Hi Mike,
Interesting that you seem to be saying that overcapacity is the cause of the "recession" (if we are going to call a spade a spade). I always wonder whether we are looking at overcapacity or underdemand - - by underdemand I mean that people want to buy, but they just can't. By overcapacity I mean that no one wants to buy, even thought they can.
Overcapacity this time, due to "irrational exuberance" in the business community? If so, would you attribute that to imperfect foresight, or something more sinister? I think you are suggesting something more sinister, more cynical. You may be right.
Seems like every time I read the Financial Times, seems like someone big, e.g. Siemans, BMW, is closing down or thinking about closing down a factory in Europe. Here, too, and of course it's not news that there is overcapacity, e.g., in the chip business, e.g., yesterday Cirrus Logic announced it would get out of several businesses that used someone elses fab, if I understood it right.
Can't help but wonder how could everyone be so wrong all at the same time? Kind of the "I was only following orders" mentality.
It reminds me of the real estate boom/bust in the late eighties/ early nineties. At the time I was subletting my office from a lawyer who specialized in real estate development, quite a bit of which was going on just outside my own neighborhood. We lived "outside the Beltway" way out in the suburbs, really at the farthest reaches of the development at the time, and whenever I would take my evening walk I would notice all the new office buildings were finished, but still empty. I asked "George" why they kept building offices when no one was renting them.
He explained that as long as the developers could keep building, they could keep paying themselves and their staff and all their cronies from the construction advances. Didn't the banks know that, I asked. Sure they do, he said, but otherwise, the banks would have to admit that they made bad loans and their collateral was no good, and face the consequences, and everyone was hoping it would right itself before then. And of course, it didn't, but that's another story.
Well, eventually, I noticed that the office buildings were finally all full (Raytheon, Orbital Science, TRW, and so on), and the abandoned half-constructed houses were completed, and they started building new ones. . . . except I just started noticing that the construction sites don't seem to be finishing up anymore . . . .
You know, maybe everyone keeps building because they think it's just a game? You can't lose too bad because the government will bail you out. Bankruptcy is a joke. Back when the real estate bust started, I would have little business people hire me to do collections against big guys, who were all filing Chapter 7 and doing cramdowns, and handing off their assets to their family members, and all, and the little guys would tell me, he's got a Porsche, he's got a Rolex, how can he go bankrupt on me? Good questions, but you know, the trustees didn't really care, they were so swamped and they just wanted to go home at the end of the day, like everyone else.
"When the music's over, turn out the lights . . . ." |
