Current Affairs


Reuters reports that

U.S. Treasury Secretary Henry Paulson plans to announce on Tuesday the formation of a program to increase the availability of auto loans, student loans and credit cards

Uncontrolled spending beyond means, aided by irresponsible loans (which where re-packaged and sold as investment options) is what brought the whole US financial market and the rest of the world, to a stand-still. Yet there is no recognition of this hard fact, that this sort of irresponsible spending ought to  be curtailed.

From a strictly economics point of view, it might be best for consumer spending to be accelerated as much as possible in times of recession. But achieving that by sending the wrong signals, and advising bad personal finance, is just going to bring this cycle on again.

Mr Paulson’s cure is much like getting the obese to eat more so that the weight watch clinics wont go out of business. Ironically this republican thinking, which is not at all unique, is exactly the same thing that got the communist USSR to go bust, by keeping around sick industries, in the interest of keeping jobs.

A more viable policy would be to actually reduce the real costs, bring more efficiency into the system that would make a whole lot of items more affordable to the consumer. Steps like capping the maximum retail prices, reducing costs (more public health-care facilities) and universal insurance, improving usable public transports which reduce economic and private transportation costs and other such initiatives that provide more money in the hands of individuals to spend. Perhaps the new government might get the votes to go ahead and implement all these, like in the Clinton years.

If instead, the government promotes raw, vulgar spending, using more and more loans and credit cards, people would buy the same old things that do not help the society move forward from its current rut. By aiding more consumer loans for the same old SUV’s and tvs and refrigerators, which the US used to produce and have now hived over seas, more of what the US spend will go off-shore to Asia, and more US consumers would be in loan to the rest of the world, like before.

If instead, the US government HUGELY subsidizes the production of solar power, hybrid cars and power efficient and innovative electronics, consumers would be suddenly spending more on products that are only produced and exported from US, helping the US manufacturing and technologies to pick up.

At the very least subsidizing the new economy, would leave the US economy with a better investment to improve its future with, and its consumers with more valuable tools rather than be left with broken electronics and SUV’s and homes with inflated prices that no one wants anymore.

Sure, by subsiding these, the old ones that cannot move forward to innovate will be left in the lurch, but that’s the way industries advance. We are after all speaking of the free-est of the free-market-economies of the world aren’t we?

Lets hope that Mr Obama who got elected on the promise of change and intelligence ( compared to Bush, Sarah Palin and McCain to some extend) can follow the same line of reasoning.

It’s a bit late, but nevertheless here are the top explanations for the current financial turmoil. It will make you laugh, cry (if you have lost) and swear at the same time.

All the three explanations are essentially the same, but from different vantage points,  from normal folks who bought the mortgages, from people who created such poorly designed instruments, from people who saw all this coming and made money in the fall, and the bad bad CEO who was finally brought down.

Giant Pool of Money – A special program about the housing crisis produced in a special collaboration with NPR News.  What does the housing crisis have to do with the turmoil on Wall Street? Why did banks make half-million dollar loans to people without jobs or income? And why is everyone talking so much about the 1930s? It all comes back to the Giant Pool of Money. Audio + Transcript.

The End of Wall Streets Boom – The era that defined Wall Street is finally, officially over. Michael Lewis, who chronicled its excess in Liar’s Poker, returns to his old haunt to figure out what went wrong. Link

CEO fuckups and the collapse – View the whole issue un-ravelled from the inside of Lehman- Link

If you knew kids, you would be able to predict how they react when they see another kid being givencandy. They would want it too.

All these financial bail-outs are creating the same situation. I used to wonder what would keep all the companies from asking for help. If I ran a company and saw my competitor being handed out HUGE amounts of cash, i would want a piece of that action too.

Now, auto companies want a bail out. Next i imagine hedge funds and airplanes and everyone else would want a bailout.

There has been solid proofs already reported on the net (immobilienblasen) about how this has already happening. (Picture from same blog)

This really only hurts the overall financial sentiment even more. There should be some detriment in place, or government should enter into some profit sharing agreement, (that cant be fooled) that keeps all these big guys from begging at the governments door.

Wonder what all those wise guys are thinking !!!

Finally the much awaited and discussed election is done with and Obama has won. What he can really achieve with the tough situation he has inherited is questionable.

But the one thing he HAS set right just by winning this election alone, is the world opinion about the United States which has taken a terrible beating after the Bush Jr era .

By electing Obama Americans have demonstrated to the world that they are not as callous as everyone believed them to be and that’s a good start. I feel that might go a long way in putting an end to all the terrorist non sense than any guns could have achieved.

First Steps ?

Now if only Obama stepped forward and acknowledge the mistakes his country has made wrt Iraq war and the countless civilians who got massacred in the civil war that it created, it would immediately reduce the terror alerts his country faces.

Not one Muslim or third world citizen would then still fund all those crazy Jihadi types anymore.

Wow, its amazing to think about the things this single person COULD change.

  • No more wars ?
  • Legislation to put an end to proxy wars ? (it is your own money you are fighting in Afghanistan (US -> Pakistan -> Taliban -> Osama)
  • Legislation to put right the credit fueled craziness of the American economy ?
  • Universal insurance and healthcare ?
  • Arms export to un-democratic / civil war torn countries and factions?
  • Consensus on Africa and Middle East?

The world is waiting Mr Obama !!! Show the folks who voted, and those who didnt, what electing a learned un corrupt leader can mean.

I’m sure that would translate into better politics world over !! and give the world politics back a moral leader who can step in and set things right which can never be helped with more guns alone.