CBS News 'Face the Nation' transcript ubiquicerpt:
GEITHNER: Bob, banks have a large incentive, now, to clean up their balance sheets, to make it easier for them to go raise equity from the markets, from private investors. So they’re going to have significant incentives to clean up their balance sheets. This gives them a way to do that that did not exist before that.
Just as an example, you know, if you had to sell your home tomorrow, in a world where nobody could get a mortgage to buy your home, you’d have to sell at an enormously low price.
You’d reluctant to sell. You might end up keeping your home longer than you want, not moving to some -- to take a new job, where you can earn more money, going forward.
That’s part of what’s happening to our financial system today.
He really thinks we are stupid. Remember Newspeakers henceforth "toxic assets" are to be called "legacy assets."
The American consumer is suffering from debt exhaustion, debt overdose and debt burden. The collapse in demand for debt is part of the cure. The cure impairs the banks. There is no getting around these fundamentals. The current and previous administrations have only ever had one strategy; play for time. They probably honestly believe that if they can hold the system together long enough it will cure itself. And why not? Every "reputable" economist of every persuasion has repeated the mantra that the modern economy is self correcting. I know that's not true and suspect I'm not alone on this blog in holding that opinion. Problem is despite the general consensus here being correct for years policy makers will not accept the solutions offered.
13 comments:
First to suggest you wait till they are antique assets. Then they will only go up in value.
Lol!
kuato kuato man...
Antique? How about when all the creators die?? Seems to work for (so-called) art, and these are among the most creative pieces history has ever seen.
p.s.: That second paragraph nails it. Too bad such truths fall on either deaf or denying ears.
Dawg: It seems to me - a person without any formal finance/economics education - that Tim/Ben/etc. believe by inflating they can fix the current state of affairs. What I believe they are overlooking is that wages are not going to inflate at the same time.
So while it makes sense to me that a full inflationary spiral (price + wage) could actually provide some "soft" reset to the current financial condition, jamming only one part of the inflation circle isn't really going to do the trick.
Compensation packages have a loooong way to fall.
hey dawg, does any reporter ever bring up the problem that the banks and pols keep mentioning better interest rates but never mention reducing principal owed? Yeah a 4% rate is nice but not when it is attached to a Mt Everest principal figure.
heh...the economy is "self correcting" allright...just a question of what the correction is to. ;-0
H Simpson said...
Mr S
you got that straight.
Sitting with a bunch of friends yesterday we started talking wages. Most of us work in high tech and most of us had taken a mandatory hit in salary/401k contribution in the past 3 months. Most of us who are still working full time do not have any extra money to help simulate the economy.
Then you have the govt counting folks who are working part time as employed. Yes employed, but when make 60 percent of what they used to, they have to cut back.
These CEOs cut back and then wonder why nobody is buying their products. Duhhhh?? Same bad logic of the 80s recession.
Love to see the government fess up to the real unemployment numbers. 10 percent my butt. Bet the number is closer to 15 and quickly headed for the 25% of the great depression
h.
Timmay is on kc's case?
It would be so interesting to know how many of the employed are working for $10 an hour while holding a bachelors or associates degree? The story told to every youngster is to get any degree and then plan your suburban life. Nobody says "work hard and save like your grandparents who accumulated all of the wealth and opportunity for me and your Mom doing mundane work diligently." Most of the folks preaching that line are new immigrants.
@w, agreed. It has become all too common for young people to graduate from college and start living their parents' or grandparents' lifestyle: four-bedroom home, three cars, RV, boat, two vacations a year, massive electronic entertainment system--with figuring out how to pay for it all being an afterthought. They often go about it by cobbling together a series of small jobs; a wishful-thinking "career" position that isn't going anywhere (real estate "investor"!), with a handful of part-time positions that are "just for now, until the career takes off". They end up working long hours between waiting tables and answering phones at the call center, trying desperately to get themselves out from under a mountain of debt.
They did a survey in one area I lived in and found that most households had *three* jobs. Two adults, three jobs; and that was typical, there were instances of young couples working four or five jobs between the two of them.
What the current generation has not figured out is that any wealth in the older generation accumulated very slowly over many years; the Greatest Generation started out in tiny apartments, going through school on the G.I. bill, then moved up to tiny homes, a single modest car, and a small B&W television, with the larger homes and the expensive toys only coming much later in life. They are where they are now because they worked hard and saved, and quite frankly, they deserve it. The younger generations would do well to learn from them; and while I'm specifically thinking of Gen X and Gen Me, the Boomers could probably use a few lessons along the same lines as well.
PV - Many Boomers need a BIG lesson in this. I know a bunch of Boomer types who have zero savings. They are now (a bit late!) starting to worry about retirement and are trying to figure out how to make up for the lost time.
I'm technically a gen-X (turning 42 today - yeah me!). I have never really accepted that label though as I was never in sync with the dynamics of the group. I had a career out of college instead of working coffee shops and "discovering myself", had my first house at 25, first rental unit at 28, etc.
I think we're going to see some interesting changes as old expectations meet reality. Many Boomers are doing great, they'll retire and may choose to continue working for fun, but won't need to. The change will be the Boomers who aren't prepared - they'll be 70+, burried in debt and unable to survive without the job.
I'm wondering if the current recession will teach some of the gen-x types to tone it down a little. Perhaps as they savage their credit ratings, they'll have to learn to live on cash instead of credit. It could be a beneficial thing for them long term.
Post a Comment