We are not in disagreement.
My view is that the Fed is inherently powerless to stop the tsunami coming its way.
Now this is a hard one, but when faced with the inevitable, say for example death, it always pays to be upfront and honest. J6P led by politicians, CNBC, and the whole group of optimists is being fed a line of "This is as bad is it will get". This is politics, but it is irresponsible. S/He will continue in hope. Is it responsible to allow consumers to get into deeper debt, with no signs of any pick-up.
My greatest surprise was that Al G agreed to extend his term 2 years ago, where any competent economic historian (of which he is meant to be exceptional) would have slowly and silently packed his bags and left. The fact that he stayed, and his last speech, indicates to me that he suffers from a high degree of vanity, and wants to be liked. Terrible characteristics for a central banker.
I agree with you that the US mentality and mindset is such that it should be able to weather any such downturn better than Japan and Europe, but the PTB (powers that be) are in a serious case of denial, and will prolong the problem rather than attack it head on. Will someone take effective action as in the Savings and Loans? The answer is yes, unless the problem is too large. Then, as us humans are wont to, we will rely upon hope to get us out of things, and listen to those politicians and officials who serve out the most of it. They will then pursue their policies of postponement and deferral.
I have been reading up a lot recently about Krondatieff cycles and the like and these 16-18 year Bull and Bear cycles. I am off the opinion that these are as charactersitic of societies as greed, stupidity, charity, and selflessness.
The very qualities that you mentioned that would get the US out of the pickle are the same ones that probably got it into it. Share Options were meant to align employees', management, and shareholders' interset in A Holy Trinity of Capitalism, triumphant after the fall of the Big Red One. It is a characteristic of US society, the environment will decide whether this characteristic will be beneficial or detremental.
The US in my view is capable of continuous incremental change and is thus more adaptive than current Japanese society. Historically the Japanese way of life moves by a revolutionary, rather than an evolutionary methods.
It has always been characterised by periods of extreme rapid development followed by mind-boggling inertia and stasis. They too will get out of their slump. (I have no idea when though, they seem to do everything they can to avoid addressing their problems). All I can say is that it will most likely end with a Bang rather than a whimper.
I have had many discussions with guys here, and once you understand the Japanese psyche, their reaction to the bubble makes absolute sense (shocking I know).
They do not like/use/have the concept of individual responsibility, so the fact that a particular (individual) company should suffer for what is percieved to be the fault of the whole is anathema to them. It is logical that all should suffer and bear the brunt. This is why they say - "It is not the Japanese Way!".
So in short what I am saying is that US gumption may be as you put it. But I think the nature of things is that we should expect a 1 - 2 decade bear/sideways market from the 2000 top, as US gumption put it up there so high in the first place. The economy is going down - Greenspan may have 400 basis pts of 10yr to play with and yes there might be a massive fiscal (deficit) financing to prop things up.
If, however, the US follows Japan's example and starts building concrete beaches (no joke) to keep the economy going, then I think (environmental considerations not withstanding) it would be time to say "sayonara".
Yup the European Pension Crisis will be another 'great' show to catch in the coming 1 - 2 decade.
-macavity |
