More and more, today, we are reading the current economic crisis proves that Market Economics is dead. Looking at the behaviors exhibited in the last twenty years, the detractors tell us, proves that people do not follow the rational economic choices that are espoused by classical economists. They claim that the new wave of economics is behaviorist and behaviorism destroys all classical analysis. In other words: “Adam Smith is no longer relevant.”
Although there are strong arguments for this approach, I believe that the classical Supply/Demand Model still works. It only needs a minor modification to remain relevant and reliable predictor of human behavior. Most of us, who only had a cursory course or two in economics, remember that the Supply/Demand approach looks at prices and quantities. There is an assumption that all of our decisions are based upon changes in prices. What we forget is that the price quantity relationships are stipulated as operating ceteris paribus. This means that everything else remains constant. Economists are not stupid. They know that people spend based upon their tastes and preferences, their income, their wealth, their expectations and many other factors. The model, however, holds these items constant and says that people will act rationally in a supply demand situation.
Where our model appears to fall apart is that people seem to be acting irrationally. If this is the case, then maybe economics is irrelevant. Looking at the same behaviors, I have come to a different conclusion. I concentrate on peoples’ expectations. I believe that people act with economic rationality based upon their expectations. However, there is nothing in the model that says peoples’ expectations have to be rational. So, if you believe that the basics of the economy have changed and there will never be a down real estate market again, you will be willing to take on an in ordinate amount of debt because the rising asset value will give you a growing net worth. Expecting a market with no down side risk is irrational. But, if you are faced with experience that has never seen a down side in real estate you will act as if the lack of a downside is reality. Your actions are rational within the context of your belief and follow standard economic models regarding supply and demand.
This approach also helps us understand why people buy high and sell low in the stock market: If the market has been growing for a long time but you are afraid of market cycles there is a high probability that you stayed out of the market during its early growth phase. As the market keeps growing you begin to experience cognitive dissonance. That is, your behavior is at odds with everything you now appear to know about the market. You finally give in and go into a buy mode. However, you waited too long and the market drops shortly after your purchases. You are now in the “…I knew I never should have done this…” mode. Your real expectations have been reinforced and you decide to “…cut your losses…” Your observed behavior is irrational. But, based upon your expectations you behaved rationally.
We do need to spend more time addressing how expectations are created. We also need to do more in the realm of education that allows expectations to be created based on rationality. The problem we have had is that the experts, who should have known better, were making so much money that they were reluctant to burst the balloon and eventually began to have irrational expectations of their own. They began to believe their own hype.
Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts
Tuesday, April 14, 2009
Friday, January 02, 2009
STOP BLAMING FDR
Paul Krugman and other economists have been attributing the 1937 recession to actions by FDR. They say he was merely following advice regarding the attempt to cut spending and balance the budget. However, whatever FDR did, there still would have been a recession. This is because the Fed, which is independent of the executive, raised the reserve requirement substantially during the same period. From 1917 until August 1936 the Central Reserve City Banks had a reserve requirement of 13% Starting if August of 1936, through May if 1937 , the Fed raised the rate to 26%. The rate for Reserve City Banks went from 10% to 20% an d for country banks the rate went from 7% to 14%.
The reserve requirement is the percentage of deposits that banks are required to hold at the Fed. This is money that cannot be loaned out. If the reserve requirement is raised banks have to either gather in a large number of new deposits and/or reduce lending. Given that the recovery was still ongoing, substantially increasing deposits was problematical. Instead, given the substantial increase in the Reserve Requirement, banks had to virtually halt all new lending. This alone would have caused what we now call a recession. (Note: I believe that FDR coined the term "recession" as a description of a slowdown in economic activity at this time)
So stop blaming FDR.
The reserve requirement is the percentage of deposits that banks are required to hold at the Fed. This is money that cannot be loaned out. If the reserve requirement is raised banks have to either gather in a large number of new deposits and/or reduce lending. Given that the recovery was still ongoing, substantially increasing deposits was problematical. Instead, given the substantial increase in the Reserve Requirement, banks had to virtually halt all new lending. This alone would have caused what we now call a recession. (Note: I believe that FDR coined the term "recession" as a description of a slowdown in economic activity at this time)
So stop blaming FDR.
Sunday, December 14, 2008
IS DON QUIXOTE BERNANKE FIGHTING WINDMILLS WITH HIS LOYAL SANCHO PAULSON BY HIS SIDE
Once Again I read the newspaper and I am astounded by the cluelessness of our economic leadership. Today there is talk that the Fed will again lower the interest rate at which banks lend to each other (The Federal Funds Rate). You would think that by now Mr. Bernanke would realize that the country is in a liquidity trap where the traditional tools of Monetary Policy are ineffective. This is evidenced by the fact that both Mr. Bernanke and Mr. Paulson have been pouring liquidity intro the systems and the banks have responded by buying other banks, paying dividends, and funding bonus pools instead of making loans with the new found liquidity. Attacking an economic crisis with monetary tools when the country is in a liquidity trap is akin to tilting at windmills in the hope of killing a dragon.
The time has come to start using Keynesian aggregate demand based economics instead of the pump priming of liquidity enhancement. The pump is primed; the liquidity is there. What we need now is someone to start demanding the water. This can only be accomplished by a government spending stimulus package that is large enough to turn the economy around. This means that we need to spend as if we were fighting a war. All of the criticisms of the New Deal boil down to the fact that even FDR was too timid in his spending proposals. Alan Greenspan set the precedent of a Fed chief commenting on Fiscal Policy. It is now Mr. Bernanke’s turn to push Paulson toward a fiscal stimulus. At a minimum this should be a set of loans to GM and Chrysler that would stave off a shrinkage in demand. These two firms will eventually have to file for bankruptcy, but the inevitable can be delayed until the economy is better able to manage it and congress has time to arrange a post filing financing package which will mitigate the worst effects of a filing.
The time has come to start using Keynesian aggregate demand based economics instead of the pump priming of liquidity enhancement. The pump is primed; the liquidity is there. What we need now is someone to start demanding the water. This can only be accomplished by a government spending stimulus package that is large enough to turn the economy around. This means that we need to spend as if we were fighting a war. All of the criticisms of the New Deal boil down to the fact that even FDR was too timid in his spending proposals. Alan Greenspan set the precedent of a Fed chief commenting on Fiscal Policy. It is now Mr. Bernanke’s turn to push Paulson toward a fiscal stimulus. At a minimum this should be a set of loans to GM and Chrysler that would stave off a shrinkage in demand. These two firms will eventually have to file for bankruptcy, but the inevitable can be delayed until the economy is better able to manage it and congress has time to arrange a post filing financing package which will mitigate the worst effects of a filing.
Monday, November 03, 2008
Why Government Spending Over Tax Cuts?
In my last blog I indicated that increasing government spending has a larger impact on the economy that tax cuts. A reader has asked me to explain this as a Part 2 to that blog and I will take this opportunity to do so.
The problem arises from something called the multiplier. Whenever income is spent it becomes income to someone else. People do not spend all of their income. Some is saved, some is used to pay down debt, and some is spent overseas (imports). The multiplier is 1 divided by the proportion of new income not going to spending. To get the total re-spending effect we multiply the initial spending by the multiplier. If on average people do not spend 10% of their new income then the multiplier would be 1/.10 = 10. Therefore, a tax refund of $100 million would result in initial new spending of $90 million and a total re-spending effect of $90 x 10 = $900 million.
On the other hand, if the government builds new roads equal to $100 million the initial new spending is the $100 million. The total re-pending effect would then be $100 million x 10 = $1 trillion. A little algebra indicates that getting a $1 trillion increase in economic activity would require $111 million in tax cuts. In this simple example tax cuts would cost the treasury 11% more than increases in public spending. Lets face it, this means 11% higher cost to us. Either way the government would be required to borrow. The issue is which leads to a lower debt?
The right wing says so what if tax cuts cost more; we know how to spend our money better than the government does. The question is: do we? Will we spend our tax cuts rebuilding our infrastructure? Will we install sewage treatment plants? Will we invest in clean coal research? All of these things need doing but the private sector returns for doing them are limited.
The problem arises from something called the multiplier. Whenever income is spent it becomes income to someone else. People do not spend all of their income. Some is saved, some is used to pay down debt, and some is spent overseas (imports). The multiplier is 1 divided by the proportion of new income not going to spending. To get the total re-spending effect we multiply the initial spending by the multiplier. If on average people do not spend 10% of their new income then the multiplier would be 1/.10 = 10. Therefore, a tax refund of $100 million would result in initial new spending of $90 million and a total re-spending effect of $90 x 10 = $900 million.
On the other hand, if the government builds new roads equal to $100 million the initial new spending is the $100 million. The total re-pending effect would then be $100 million x 10 = $1 trillion. A little algebra indicates that getting a $1 trillion increase in economic activity would require $111 million in tax cuts. In this simple example tax cuts would cost the treasury 11% more than increases in public spending. Lets face it, this means 11% higher cost to us. Either way the government would be required to borrow. The issue is which leads to a lower debt?
The right wing says so what if tax cuts cost more; we know how to spend our money better than the government does. The question is: do we? Will we spend our tax cuts rebuilding our infrastructure? Will we install sewage treatment plants? Will we invest in clean coal research? All of these things need doing but the private sector returns for doing them are limited.
Sunday, November 02, 2008
THE POTENTIAL FAILURE OF MONETARY POLICY
Writing in today’s (10/31/08) New York Times Paul Krugman labeled our current financial crisis a “Liquidity Trap.” This is a situation where attempts to lower the interest rate have no effect on investment spending by businesses. The USA hasn’t seen a Liquidity Trap since the great depression. Now, analysts are predicting that the Fed might lower the Fed Funds Rate, the rate at which banks lend to each other, to zero. The Japanese tried this during their economic malaise of the 90’s and it had almost no impact.
Although the current condition of the US economy is unlike that of the 90’s economy of Japan, we are faced with a similar question. That is: are banks willing to lend? The current answer in the US economy is NO! Banks are in panic mode. As the Fed pumps money into the system, the money supply will continue to shrink because the banks are unwilling to lend. On the other hand, businesses are only willing to borrow to meet working capital (short-term) needs rather than capital expansion. With consumers worried about their futures, they have reduced their discretionary spending. An absence of demand will lead to a reduction of businesses' plans for capital expansion even if they can borrow at minimal cost. This situation points up a flaw in Supply Side Economics. The Supply Side assumes that falling costs of capital will induce investment. It ignores the behavioral element which indicates that executives would be hard pressed to recommend expansion when they have excess capacity. In addition, market analyst would pillory executives trying to expand capacity during an economic down turn.
All of this indicates that McCain’s economic plan that is based upon increased saving leading to reduced costs of capital and Bernanke’s monetary expansion will have little or no effect upon an economic recovery. The great depression, and Keynes, has taught us that demand is still the primary determinant of economic activity. The Supply Side mantra of Say’s Law: “…supply creates its own demand…”works only in an economy that is already recovering. What the economy needs is a stimulus to demand. Given the deteriorating condition of our national infrastructure this would be best accomplished through an increase in government spending rather than tax cuts. In addition, it is well known that accomplishing a given increase in economic activity costs more with tax cuts than it does with an increase in government spending. Explaining the reasons for this would take too much space for a blog. However, Mr. Obama should take note of this problem if should he be elected.
Although the current condition of the US economy is unlike that of the 90’s economy of Japan, we are faced with a similar question. That is: are banks willing to lend? The current answer in the US economy is NO! Banks are in panic mode. As the Fed pumps money into the system, the money supply will continue to shrink because the banks are unwilling to lend. On the other hand, businesses are only willing to borrow to meet working capital (short-term) needs rather than capital expansion. With consumers worried about their futures, they have reduced their discretionary spending. An absence of demand will lead to a reduction of businesses' plans for capital expansion even if they can borrow at minimal cost. This situation points up a flaw in Supply Side Economics. The Supply Side assumes that falling costs of capital will induce investment. It ignores the behavioral element which indicates that executives would be hard pressed to recommend expansion when they have excess capacity. In addition, market analyst would pillory executives trying to expand capacity during an economic down turn.
All of this indicates that McCain’s economic plan that is based upon increased saving leading to reduced costs of capital and Bernanke’s monetary expansion will have little or no effect upon an economic recovery. The great depression, and Keynes, has taught us that demand is still the primary determinant of economic activity. The Supply Side mantra of Say’s Law: “…supply creates its own demand…”works only in an economy that is already recovering. What the economy needs is a stimulus to demand. Given the deteriorating condition of our national infrastructure this would be best accomplished through an increase in government spending rather than tax cuts. In addition, it is well known that accomplishing a given increase in economic activity costs more with tax cuts than it does with an increase in government spending. Explaining the reasons for this would take too much space for a blog. However, Mr. Obama should take note of this problem if should he be elected.
Wednesday, October 29, 2008
Mc Cain Clings to the Solutions That Even Greenspan Says were Wrong
Today, in Florida, John McCain once again proved that he has no understanding of economics. He stated that the nation’s economic problems would pass. This is the same argument that classical economists made back during the depression. They said that markets are self correcting and that unemployment and recession are self correcting. This is the same as the specious argument that market discipline would prevent economic excesses. Keynes, much maligned by the Greenspan school of economists, proved that recession was not self correcting.
McCain has also hung his economic hat on the argument that giving businesses breaks to reduce the cost of investing will stimulate the economy. This is saying that supply creates its own demand. This was known, by economists, as “Say’s Law.” The problem is that the biggest boost to investment is demand for the product. If there is no demand, and/or there is excess capacity businesses are not going to invest in equipment, buildings, or inventory.
Another element of McCain’s economic program calls for the reduction of taxes at upper income levels. This will supposedly accomplish two things. Firstly, the rich will save thereby increasing funds available for investment lending. Secondly, these funds will thereby reduce interest rates. For this to work, there have to be banks that are willing to lend and businesses willing to borrow for investment purposes. In the absence of demand, we have already established that businesses are not willing to borrow for investment. In addition, this approach will work only if banks are willing to lend. Observation of current banking behavior indicates that they are not willing to lend. Even with bailout money from the government banks are too risk averse to lend.
Recently, Alan Greenspan has stated that he was mistaken in the belief that actors on the financial stage would act appropriately. What makes McCain thing that this will change?
McCain has also hung his economic hat on the argument that giving businesses breaks to reduce the cost of investing will stimulate the economy. This is saying that supply creates its own demand. This was known, by economists, as “Say’s Law.” The problem is that the biggest boost to investment is demand for the product. If there is no demand, and/or there is excess capacity businesses are not going to invest in equipment, buildings, or inventory.
Another element of McCain’s economic program calls for the reduction of taxes at upper income levels. This will supposedly accomplish two things. Firstly, the rich will save thereby increasing funds available for investment lending. Secondly, these funds will thereby reduce interest rates. For this to work, there have to be banks that are willing to lend and businesses willing to borrow for investment purposes. In the absence of demand, we have already established that businesses are not willing to borrow for investment. In addition, this approach will work only if banks are willing to lend. Observation of current banking behavior indicates that they are not willing to lend. Even with bailout money from the government banks are too risk averse to lend.
Recently, Alan Greenspan has stated that he was mistaken in the belief that actors on the financial stage would act appropriately. What makes McCain thing that this will change?
Saturday, October 11, 2008
The Crisis in Non-Financial Companies
As we look about the business landscape we find that many older, former blue-chip, firms are on the brink of financial collapse. Given the shrinkage of credit, many are asking if these firms have enough cash to survive a major recession. GM is looking to the possibility of using the Fed’s discount window and GE has already started marketing commercial paper to the Fed. Why are these firms so cash poor that they have to go to extremes to survive?
I blame the Wall Street analysts and the MBA programs of America. In the last 40 years there has been a growing emphasis on distributing cash to share-holders at the expense of a company’s future financial health. About eight years ago I spoke with the management of a firm which had recently moved from listing on the American Stock Exchange to listing on the New York Stock Exchange. Management was flabbergasted when the stock analysts assigned to their firm said that they could not recommend buying the company’s stock because they didn’t owe enough money. The company’s management had always pursued a program of internal financing. They believed that low leverage (borrowing) ratios meant lower costs to share holders and safety in the event of an economic turn-down. The analysts insisted that the company should do more borrowing and hand the excess cash over to the shareholders.
UPDATE 9/27/2011: THE FIRM IS NOW PRIVATELY HELD
Almost all publicly traded companies are faced with this dilemma: Do they look to the long term financial health of the company or do we put emphasis on maximizing short-term shareholder value? The fact is that that the two may be mutually exclusive. High cash distributions may enhance short-term shareholder value while undermining long term financial heath. It is similar to the kick an addict gets from cocaine. It feels good every time the addict gets a hit. However, the addict’s long-term physical health is at risk.
As a product of several of America’s business schools I am well aware of the financial analyses that are being taught. I also understand the economic theory underlying the analytic thought processes. The problem lies in the fact that most of the analysts are working from a strictly academic angle. Most have never worked outside of the financial sector and have no notion of how a firm producing real as opposed to financial worth operates. The crux of the problem is that they treat all wealth creation as if it were financial wealth. This leads to a casino mentality where the emphasis is on short-term results. We end up in a world where there are no investors. All we end up with is traders. If you don’t believe this, just look at the turn-over ratios of some of our largest pension plans. The ratios often indicate that the portfolios are being completely liquidated and repurchased more than once every year. This is not investing. It is gambling masquerading as an investment strategy.
If we want America’s firms to survive, we need to break this gambling mentality. We need to restructure the nature of business education. We need to realize that risk is more than the financial analysts’ notion of price variability. They believe that diversification will get rid of the specific risk of bankruptcy. What they fail to recognize is that the emphasis on leverage increases the bankruptcy risk of all firms. If all firms are under increased bankruptcy risk then specific risk becomes market risk and it is impossible to diversify it away.
I blame the Wall Street analysts and the MBA programs of America. In the last 40 years there has been a growing emphasis on distributing cash to share-holders at the expense of a company’s future financial health. About eight years ago I spoke with the management of a firm which had recently moved from listing on the American Stock Exchange to listing on the New York Stock Exchange. Management was flabbergasted when the stock analysts assigned to their firm said that they could not recommend buying the company’s stock because they didn’t owe enough money. The company’s management had always pursued a program of internal financing. They believed that low leverage (borrowing) ratios meant lower costs to share holders and safety in the event of an economic turn-down. The analysts insisted that the company should do more borrowing and hand the excess cash over to the shareholders.
UPDATE 9/27/2011: THE FIRM IS NOW PRIVATELY HELD
Almost all publicly traded companies are faced with this dilemma: Do they look to the long term financial health of the company or do we put emphasis on maximizing short-term shareholder value? The fact is that that the two may be mutually exclusive. High cash distributions may enhance short-term shareholder value while undermining long term financial heath. It is similar to the kick an addict gets from cocaine. It feels good every time the addict gets a hit. However, the addict’s long-term physical health is at risk.
As a product of several of America’s business schools I am well aware of the financial analyses that are being taught. I also understand the economic theory underlying the analytic thought processes. The problem lies in the fact that most of the analysts are working from a strictly academic angle. Most have never worked outside of the financial sector and have no notion of how a firm producing real as opposed to financial worth operates. The crux of the problem is that they treat all wealth creation as if it were financial wealth. This leads to a casino mentality where the emphasis is on short-term results. We end up in a world where there are no investors. All we end up with is traders. If you don’t believe this, just look at the turn-over ratios of some of our largest pension plans. The ratios often indicate that the portfolios are being completely liquidated and repurchased more than once every year. This is not investing. It is gambling masquerading as an investment strategy.
If we want America’s firms to survive, we need to break this gambling mentality. We need to restructure the nature of business education. We need to realize that risk is more than the financial analysts’ notion of price variability. They believe that diversification will get rid of the specific risk of bankruptcy. What they fail to recognize is that the emphasis on leverage increases the bankruptcy risk of all firms. If all firms are under increased bankruptcy risk then specific risk becomes market risk and it is impossible to diversify it away.
Friday, October 10, 2008
Will Our Own Expectations Kill Us?
I just finished taking a CNN on line survey. Once I entered my response the results to date were listed. The outcome scared the hell out of me. The question was: “Are you confident world leaders can solve the financial crisis?” The result was that 70% of the respondents said no.
Normally, survey results do not have any effect upon me, especially ones that merely ask for opinions. Then why does this particular result scare me? The reason has to do with the effect people’s expectations have upon their economic behavior. Generally, people will either buy or save depending upon their expectations of their future economic health. If they believe the economy is slowing, they will cut their spending. If they believe the economy is healthy, they will continue to spend or even increase their spending. The current financial crisis has led to decreased expectations for the economy. This has led to a concurrent decrease in consumers’ economic activity. Consumers are the engine that drives the American, and subsequently the world, economy. This is where the survey result comes in.
The survey indicates that American consumers believe that world leaders will not be able to solve the financial crisis. Therefore, they believe that the economy will continue to decline. As a result, consumer spending will either stay low or decline. Either way this spells trouble for the economic future. A continued shrinkage in consumer confidence can turn what already looks like a severe recession into another great depression.
This weekend’s G-7 meeting must come out with solid plans that people believe will stop the financial decline. If this happens we can expect that people will begin to change their behavior. However, if the plans are tentative indecisive political obfuscations we can expect to see an economic disaster in our future. The Hoovervilles of our parents and grand-parents will become the Bushbergs of the 21st century.
Normally, survey results do not have any effect upon me, especially ones that merely ask for opinions. Then why does this particular result scare me? The reason has to do with the effect people’s expectations have upon their economic behavior. Generally, people will either buy or save depending upon their expectations of their future economic health. If they believe the economy is slowing, they will cut their spending. If they believe the economy is healthy, they will continue to spend or even increase their spending. The current financial crisis has led to decreased expectations for the economy. This has led to a concurrent decrease in consumers’ economic activity. Consumers are the engine that drives the American, and subsequently the world, economy. This is where the survey result comes in.
The survey indicates that American consumers believe that world leaders will not be able to solve the financial crisis. Therefore, they believe that the economy will continue to decline. As a result, consumer spending will either stay low or decline. Either way this spells trouble for the economic future. A continued shrinkage in consumer confidence can turn what already looks like a severe recession into another great depression.
This weekend’s G-7 meeting must come out with solid plans that people believe will stop the financial decline. If this happens we can expect that people will begin to change their behavior. However, if the plans are tentative indecisive political obfuscations we can expect to see an economic disaster in our future. The Hoovervilles of our parents and grand-parents will become the Bushbergs of the 21st century.
Wednesday, October 01, 2008
THE COMING DEPRESSION
Now that congressional Republicans have decided that they want narrow political expediency to defeat the bailout package I am fearful for the future of our nation and the rest of the world, Although I did not believe that the proposed compromise was the best way of handling the problem I felt that an expedited poor plan was better than no plan at all.
People and markets are driven by expectations. If they believe that something will be done to alleviate a problem they will act as if the problem has been solved. On the other hand, if they see political divisiveness, they will act as if the problem will never be solved. This means that the financial markets will see a flight to quality. A flight to quality means dumping stocks and buying US Government Securities. The goods and services market will experience falling sales because people see their jobs as being in jeopardy, their 401k investments and savings shrinking while the value of their homes is falling. All of this will bring about further layoffs and a downward spiral in both consumer confidence and sales. I really don’t know a better description of the factors leading to a depression.
I know that many commentators believe that we now have the opportunity to do the job right. I do not believe that we will. The republicans believe that a total reliance on a market solution will solve the problem. In fact they are calling for market solutions devoid of regulation. This is what got us into the problem in the first place and the democrats would be dumb to go along with it.
On the other hand the democrats are calling for a “New Deal” type solution which might actually work. The problem here is that the republicans are so opposed to anything that smacks of the “New Deal” they’d rather sink the country than let it pass. They will throw procedural road blocks to the system that would prevent any solution that didn’t give the market reign.
We are still a month away from the election and three months from a new congress and president. In that amount of time we can face a complete economic, as well as financial, collapse. If our congressional leaders cannot create a new solution before the end of the week it will be too late. I am afraid we are destined to relive the great depression. Hello 1932. Hoovervilles will be Bush Bergs, Buddy can you spare a dime will become fella can you spare a 5, and 25+% unemployment will rein.
People and markets are driven by expectations. If they believe that something will be done to alleviate a problem they will act as if the problem has been solved. On the other hand, if they see political divisiveness, they will act as if the problem will never be solved. This means that the financial markets will see a flight to quality. A flight to quality means dumping stocks and buying US Government Securities. The goods and services market will experience falling sales because people see their jobs as being in jeopardy, their 401k investments and savings shrinking while the value of their homes is falling. All of this will bring about further layoffs and a downward spiral in both consumer confidence and sales. I really don’t know a better description of the factors leading to a depression.
I know that many commentators believe that we now have the opportunity to do the job right. I do not believe that we will. The republicans believe that a total reliance on a market solution will solve the problem. In fact they are calling for market solutions devoid of regulation. This is what got us into the problem in the first place and the democrats would be dumb to go along with it.
On the other hand the democrats are calling for a “New Deal” type solution which might actually work. The problem here is that the republicans are so opposed to anything that smacks of the “New Deal” they’d rather sink the country than let it pass. They will throw procedural road blocks to the system that would prevent any solution that didn’t give the market reign.
We are still a month away from the election and three months from a new congress and president. In that amount of time we can face a complete economic, as well as financial, collapse. If our congressional leaders cannot create a new solution before the end of the week it will be too late. I am afraid we are destined to relive the great depression. Hello 1932. Hoovervilles will be Bush Bergs, Buddy can you spare a dime will become fella can you spare a 5, and 25+% unemployment will rein.
Subscribe to:
Posts (Atom)