprt. In a matter of six months about 40% of the houses were foreclosed and real estate proices dropped like a stone. I was living in Orange Country in the 1970s under the enlightened leadership of President Carter when the aerospace industry went in the tank. Housing prices fell by 30%, if you could sell at all. We got our first taste of high oil and gas prices thanks to OPEC. Gas lines, gas theft, and such were common. Then we were assailed by 16% inflation with 13% interest rates. I read a lot of stories telling about the gloom and doom you are repeating only it was different institutions or different scalliwags who had foisted all the losses on us. Things were tough then. People got laid off, lost their houses, went bankrupt, etc.

Then we had the Savings and Loan crisis in the
80s. It makes this mortgage problem look like chump change.

So you get all your money out of the banks, buy gold, get your guns and ammo together, get your survival supplies on hand and wait for the end of the world as we know it. I'm sure there are many others who would be happy to join you at this point. It's FEAR writ large and it is primarily spread by newspapers, TV stations, and bears who love to short markets when people go running away from assets with their hair on fire.

Now, you may be much smarter than I am and I could be all wrong about this. Maybe this time it really is DIFFERENT. If it is we're all in for some really tough times ahead. I grew up during the depression. I've known tough times. I can do it again if I have to.

Have a nice day.
This comment has been removed by the author.
Jimmy J.

I already have plenty of ammo, thank you. Am working on the other supplies.

Then we had the Savings and Loan crisis in the
80s. It makes this mortgage problem look like chump change.

Bzzzzt! Thanks for playing. S&L: 160 Billion (I think 250 B in today's money). Currently we are down more than that, with estimates of $1.6 Trillion - and those estimates keep going up. This is really only getting started, between the other so-called messes I mentioned before *and* the recession - these things will feedback into each other in multiple ways.

It's not a matter of waiting for the shoe to drop - it is raining shoes, with plenty to come.

A Depression would not surprise me. A long serious recession looks like best case. The idiots in NY and DC have really screwed the pooch on this one.
And the figure of 160 trillion comes from where? My guess is the financial media or the Internet. That is the problem. You see, no one knows what the size of the problem really is. Many Wall Street firms are taking losses and writedowns because the market for some of their securities is locked up. (Loss of trust.) Mortgage lenders and banks all doing the same. The truth is most of those assets have value, but if they are not immediately liquid they are liabilities to these outfits. So the writedowns. But the guys with the sharp pencils and green eye shades are looking at this and rubbing their hands together. The actual losses will not be known for several years. In the meantime some people like Warren Buffet who have run the numbers in specific situations, looked at the assets and done due dilligence are going to buy assets at dimes on the dollar. This is the way it has worked out since I've been around.

As MOM points out, what we face is a global deflation. And the reason is FEAR!! When people start getting panicky about debt and trust breaks down, growth stops. Too much producing capacity and not enough demand. Every time some economist or Wall Street pundit or journalist looking for news publishes a story about how BAD it really is more trust is lost. Our economic system is based on trust. I assume you have a credit card. Good as gold right? If things are really as bad as you say, merchants won't be taking credit cards much longer. They will want cash on the barrelhead. I've lived in those times. And it's no fun. But like I say, I may be wrong. If I am I will deal.

In the meantime, I'm waiting for the smoke to clear, which it will. Then I'm going to try to buy me some assets for dimes on the dollar.
In the meantime, I'm waiting for the smoke to clear, which it will. Then I'm going to try to buy me some assets for dimes on the dollar.

Oh so it's all about fear, not fundamentals, there are no *real* problems, but when the smoke clears, you'll be able to buy for "dimes on the dollar"? How does *that* work? Your arugument just collapsed under its own weight.
Yes, there are problems. There are always problems in any economic system. Things get out of balance. Too much exuberance on the upside. Too much leveraging because "this time it's different." But it's not. History just keeps repeating itself. The institutions and the players change, but human greed and fear do not. There is always too much exuberance when things are going up and too much panick when things go bad. You have read about the "madness and delusions of crowds" have you not?

What more problematic than anything right now are the unknown unknowns (Thank you Don Rumsfeld.) The rumors and speculations are overriding what few facts are known at this time because we all fear the unkown and more than that the unknown unkown. I have not seen this much unthinking panic in the markets since.......oh, let me see.......9/11?

As I say, you may well be correct. This could be the end of the world as we know it. However, looking back at history, I would say the odds are against it. On the other hand, I'm never certain that our Congress Critters aren't capable of screwing up even so strong an economic engine as this one. So, yes, I do have my sleepless moments when I think about the economic intelligence and acumen of such as Chucky Schumer.

Have a nice day.
Interestingly, both I and another employee missed work on Friday as we did not have gas to get to work and no way to carpool. Wonder how much of that is going on nationwide??
Teri - probably quite a bit. Just wait until the winter heating season.
Jimmy J.,

I think the odds of it being the end of the world as we know aren't large.

But the run-up we've had compares in many ways to the roaring 20s and a Depression seems possible. The actions of Bernanke and Paulson, (not to mention Congress and the rest of the executive branch), are not encouraging.

And Schumer *is* an idiot.

Maybe you're right. Actually, I hope you are - a normal recession with a normal recovery would be just ducky by me - it just doesn't seem likely.

You have a nice day, too.
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