Tuesday, November 18, 2008

Everything was going so well - what happened?

Do you ever wonder what changed? Sure people where borrowing too much. Spending beyond their means by buying homes they could not afford and taking out loans on assets that where valued higher than they probably should have been. And sure rich bankers where getting richer by trading in something called derivatives that Warren Buffet calls economic weapons of mass destruction. But...

It does not make any sense. It's not like production facilities suddenly evaporated or consumers are less interested in consuming. Nor is the service industry saying, we don't want to perform services any more. Ok, so values got a bit out of hand and some of that leverage stuff was a Ponzi scheme, but how about we just fire those guys and wipe the slate clean. It's only paper money anyways. And since governments are in a mood to print money, they can hand it back to the underlying owners of the leveraged assets.

A bunch of value was created on paper that turned out to be worthless. Now its really hard to figure out who should be held accountable. Kind of like the dot-com boom and bust. Just on a much bigger scale. So now a bunch of people wake up and don't have the money they thought they had. It sucks. I know, it happened to me in the dot-com bust. But I got over it. Lets tell the bankers to get over it. Look at the upside: finally it may become possibly to buy a two bedroom apartment in New York and London for someone who has a normal job.

Beyond all the paper value that got created and then vanished, nothing really changed. We're all the same. Surely the American consumer will continue to consume if given more cash. Just hand it out and watch - it'll happen all over again. The Chinese can continue to produce and grow. The Europeans can continue to host tourists. In short, this doesn't have to stop. Why don't we just all start it over again. I suggest we all volunteer to take a 30% write-down in our net asset values (based on where we were 2 months ago) and then start the whole thing over again. How's that for a plan?

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