What else does our government have up its proverbial sleeve? We've bailed out the banks. They used it to go on vacation, pay bonuses and generally do everything except use it for its intended purpose. They've proven that the government still cannot provide adequate oversight and they'll continue to take any handouts offered.The consumer isn't going to spend money while the economy sheds jobs.
I stumbled upon an article about Nouriel Roubini, an economist that predicted the crash of our economy two years ago, and I've been following him for several months now.
--As long ago as February 2007, Roubini was writing on his blog that “the party will soon be over,” and warning of “painful consequences for the U.S. and the global economy.” By last February, his tone had become apocalyptic, raising the specter of a “catastrophic” meltdown that central banks would fail to prevent, triggering the bankruptcy of large banks with mortgage holdings and a “sharp drop” in equities.
The next month, Bear Stearns Cos. failed, to be taken over by JPMorgan Chase & Co. in a government-backed deal. Then, in September, Lehman Brothers Holdings Inc. went bankrupt, prompting banks to hoard cash and depriving businesses and households of access to capital. The U.S. took over AIG, Fannie Mae and Freddie Mac, and the Standard & Poor’s 500 Index suffered its worst year since 1937.
“I was intellectually vindicated,” Roubini says. “But I was vindicated by having an economic disaster which has political and social consequences.”
“The consensus is catching up with me, but it’s still behind,” Roubini said in an interview in Davos. “I don’t know what some people are smoking.”
I've always contended that the people who are best suited to run the country are smart enough to steer clear of the job. This is exactly how we wound up with Bush...the guy who couldn't construct a sentence to convey either a point or a message.
Why isn't this guy providing advisement to Bernake? It's clear that Bernake (or Greenspan) couldn't have predicted or controlled the outcome-but it may have been wise to know of the risks as soon as they're identified. Our government is notoriously slow at reacting to issues (see the previous post about food safety-the state of Minnesota identified the problem far quicker).
Clearly Roubini is on to something-he's been talking about it for two years and until the shit hit the fan, nobody listened. Now, he's a veritable celebrity among economists.
http://www.bloomberg.com/apps/news?pid=20601170&refer=special_report&sid=a6A9lCHrtAqk
A proposal to prevent wholesale financial failure
What do food safety and our economy have in common? They both require a lot more oversight to keep them in check. I don't propose that the government step in and take over-just create regulations and enforce them consistently. The latter is more the problem.A lack of oversight is exactly what allowed Madoff to rack up such an elaborate scheme.
The losers of Bernie Madoff's Ponzi Scheme
and, in the words of the e*Trade baby's friend "I want to punch the economy in the face"
I'm thankful to have a job and relatively little debt-but I know that I am one of a very few who was prepared for this economy...and in all honesty, my preparation was happenstance.
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I think Bernanke actually knows this stuff. Thing is, being Federal Reserve chairman is actually a fairly proscribed position. He has power to set interest rate on Federal Reserve loans, and conduct open market operations to print or shred money, and print money by buying assets that may or may have value. But he can't set regulatory policy or write laws or anything like that. It must be intensely frustrating for him, he's doing his part, all the things that a central banker is supposed to do in these situations (make sure banks don't fail because of bank runs, print money if money evaporates out of the economy, etc.), but nobody else is doing what they're supposed to be doing. It's the sort of thing that, at my last job, had me miserable and pulling out my hair...
- Badtux the Hairless Penguin
I agree with your thoughts about Bernake-I feel a lot better about him than I did about Greenspan.
While controlling the interest rates is a huge part of the cash flow for the markets, it doesn't always predict where the money will go or how it will be invested or spent. It's all speculation based on historical events.
I cannot imagine the level of frustration on Bernake's part-but I don't argue the point that Roubini has a different point of view about the economy and might have some rather useful information from the market side of things.
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