“The sky is falling, the sky is falling!” Watch any news broadcast or pick up any newspaper and the stock market appears to have hit the apocalypse. Almost everyone I know, be it on Wall Street or Main Street, is throwing in the towel. Capitulation! I have spoken about that term before in previous posts but the real meaning of it is giving up or terms of surrender. People can no longer be emotionally tied to their investments and have just given in to the pervasive carnage in our capital markets system. Historically, (except for the Great Depression) things typically start to stabilize and turn around after capitulation in the markets. Although not a scientific number, it generally takes about 9 to 12 months before signs of a real fundamental shift start to occur. Right now people’s nerves are raw and the continuous cacophony of bad news from the global press is not improving matters.
As I see it, the markets are currently being driven as much by emotion as by liquidity and normal market pressures. Obama is basically doing a press conference every other day to try and assuage the public that a plan is in place and that everything is going to be ok. I applaud the attempt at trying to calm the public but it is really style over substance. Unless Geithner can start making some tangible headway on the capital markets mess people will become numb to the various press conferences being held trying to convince the public that the government is fixing things.
The stimulus package, while a necessary component to bringing stability to the economy, was really nothing more than pork barrel spending with politicians still attaching riders and earmarks to their special interests. That is an inherent problem with the government and politicians trying to figure out the complexities of the capital market system. They have no fungible background to tackle this current mess other than the levers and knobs of the money supply and interest rates. Obama ran on and was elected under the premise of change. The administration’s plan coupled with the stimulus package is nothing more than the same thing with a new wrapper. We need real change! As the old saying goes “drastic times need drastic measures.” So here we go, these are my thoughts on getting back to some level of normalcy:
- Step one: Rescind the current stimulus bill and form a new advisory team of people consisting of 3 democrats, 3 republicans, 3 top tier economists, 3 captains of industry (i.e. Jack Welch), 3 small to mid tier business owners and for good measure a tarot card reader (not really). Have them all sit in a room with the President to hash out a plan. The key difference should be to give the group the power of the line item veto so that a substantial portion of the politician pork can be cut and reallocated towards actual stimulus.
- Step two:
Nationalize AIG and stop the constant unsupervised flow of capital into what has clearly become a black hole. Strategically sell off components to worldwide groups and maintain the core while bringing in professional capital market turn-around artists. When people are incentivized for a particular outcome it is amazing how often it actually occurs.
- Step three: The Apple Dumpling Gang dvd Offer a onetime tax amnesty for all the capital currently residing offshore from US citizens and corporations. Heresy you might say (especially the liberals) but this would have a very tangible effect on the creation of business and jobs. The money that is currently being hidden or residing in very low tax rate havens is mostly from entrepreneurs, captains of industry, high net worth business owners etc. If that money is allowed to come back in a “don’t ask don’t tell” scenario, free from taxation, it would create thousands, if not hundreds of thousands of jobs. It would be akin to a direct shot of adrenaline into the economic system. Sure there are pundits that would say the logistics of managing the process would be overwhelmingly cumbersome but the benefits far outweigh the logistics. Figure that out and we can really turn this economy around.
- Step four: Do not bail out the Auto industry and let them come into the 21st century by performance not by subsidies (understand the sensitivity of this one, but it really needs to be done.) The auto unions are the real culprit behind the auto companies being ineffective at competing with other global brands. The unions have added such a high cost in terms of wages, health care costs and their archaic structure. Honda and Mazda have non union factories in the US and are able to produce a high quality product at an affordable price mainly because they utilize non union workers. Unions had their place in the US when the working conditions were abysmal and the workers were not protected. That no longer exists but because the UAW is so strong they have an enviable lobby in Washington.
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America can no longer afford politics and “business as usual.” We the people need to be heard, not disenfranchised. We are talking about our survival and our way of life. People are scared and rightly so, this is not a game this is our future and it needs to be fixed.
5 responses so far ↓
1 Stacey Derbinshire // Mar 9, 2009 at 12:45 am
You know, I have to tell you, I really enjoy this blog and the insight from everyone who participates. I find it to be refreshing and very informative. I wish there were more blogs like it. Anyway, I felt it was about time I posted, I?ve spent most of my time here just lurking and reading, but today for some reason I just felt compelled to say this.
2 Erik Martineau // Mar 9, 2009 at 3:04 am
Couldn’t agree more with the auto bailout comments. The unions need to go and be buried like Jimmy Hoffa. To many good workers are not getting a chance because of high priced untouchable union workers who are not doing anything to help comapanies be innovative with production costs. We cannot keep throwing money at banks and other businesses that do not move forward with solutions that will benefit and stimulate the US just because they have had longevity, it’s time for them to step aside and die and make way for the future comapnaies that can stimulate the economy with their new innovations.
3 Peter Sellers // Mar 10, 2009 at 3:20 am
This is once again - spot on.
4 A- // Mar 10, 2009 at 4:07 pm
Umm, a rather diverse 4 point plan Andre… Step #1; too late. Step #2; AIG could well be on the hook for trillions in default credit swaps, this is a total mind bender because I don’t know what stops the bleeding at AIG. Gov’t ownership doesn’t change the potential liabilities. Step #3; problem here is that these individual and entities would be concerned that the IRS would know who they are and therefore could track them for future audits. Step #4; it has taken me a while to come around to this one but I now agree with you. Since no one is buying cars right now anyway this represents a good time to go into bankcuptcy, restructure and come back to consumers with a solid operating platform and a positive marketing message. As to my view of what is the fundamental problem, I see it as essentially a banking sector problem. The economy, the stock market, and the consumer will bounce back when the banks are functioning. This will take major restructuring, probalby with gov’t help/intervention, and pssibly a couple of large failures. I think we would all feel better if banks stuck to straigth-forward lending and investment banks did the more creative (i.e. risky) financings. So repeal that 1999 act of congress that allowed banks to become investment banks.
5 Rick Glass // Mar 10, 2009 at 5:53 pm
Try this one–make every exisiting home mortgage at 3% fixed interest. This would save many homes from foreclosure but the big effect would be all the good homeowners who pay their bills-would now have extra money per month to spend on a new car, appliance, remodel or whatever. You would stimulate the economy without spending one tax payer dollar out of pocket. If the lenders don’t go along with this-let them figure out their own answers without federal bailout money.
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