A reader sends a link to a PBS video of Kenneth Rogoff, Harvard economics professor and former chief economist of the International Monetary Fund, describing long the current crisis will last (4 to 5 years), what the G-20 will achieve (nothing) and what needs to be done next. He is interviewed by David Brancaccio, who never quite seems to get the answer he hopes for from the professor.
Open thread.
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The professor seems to hold with the crazy notion that some international regulatory body will NOT be politicized.
With BHO in charge there is no way the cure can begin. So his time-line is mind-boggling, optimistic.
The IMF has had a pretty bad reputation for salvation.
With the gearing used by European banks they are TOAST.
I thought Rogoff was missing one large factor. The smaller economic meltdowns he studied occured within the context of the larger system where there was presumably some free energy, either in terms of economic growth or financial resources to fix the local problem. But now the crisis is facing the entire system. There are no reserves; unless we can get a loan from God all resources have to come from within the closed circuit.
So when Professor Rogoff said that we had to inflate our way out of the crisis as the “time honored” solution; that we had to get into debt to flush the poison out of the system, he was in a way counting on this loan from God, in the shape of borrowing against the future. I don’t object to that entirely because we all implicitly borrow against our tomorrows. It is the extent which makes me uneasy.
Nor did he address the question of political risk. Essentially the same people who got us into this mess have been charged with solving the problem. The only way we can believe the outcome will be different is if we can align their interests differently from that of the recent past. In other words, the economic architects who dismally failed us scant months ago must now have the incentive to fix the problem which they had benefited from.
Won’t the crash — the “heart attack” as Rogoff calls it — provide the solution to the agency problem? I am not so sure. Because if we can borrow from the future, then what is to prevent them from rigging up a newer game with the same eventual end, each time rescuing themselves by recourse to intergenerational borrowing? Rogoff doesn’t answer this. Perhaps it is too philosophical a question.
The dear professor still doesn’t have a workable solution.
As previously posted: the RMBS market needs to be shut down. Government clowning around whereby this or that official runs up game-changing nostrums.
This situation causes the market to drop bids while the bankers mark them them to par. This bid to ask gap is now cosmic in most RMBS.
The only CREDIBLE way to resolve them is to CASH THEM OUT. Problem gone. And the way that the documents are rigged the only way to get the cash is to refinance the underlying mortgages. Now that’s something that bankers know how to do in style.
To speed this up, the government could establish a Resolution Mortgage Bank cranking out 2.5% 15 year mortgages with recourse for those good credits that have their current mortgage bundled.
The CDO and RMBS market would be shut down: no new securities could be syndicated.
The beat-downs that the lenders must suffer cannot be picked-up by the taxpayer.
The departure of Wall Street will drive business towards commercial banks and will permit them to lend profitably at old norms and rates.
Finally the big banks will have a business model that can work.
The holders of existing RMBS will have a fount of fresh debt to invest in.
If there is one thing beyond all other factors: start with something that is assured of success and then build on it. DO NOT attempt to start your efforts in the heart of the vortex.
Unfortunately, jumping into the fur ball is all the talk from the ‘experts.’
Jeez, the way Rogoff is talking it’s like mortgaging the family farm to the hilt and then flying out to Vegas in the confident expectation that you’ll continually roll straight “7′s” on the craps tables…for the next ten years.
Is this theoretically possible? Sure. But the odds are much better that you’ll instead a) lose the family farm and/or b) end up slowly decomposing in somebody’s car trunk.
I’ll see your Rogoff and raise you one Niall Ferguson. Inflation may end up being popular as there are a lot more debtors than creditors and the creditors are barely hanging on. Whether there is some super-duper process for doing refi or writing down face amounts of mortgages, everyone’s debt will be forced to shrink. What will be the social effects of a collective decision to cancel debts, whether outright or in effect? We are about to breach a psychological boundary and once we do that, we will have developed a taste or tolerance for breaching boundaries. There are also more than a few savers out there. What about when they see even 15% inflation eating away at their remaining savings after already having lost so much?
More than awkward diplomatic moments or attacks on Rush, the kind of social upheaval that would go with even the mild scenario of Rogoff could do some really serious damage to the Obama presidency in ways that are not yet clear. When you combine the dislocation with the scolding, finger-wagging tone of Obama, much bitterness may ensue.
I know the latest talk is about emulating Europe. My question is: Europe of which decade? Just my $0.02
What concerns me is that the only answer any government has to this crises is to do the only thing a government can do really well, throw money at the damn thing.
The financial systems seems to be going the way of journalism, there’s so many liars and crooks that none can be trusted. Who would put thier money into such a rigged game. In Vegas, your odds may be long, but at least there’s a chance of winning.
Flush the crooks and the money will return from the sidelines.
This page is about the most impressive piece of work I’ve seen on the web:
Meltdown
This is the community agitator and ACORN attorney named Barack Obama, who sued Citibank in 1994; one of hundreds of nuisance lawsuits filed by ACORN and its affiliates to loosen mortgage underwriting standards.
Timmy G once worked for the IMF.
We have an experienced hand on the wheel.
—
Don’t forget, Wretchard, Timmy already has a plan to deal with the closed system problem:
Geithner boosts NASA funds to probe cosmos for bail-out cash
—
—
RUSH: How many of you people out there are on Twitter? The White House has invited the cofounder and the CEO of Twitter, a guy named E.V. Williams, to join in a discussion with young business leaders on the economic crises. E.V. Williams, Twitter, has six million members, and a 700% plus growth rate. However, they make no money in the in the United States. Heh-heh.
As the Twitter guy said,
“They must be really out of ideas if they’re having me up here.”
Now, again, they don’t make any money. So why is the guy there? There is a reason. You’ve heard about Obama’s Internet army. They Tweet. Obama’s entire operation is based on instant messaging to hundreds of thousands via Twitter to destroy Joe the Plumber, Rick Santelli, Jim Cramer — their failed attempt to destroy me… The attempt is just to destroy with these little one-line character assassination thoughts that go to these millions of people who use this, and that’s where the Democrats are way ahead of the Republicans on all of this.
But anyway, one thing about this Twitter business… We found out that there were four people impersonating me on Twitter. There were four pretenders out there. Our IT people at the EIB Network grabbed control of those, and we now control the Rush Limbaugh Twitter account, although I don’t Twitter. I haven’t put any Tweets out there. But we did get control of it. Wait a minute… Well, now I’m told that they’re still not shut down. Okay, I’m getting confusing data because my IT people told me we had gained control of the phony Rush Limbaughs on Twitter, but now my computer geek says no, they still haven’t shut ‘em down. These instant messages during the show are a distraction! And I’m beginning to think so is e-mail during the show. Bottom line, I don’t know if they’re still being used or not; I don’t care. For any of you who Tweet, it ain’t me if anybody says they’re me Tweeting. I’m not Tweeting.
..Mr. Rogoff mentions the time honored use of inflation to alleviate debt. That’s only 1/2 of the equation. The other half is debt renunciation, and Congress has already started that with their sceme to allow bankrupcy judges to rewrite mortgage principle down to market value. Just the judge, the debtor and his atty. Who’s missing here ? Why, the mortgage holder isn’t in on the decision. He won’t even know it’s occurred until his asset has been sold out. And who holds that mortgage, we may ask ? We do. Anyone with savings in the market or in a plan which invests in the market.
…For those of you who think this won’t happen, well, it already has happened, in 1933, when the Roosevelt administration renounced 68% of the debt of all contracts, including government debt vehicles, by reneging on the gold clauses in those contracts which specifically were put there to prevent inflated currency being used to repay loans. Google gold clause and read all about it.
..Who in their right mind would loan money, the debt of which could be reneged on or inflated away with government connivance ?
..I think we are going to see. In a system of finance built on trust, this ought to just about kill it.
As Doug and others have underscored, people are very uneasy with a guy like Obama, with no real business skills and his association with shady people to dip into the American Tax Payer’s wallet to mortgage our way out of a recession.
The similarities between con-man Madoff and Obama are very unsettling. Madoff had no real financial education and neither does Obama. Madoff and Obama use the “Good Old Boy” network to further their personal fortunes. There are huge gaps in Obama’s personal history – far too many for a person in the Oval Office.
Worse, Obama is showing complete incompetence by constantly relying on “consultants” and Teleprompters to deliver his message. On the surface Madoff and Obama are appearing as snake oil salesmen.
To the international venue: UN secretary-General Ban Ki Moon is calling the US a “Deadbeat” Nation. China sends our intelligence ship the USNS Impeccable packing. Cheves is offering Russia an island as a base for Russian strategic bomber aircraft. Obama just blithers away at the podium.
I have little confidence in any of Obama’s actions to date.
Instead of the Bernanke Helicopter cash delivery service why not have the government just mail everybody a $1,000 Walmart gift card. That should make the chinese happy. I will bet anybody in the room $10 that Joe Biden thinks that makes sense. I’ll bet $1 that Joe has proposed this.
That NOW site where the Rogoff video plays is nuts. It is full on pro Obama, it must be run by Axelrod or Plouffe…
The Comments are virtually all fawning. Rate the job Obama is doing: “he’s great” “Give him an A” “Considering where Bush/Cheney left him the first 50days are amazing!” …it’s sick, they have no clue, and receive no contrary information.
I submitted a comment, likely it won’t get posted as they reserve the right to not post or remove at their discretion. If you go look you can see – here was my submission: no vulgarity or weird commercial links, just normal comments:
“It should be embarassing for the President and PBS. The fawning, sycophantic coverage here is creepy. Not a discouraging word by the “watchdog” journalists at PBS.
How about Obama’s pledge to post legislation for 5 days before he signs it? Didn’t happen with either big bill – in fact I doubt the Senators that passed the “Stimulus Bill” read it before they voted in favor…
The most important office, Treasury is stumbling and doesn’t have any under-secretaries, only Geithner, who wouldn’t figure his taxes correctly and can’t figure out how to staff his dept.
Earmarks, scrutinize next time? The Pres. has scared us all about the dire straits we are in and he can’t get his fellow Dems in charge in both houses to lay-off the pork just this once?
He points at lax regulation for the mess we are in, who was in charge of both Houses from 2006 on? The same leadership in charge now – Frank and Dodd and Obama was a Senator in their caucus – these are the same guys that didn’t hold hearings or propose regulations in the past and they think it is somebody else’s fault?
Obama’s chief of staff – Emmanuel – he was on the Board of Freddie & Fannie and got paid $260,000 for his oversight while Chairman Raines (a Dem appointee) got paid millions while his organization perpetrated massive acctg violations! These are all Democrats adn the same ones that are in charge now! How come PBS is digging in on this?
Seems like they are all part of the same party…”
@Stan,
Did you hear a knock on the door?
So, I’m going to go out on a limb here:
I think the financial market has just about hit bottom. The worst is over for the banks – although not for the rest of us.
Let’s start with some data:
Home Prices
Bond Market
Consumer Spending
Stock Market
So, it looks to me like we’re in the 9th inning for the financial sector. But that doesn’t mean the pain is over. You cannot turn off the credit market for 6 months and pretend that there is no impact on the real economy (the one that actually produces goods and services, vs. just allocating capital).
There is still a lot of unemployment to come. Capacity continues to get cut, and that means jobs are going to be shed. The pain will be concentrated in those markets where the excess capacity exists: the Midwest, the Northeast, California, and Florida. In those places, there will be a lot of disruption, and a net outflow of people as folks leave in search of work.
But there are over 2,000,000 job openings in the US, and those openings will get filled. As house prices stabilize, buyers will re-enter the market and those who need to sell and move will be able to. My guess is that this will happen throughout 2009, and maybe into 2010.
The big fly in the ointment is Washington. The first “Stimulus” was a joke. If we get the Porkzilla Budget as proposed, and Son of Stimulus, it will have really, really big negative impact. The need to finance the resulting deficits will hurt interest rates, as investors demand higher returns to purchase the tsunami of supply that is coming. In addition, the fear of inflation – driven by fiscal deficits and an increasing politicization of monetary policy – will start to spook bond buyers, and that will also push interest rates higher. Higher interest rates will create a panic in Washington, and there will be tremendous pressure put on the Fed to keep rates lower so as to sustain the recovery. That will lead to a rapid run-up in prices.
So, if I was a betting man, I’d bet with Rogoff. Get ready for inflation, which, given its timing in the business cycle will be stagflation, since unemployment will still be high.
The bottom line is this: the “crisis” that President Obama was “handed” was well on its way toward getting worked out. However, rather than continuing to focus on monetary policy, he has begun the most rapid fiscal expansion in history. This will extend the recession by 3-5 years longer than it needed to be, and the result will be a protracted period of stagflation.
By the time he’s done 2012, Obama will be wishing he was as popular as Jimmy Carter. His only way out at this point is if his budget and Stim2 fail. So, oddly, if he fails he may survive. But with the “help” of Pelosi and Reid, “failure is not an option.” After all, we’re trying to save the world here.
So, if the President gets his way, it will take a decade to undo the damage. And the ultimate irony is that the people who will suffer the most through this period are the very people who put him in office: the poor, the young, and the clueless.
Perhaps that’s not irony. Perhaps it’s justice. But it’s still sad.
For all of us.
L3
[Picture of Obama speaking out of both sides of this mouth]
“I’m for pork, big government, earmarks & huge debt. It’s the worst economy since the great depression.”
“Let’s eliminate pork, spending and be fiscally responsible. The economic crisis is not as bad as we think.”
See: Picasso Interprets Barack
http://www.investors.com/editorial/cartoon.asp
Rev Al is still head of some committee, but I can’t find it. Help Please?
Al Gore, Pat Robertson, and Al Sharpton on a beach
“It was like ‘The Twilight Zone’ seeing them sitting on the couch,” said Bill Kelly, a special events coordinator in the city’s resort office. “And then around the corner comes Al Gore.”
—
The $300 million campaign is expected to launch next week, CBS News reported. Gore talks up his views in a “60 Minutes” interview set to air Sunday.
The global issue got local Wednesday as a film crew set up scaffolding, lighting equipment and a tan leather couch on the strand, not far from the waves.
In 1989 and 1990 Sharpton again beat the odds, prompting Newsday columnist Murray Kempton to compare him to “a cat who has nine lives. He just keeps surviving.” First, Sharpton beat a tax evasion rap, which he called a government vendetta. Then, in 1990, he was acquitted on charges that he pocketed more than half of the $250,000 he raised through the National Youth Movement. At the beginning of the case, Sharpton wrote to the grand jury: “Since I was a young child, I was a minister.
I know no other life than serving others and allowing God to take care of me. I never owned a car, house, jewelry, etc. My intent is my causes, not wealth.”
—
On May 9, 2008, the Associated Press reported that Sharpton and his businesses owed almost $1.5 million in unpaid taxes and penalties. Sharpton owed $931,000 in federal income tax and $366,000 to New York, and his for-profit company, Rev. Al Communications, owed another $176,000 to the state.[8]
On June 19, 2008, the New York Post reported that the Internal Revenue Service had sent subpoenas to several corporations that had donated to Sharpton’s National Action Network. In 2007 New York State Attorney General Andrew Cuomo began investigating the National Action Network, because it failed to make proper financial reports, as required for non-profits.[75] According to the Post, several major corporations, including Anheuser-Busch and Colgate-Palmolive, have donated thousands of dollars to the National Action Network. The Post asserted that the donations were made to prevent boycotts or rallies by the National Action Network.[76]
Sharpton countered the investigative actions with a charge that they reflected a political agenda by United States agencies.[77]
—
On December 15, 2005, Sharpton agreed to repay $100,000 in public funds he received from the federal government for his 2004 Presidential campaign. The repayment was required because Sharpton had exceeded federal limits on personal expenditures for his campaign. At that time his most recent Federal Election Commission filings (from January 1, 2005) stated that Sharpton’s campaign still had debts of $479,050 and owed Sharpton himself $145,146 for an item listed as “Fundraising Letter Preparation — Kinko’s.”[74]
The chaos of Wall Street may have the world starving all too soon.
Payments to farmers critical to getting the 2009 crop in the ground have disrupted.
The ethanol fiasco is taking down a slew of farmers.
Ammonia pricing is screwed up due to legacy purchases when oil and nat gas were heading to the moon. Now the crops that would typically use this fertilizer can’t pencil out.
Here’s a link http://tinyurl.com/65fdks
L3…
I believe that we are witnessing a staged set of lies by the powers that be.
Volker has convinced BHO that he needed to talk the market up.
Hence all the cheery talk from Wednesday on.
It’s all bunk.
Staggering losses on HELOCs await explosion at Wells Fargo.
Alt-A resets and recasts are going to explode all over the RMBS world. This is a much, much bigger nightmare than anything seen to date.
We’re not even at the end of the beginning.
BTW California already is off her budget projections by $ 8,000,000,000 in less than a month. She is losing tax receipts at such a tempo you’d think it was a wholesale tax revolt. It isn’t. Business is falling off a cliff here.
True unemployment ( U6 + purged illegal immigrants ) is way past 20% here. You can see the effect by just driving the rush hour. Traffic accidents have dropped so much that the body shops are hurting and the insurance industry is in underwriting heaven.
An unemployed, non-commuting motorist is an absolute cash cow for the industry.
I have a couple of questions for those more experienced in matters financial.
If it is increasingly apparent to many that inflation is to come, how come this does not yet seem to be reflected in the value of the US dollar? Is the assumption that all currencies are in for the same trouble, or that you just can’t trust many governments to still be around when a long-term bond matures, or that people are hedging in gold, etc.? How many people here predicting inflation are seriously preparing to move whatever savings they may have? As I used to ask global warming enthusiasts, have you been eyeing the real estate market in northern Saskatchewan yet? What do you really believe?
The bulk of the financial market is lubricated by debt not currency.
This lubricant is now in short supply because of drastically rising re-appraisals of risk.
The number one thing that all of this cheap credit did was move the market to value real estate too dear and with too much gearing/ leverage.
Now that the marketplace has become aware of just how far away from historical norms our society let its finances get the players want to cash out.
So it’s dollars that they want and the demand is coming from every direction.
We are seeing the beginning of a reversal of Chinese policy. She is shorting the dollar. How? By throwing her todays-dollars against hard assets in multi-year forward deals. The typical deal is oil, but any mineral will do.
Gold has not really broke away because the central bankers with a stake in the fiat money order are dumping their stocks. The psychology of a surge in gold could literally shatter the acceptance of paper money. This is something that all central bankers cannot bear.
So the system is now set to deflate because of system wide concerns about getting your money back. Helicopter Ben is tossing credit everywhere and cranking up the press run.
We are still in full blown failure mode with everybody from Russia to Iran to Venezuela headed straight for insolvency.
For all of her dollar reserves, Russia has even more near term dollar debt. So her currency is crashing. Ditto for her equities markets. Ditto for net foreign investment. Putin may come down with kinetic lead poisoning.
Once Israel spanks Iran, whence Iran mines the straight, whence the USN spanks Iran, whence Iran launches Hamas, and the Hez, whence Israel spanks Syria, whence … Interesting times, no?
And as for China she’s blown her wad on a useless military and a slew of iron rice bowl legacy pits… She’ll be lucky to hold together. Hence we’re seeing the elite shopping for a ‘panic-house’ in the States so that they can escape the blast zone.
And as for Japan, how lucky it must be for Korea and China to have punked your own mercantilist export-led cash engine?
G20 = liars on loan from God.
Truepeers:
Have you seen this?
—
– The Great Solvent North -
HAS the world turned upside down? America, the capital of capitalism, is pondering nationalizing a handful of banks. Meanwhile, Canada, whose banking system had long been notorious for its stodgy practices and government coddling, is now being celebrated for those very qualities.
The Canadian banking system, which proved resilient in the global economic crisis, is finally getting its day in the sun. A recent World Economic Forum report ranked it the soundest in the world, mostly as the result of its conservative practices. (The United States ranked 40th).
The real story there is that Canada never allowed absurd gearing for her regulated banks.
It’s the no-money-down loan that moves the market way, way out of line.
That’s true in the urban center or out in the sticks.
Once price signals get totally out of whack players enter the marketplace from everywhere.
You can see the action on screen with shows like Flip This House. An endless stream of clueless newbies was able to get clear of one stinker after another.
When fools can make money in a mature endeavor like home improvement you must conclude it’s a bubble.
Fortunately the exact same troop of fools that got us here is going to stay at the helm.
@L3 #14: As to your predictions for the Dow etc: You may well be right. However charting lines of resistance and support (normally very useful) can quickly ruin you when things are in a state of flux. Actual buy and sell decisions change more quickly than new charts can be drawn to reflect prevailing sentiment.
If I had to play Cassandra on this one, I would predict the Agonizing Bear. A rather stagnant marketplace drifting lower on ever-reduced volume. It will bottom out whenever reliable interest and dividend yields are more than enough to both service and retire margin debt. (See 1974) No prediction on the actual numbers.
Unemployment will bottom out soon in the Reddest of the Red States, if it has not done so already. The attitudes that kept those states red in 2008 will also cause them to practice the kind of self-reliance that will see them through.
The Bluest of the Blue States will
s-u-f-f-e-r. Mendicants awaiting Messiah Kool-Aid will have a long dry spell.
We already see a mini-version of this in Nevada. Las Vegas (blue) is running around like a chicken with its head chopped off. Rural Nevada (red) is coping adequately plus.
I do not foresee stagflation overall. Just continued deflation. The true money supply continues to shrink as the unwilling reduction of excess debt keeps defaults and foreclosures going on and the process is being prolonged by every move the current administration makes.
Deflation is analgous to a bonfire. It consumes $100 bills faster than the printing presses can print same. And then the mental midgets running the printing presses throw the new banknotes directly into the furnace.
So stagnation instead of stagflation lies ahead, so says my somewhat clouded crystal ball.
And BTW: Don’t forget that the minimum wage
goes from $6.55 an hour to $7.25 in July. Not a very good time for that. Especially in Nevada as our resident blues passed an initiative that starts adding a $2-$3 state surcharge to whatever the feds mandate. Just what over-leveraged casinos that already have a hard time making bond payments need.
@Blert: What part of the Californicated People’s Republic are you in?
I spent 27 years in the Bay Area. If there is no traffic on the bridges, that place is hurting for sure.
Dave,
Right, that 40 to 1 leverage works both ways, doesn’t it.
I wonder about L 3′s 1.2 real estate ratio at the high end of the normal range in these far from normal times.
Also record housing stock, including a generous slice of McMansions.
thanks for the analysis blert,
must remember “kinetic lead poisoning”
Doug, I’ve seen various stories like that. The banks are more conservative here, but on the other side, there has been something of a sub-prime market in Canada: see today’s G&M, e.g.
As for consumer credit, my experience has been that it’s pretty easy to get in Canada: I can still get more than I could readily repay with present income (just got notice that they’re bumping up the interest rate a full point on my freely-offered line of credit, but it didn’t disappear like I thought it might a few months ago). But, it would seem that Canadians, being Canadians, have often been less keen to spend what’s on offer.
One more anecdote: blert talks of Chinese “panic homes” in US. No doubt it’s the time to buy in some places; here in Vancouver where this has been going on for years there is the first major lull in condo construction for some time; the last decade or two has seen a huge rise in real estate prices, this often linked to Asians buying safety condos (you look at the towers in the early evening and see how few of the units seem to be occupied) and there are even stories of large homes left rotting in the most expensive neighborhoods due to absentee owners. One wonders if the Chinese haven’t wasted just as much in such ways as they have on the military. I have a friend who immigrated from Beijing a while ago, a young guy who owned an apartment there, a legacy of the days when families were given apartments in the work unit buildings. I assumed he had rented his apartment when he left, but no that would have been a tricky grey market activity, so it’s just been empty for years now since his parents have been able to buy elsewhere. Given Chinese demographics, I wouldn’t bet on them keeping up West Coast house prices. Another problem with the lack of ways to reinvest wealth in China is that it is making some families incredibly decadent. I hear stories of great wealth being spent in a single generation.
East of Sacramento near I-50 in the foothills.
These days it takes an accident to get a rush hour traffic jam.
I live in the wealthiest area near-abouts…
Time was that the local Chevron station was absolutely packed hours on end. Now I can roll in any time and typically there is but one or two machines gassing up. In round numbers a drop of business of around 85%.
The number of RV’s rolling up the hill towards Lake Tahoe has collapsed utterly.
The local billionaire has downsized his office, fired some staff and now personally runs the action from a self-storage location that he built. The rest of his kin have moved in and are on his payroll, too.
It’s really something when you see that. BTW his dad purchased the better part of all of El Dorado Hills, California many decades ago. So he and his brother still own staggering tracts of land and buildings. Yet he’s feeling the pinch. Me thinks the brothers got killed by Wall Street.
You can go to Google Earth and zone down to see just how much land and property they still have.
And, yeah, he’s as nervous as hell. The local commercial real estate market is seriously overbuilt. He built it. He’s the master lessor.
The nice aspect is that traffic flows easy as if 9 years of economic growth were removed from the road net.
Locally, $1,000,000 homes have dropped back to $ 600,000 as a bank sale. Ouch.
My neighborhood is McMansionville and that’s the hit the system is going to take on most of the homes that you can view via Google Earth.
So L3 is way too early for California. We’re radioactive.
Will the G-20 meeting amount to anything more than Yurp and Russia demanding more money from the United States, and Obama pleading for the world to stand on its own two feet without (further) American assistance?
If things are bad in America and likely to get worse, what must it be like elsewhere where they weren’t rich or smart or strong to begin with?
NahnCee…
The boost in IMF capital is intended to cover exactly this…
The answer to your second involve four horsemen.
There is no clarity of how to solve this problem for the simple reason that we are still trying to ‘solve’ the problem painlessly, and that is not possible. The solution runs through a gauntlet of unemployment, fewer services, fewer entitlements, more work for less – all the things that are politically unpalatable.
BHO and Bush should’ve followed the President Harding solution:
Cut taxes like crazy…
Cut Federal spending like crazy…
Don’t change the fundamental rules of the game time and time again.
Presto, a brief bout of pain, then the gain.
19. blert:
L3…
“I believe that we are witnessing a staged set of lies by the powers that be.
Volker has convinced BHO that he needed to talk the market up.
Hence all the cheery talk from Wednesday on.
It’s all bunk.”
—
I think there’s a lot of ass-covering also, with people like Bill Marriot calling them out for killing business/communities/lives.
If the Pubs were 1/10 as competent as the Hospitality Industry has been about delivering a focused, understandable message, the Dems would be in much deeper do do.
Leo,
Great analysis. It is a useful perspective for anyone making asset allocation decisions.
I thought Prof. Rogoff gave a fairly dispassionate analysis of the situation, and we need more of that.
If anything, I think he was too optimistic. I believe him when he says that we need to take our medicine and get this thing behind us ASAP, and I’m no financial whiz, but it seems to me that any real solution would be political suicide. This is being run by politicians, not Harvard economists, and they’re not going to have the ability to take the necessary steps.
People are not ready for painful solutions, and just want assurances that the Gov’t is taking care of the problem. As things get worse, maybe there will be an opportunity to do some realistic things (whatever they are, I don’t know), but I think it’s more likely that politicians will continue to divert their eyes and mislead the public as to the extent of the problems, because they will not have much of a choice.
Events will drive this thing, and they’ll take us to a place we don’t want to go.
The arguments re inflation vs deflation drive me to distraction, as I have a lot riding on which way it goes. The facts cited by L3 in favor of recovery seem important, but then Blert makes a pretty strong case too. The same debate is going on all over the financial media, and I would really, really like to know which is right. At the moment I am leaning toward the deflation camp, because I read so many articles about other big IEDs buried by the roadside, and also because it seems to me intuitively that the deflation in household wealth is so large that the Feds can’t possibly counterbalance it with even the trillions being talked about. That, and the slowdown in velocity. But I’d love to hear more from the financial experts here.
HV,
I’m no financial expert, just a trader, but here is a suggestion. Anyone weighing allocation choices should consider not only the probability of inflation (or deflation), but also its likely magnitude and the consequence thereof. Personally I find 8% inflation in 2010 more credible than 8% deflation. My decision is whether to draw from TIPS in an IRA to build a new house, or to get a fixed-rate loan. I’m leaning toward the latter.
I don’t see how inflation can occur without inflation of income happening. In the past, when most of us worked for unions and such, there may have been a way to keep income on pace with inflation but that’s not the case now.
blert,
Excellent posts. A couple of follow-on comments to spice up our collective broth.
I believe we can both be correct. Your assessment of California sounds consistent with my own, and I don’t disagree that the Golden State is looking like painted lead. It has had a quasi-European system for about two decades, with one party rule driving an inexorable growth of government. You can’t punish entrepreneurship and small business without punishing the middle class.
What? California – the home of Silicon Valley and thousands of independent filmmakers – is anti-entrepreneur? The people may or may not be, but the government sure is. It looks at the great success of the Google Boys or Steven Spielberg and thinks that you won’t hurt entrepreneurs by slathering on regulations and increasing taxes. Those guys can afford it, and even they support more regulations to protect the environment. So everything’s cool, baby.
But it ain’t. Government is now so big and its unions are so powerful that it may well fail. It is, for all intents and purposes, bankrupt. Only a Federal bailout will keep it running.
So I believe that is what will happen. President Obama will find a way to give them enough cash to keep them muddling along. But their economy will continue to drag, and this will impede the national recovery.
But…it won’t stop it. We’ve experienced this sort of situation before. In the mid 1980′s, the collapse of oil prices led to the collapse of commercial real estate values which led to the collapse of the savings and loan industry in Texas. These collapses, like all asset value collapses, were preceded by a period of speculative excess. We were in tremendous pain for almost a decade, with lots of bankruptcies and foreclosures and general unhappiness. I remember it well.
In the rest of the country, however, the recovery proceeded apace, and soon enough Texas started to recover as well.
If you looked at the overall economic statistics for the US, that period looks anemic, but hardly disastrous. It was a period of slow, steady growth.
Now, my claim is that, as a nation, our financial system has about hit bottom. The early statistical signs are there. But I also argued that there’s lots of pain to come in the real economy. This will be true especially in places like California. It is coming, as you describe.
The question I think we’ll have to answer, however, is whether we still see ourselves as a single nation. We all get tremendous benefits from having a national economy that is diversified and large. But there are costs; California, Ohio, Michigan, Massachusetts, and New York are likely to be a drag on the economy as they work through their failed Euro-lite models.
If they try to drag the last few remaining states into their model – driven by a massive expansion of the federal writ – it will be really ugly, and the center may not hold.
If they clean up their acts, and move back toward economic freedom and smaller government, we’ll all come through this stronger than ever.
And while it may appear now that the forces for liberty are in retreat, I believe we will see a resurgence of true conservative values among the one group that can still learn, and is large enough to make a difference: the young.
This recession will either teach them that there is no free lunch, or it will lead them to sell their futures for a free lunch today.
So talk to the young. Tell them what you believe. Speak truth to power. Fight the zeitgeist!
Finally, I really appreciate all of your thoughtful insights here at the BC; I’ve learned a lot from them, and you.
Cheers.
L3
truepeers,
Great question. Here’s what I think is happening.
Inflation occurs when there is too much money chasing too few goods. We all know that there has been a massive increase in the money supply. So why hasn’t there been inflation?
The reason is that there are still too many assets. We overbuilt and overspent in the past decade. There’s a ton of excess capacity, and that capacity has not yet adjusted to the new reality.
But the rise in unemployment indicates that that capacity is being shuttered. This is what I mean when I refer to the “real economy.” You also see this in other statistics: inventories are falling quickly, plants are being closed, etc.
As this process picks up steam, there will be upward pressure on prices. Once your competitor has closed a plant, you gain more pricing power. You can start to stabilize, and then raise, your prices. In this situation, risk of collapse is less so you can now invest your money and earn a reasonable return again, so you sell your T-bills and invest in a business.
All of this has the effect of raising interest rates. Treasury prices fall, meaning rates rise. The Fed then must raise its rates. What this does to banks is raise their cost of funds. They then pay back all of the money they borrowed from the Fed, and the money supply shrinks again.
This all happens really, really fast. And so the Fed must act quickly (think small OODA loop). But here’s the problem: the recovery will be uneven, so some places will not yet be able to survive with higher rates. These places will mobilize their political forces and put pressure on the Fed to keep rates low. If they give in, the money supply will not shrink and inflation will spike up.
Right now, though, the reason you’re not seeing this happen in the market is that the capacity has not yet shrunk. And Federal intervention makes this situation worse: by providing incentives to protect jobs, they keep this capacity on-line. This keeps inflation low, because there are still enough goods for all of the money added to the system.
But this won’t last long. Businesses are adjusting fast. This is why we’re starting to see positive signs. It is breathtaking how fast the adjustment is happening – I see it every day. The statistics lag, so we won’t see in official numbers for a bit. But it is happening.
So the situation is like a supersaturated liquid. Once it starts to precipitate, it will go really fast. The only hope for keeping up is the short OODA loop of the Fed. We have a chance.
The question is whether Obama will let Bernanke do the work necessary. On that front, I’m not optimistic. That’s why I see inflation – and as I discussed, this means stagflation – in our near future.
One person’s view, FWIW.
Cheers.
L3
Zim,
Inflation of income – better know as increasing wages – will happen. But wage inflation generally lags price inflation. That’s why inflation is such a bad thing for workers. Inflation is a killer for the working stiff; not so much for the investor.
The reason for this is simple: it’s a lot easier to reallocate capital than switch jobs. I can sell bonds and buy equities or real estate in an afternoon. Switching jobs takes weeks, or months. And it is made worse by the fact that my new job may be in a different part of the country. So I have to be able to sell my house, move my kids into a new school, etc. This makes wages “stickier” than prices.
Unions generally only make things worse by increasing labor transaction costs. They can help push labor rates higher in certain situations, but their OODA loop is really long. If we’ve learned anything in the last two decades, it is that flexible labor markets contribute to lower unemployment and higher average compensation.
Unions are built on a static, monopolistic view of business. But the world is dynamic, and market-driven. Their model, therefore, doesn’t work in a free market. It’s also why they’re most prevalent in monopolies like governments and school districts. In the free market, when people don’t get paid enough, or don’t like their working conditions, they quit and go to work for a better employer.
So, wages will increase. Count on it. But inflation will still be painful because of the lag.
Cheers.
L3
I’m normally a lurker, but for this thread I’ll make an exception. I don’t claim any special expertise in any of this (hey, I’m an IT guy), but my wife is a bankruptcy lawyer with a couple of interesting points.
Right now we’re clearing the CDO’s from the mortgage business (residential not commercial). They CDO’s handling credit cards, car notes, and commerical real estate haven’t crashed yet (still in the pipeline for implosion). So her opinion is there’s more to come.
Any opinions on her view?
-Monty.
mwalls,
I’m skeptical that there is a major implosion coming for credit cards or commercial real estate. The reason is that the amounts of leverage in those areas didn’t ever exceed historic norms.
Consumer credit certainly expanded as mortgage equity withdrawal slowed. Initially, consumers were in denial and turned to their credit cards to support their spending habits. But this didn’t last long. After growing 4-5% annually for years, it grew only 1.7% in 2008, and actually fell about 4% in Nov-Dec 2008.
There is still a lot of credit card debt out there, and there will be writedowns, but nothing of the scale of the mortgage market. It’s just not nearly as big, and didn’t get as out-of-hand. So I don’t see the systemic risk – just more localized pain.
Commercial real estate is much the same story. Actually, that market has been pretty disciplined; underwriting standards didn’t dramatically fall (like residential), and there has even been deleveraging from REITS (Real Estate Investment Trusts, which don’t use as much leverage as other traditional forms of real estate investment). So, again, while I see some pain – especially in areas where there is negative job growth, job growth being the primary driver of commercial real estate – I don’t see a systemic risk on the scale of residential mortgages.
This is not to say there won’t be individual banks that could be sunk by either of these; with their balance sheets already weakened by residential mortgages, their design margin is gone and any negative news could bring in the FDIC.
Hope this makes sense. Regardless, your wife’s business is going to be strong for the next few years…
Cheers.
L3
Interesting article in the local paper a couple of weeks ago. It said that by normal standards this area has a 10 to 15 YEAR supply of housing built up, the legacy of all those people who bought all those houses and condos as sure fire high gain low risk investments.
Problems of this magnitude are pretty much limited to a very few states, such as Florida, California, Nevada, and Arizona. In Port St. Lucie in Florida the problem is so large that they are considering declaring a disaster area as a result. The idea is that they would spend millions of dollars to build public facilities and that would give the unemployed construction workers there some money to prevent foreclosure on their homes.
The Pt. St. Lucie “solution” is a microcosm of the Obama Porkulous Package. Don’t accept the fact that the housing industry has screwed itself quite thoroughly. Instead give them more money to tide them over these hard times.
The problem with this is that Pt. St. Lucie CANNOT any longer have an economy based on building houses, any more than the guys who run the cotton candy stand at the fairground can expect to prosper there outside of one week a year.
Now, to appreciate how bad the problem is, nationwide, go over to Zillow.com and look up the prices of the houses at some places where you were familiar with the prices, say, 10 years ago. You will very probably be utterly shocked. I think that we are going to have to see a much larger deflation of home prices, and nationwide in scope before things get back to “normal.” I don’t see this ending in 4 or 5 years.
So … in fixing California’s economy, how do we propose to deal with all the illegal Mexicans who have been feeding at the federal and state taxpayer trough for free lo, these many years? We’re reading that some of the newer arrivals are giving up and going back home, but that still means that 12 million or 24 million or however gazillion of them there are in the United States are still here, still receiving free health care, still sending their English-ignorant spawn to our schools, still getting food stamps and welfare, and still running the infrastructure into the ground from overuse.
It seems to me that we can’t do anything about a Euro-lite governmental system until we deal with the illegals.
The welfare state and open borders = government insolvency and societal collapse every time.
It’s built into the math.
L3
Thanks for your analysis. You seem to imply that the US is still fundamentally a manufacturing economy; is that fair? But how much of the past decade was an overbuilding of productive assets and not just some drive to consumption of foreign goods made possible by leveraging? People today have so much junk. My guess is that the average family could probably go for several years without really needing to buy much more short of food and fuel.
Leo, I just don’t see California, Michigan and the other states “working through” their Euro-lite socialism. I see them getting bailed out and continuing in the same vein. Instead of a few states realizing the disaster that socialism is, the entire country seems to be headed that way.
Leo, you analyze economic conditions without politics being taken into account. Left alone, the economy may well respond the way you say. But how are the policies of Obama going to affect them? Have those policies been accounted for in the early stats you are seeing of a bottoming out of the financial markets?
What are the long term affects of Obama’s policies going to be? This is like Margaret Thatcher’s ratchet. We just ratchet up more and more socialism.
I don’t fear for our economy. I fear for our freedom.
This is the first link provided by Wretchard that I found to be a complete and total waste of time.
It would be of interest to remember that a lot of our (US) production capacity is now in Mexico and Asia (specifically China). They are “feeling the pain” right now. With demand for auto parts (Mexico) fallen off, I’m sure that is a factor figuring into the drug cartel problems there right now, as there are more people moving into the drug smuggling business out of financial desparation.
Likewise, in China. They are going to have to adsorb a lot of people that are going to be out of work for a while. Maybe the young men will go into the Army? What sort of mischief might be in store? The long anticipated invasion of Taiwan, the renegade province?
And speaking only of the “Euro-lite” socialism of Ohio in particular, several problems are large on the horizon, greatly linked to cap and trade and carbon taxing and permitting (should it actually come to pass). Ohio is second only to Michigan in auto manufacturing, and still has a lot of steel mills. Most of the electricity in Ohio is generated by using coal to boil water and turn turbines.
All this is going to run up against the hard wall of the Obama – Pelosi Axis of Carbon Dioxide Defenestration. Politically, this could turn Ohio back to the R-side, sooner than you might think.
I think the silliness and unbearable lightness of the Lightworker will come crashing down politically sooner rather than later. And because of the unsurity of the nature of the present credit markets, I predict a lot of shortages of food and other commodities (and rising costs) in the next six to nine months, and maybe longer. This is the trigger to the stagflation that is feared and rumored. Not in durable goods (cars and washing machines) and housing (still falling someplaces).
RWE,
I think the situation you describe in Pt. Ste. Lucie is an example of where speculative excess in certain areas will trigger total, but local, collapse.
There’s a funny little place on US-290 between Houston and Austin called Winkleman, Texas. It’s right off the road, and looks like some guy’s dream of recreating a small town in West Texas from the 1940s. It has a General Store, a Saloon, a Boarding House, and a couple of other buildings of unclear use.
It was built about 15 years ago. For a while, you’d drive by and see a couple of cars parked in front of the General Store, but there was no real economic base, save for the regular traffic on the highway. But how many of those folks wanted to stop and partake of West Texas nostalgia? We probably drove past more than 50 times over the last 15 years, and never stopped once.
Today, the place is completely abandoned. The poor devil who built the place has flushed all of his investment, and if any lender was involved, they’ve long since either called the guy’s personal guarantee, or written it off. He may be working at the gas station down the road, or he may be filthy rich, for all I know.
Sounds to me that Pt. Ste. Lucie is an upscale, hip version of Winkelman, Texas. If so, the place is toast. Sorry.
But the good news is that it appears that a lot of the excess residential capacity is concentrated in places like that. They have to be abandoned, or perhaps re-invented as some kind of other development, at pennies on the dollar to the original investors.
This means that the places that didn’t fall victim to this sort of silliness are probably better off than the averages indicate. Places with a productive core; they will survive, and bounce back quickly.
Maybe overly optimistic, but, hey, I’m an optimist. But y’all already knew that.
Cheers.
L3
elby,
My analysis doesn’t differentiate between producing goods or services. Both add to the economy, and both are impacted during downturns. After all, service companies need assets, whether they’re consulting firms (they need computers, desks, offices, etc.) or lawn guys (they need lawn mowers, trucks, trailers, etc.)
That said, I agree with your assessment. Most Americans are getting back to basics. But even with that, there’s a lot of consumption. What we’re talking about here is the 10-15% of truly discretionary expenses. Those are going to get zapped and converted into either mortgage payments, savings, or paying down other debt.
IMHO, this is all good for the long run, even if it is painful in the short run.
Cheers.
L3
NahnCee,
We are in violent agreement. The question, of course, is what to do. But the political pressure to solve the illegal immigration problem is about to get very, very high.
Cheers.
L3
If we legalized all the illegals in one fell swoop, Obama could then levy a major “citizenship tax” on them for the privilege. Make up for all the years they were here for free and the rest of us *really* need that tax money now.
Leo: very interesting. I’ll throw in a bit of anecdotal data into the mix.
Two of our suppliers had record first quarters. We have had a record first quarter. Very busy.
I work in commercial refrigeration air conditioning. In British Columbia, Canada. This province had an overheated real estate situation, which has collapsed. Very tough for construction.
But very good for service and maintenance. There are a few trends; national account type business is folding. Where some paper pusher/sales type schmoozes the head office into a national account type situation. They cost more money, less gets done. An acquaintance who does work in another field was getting work/purchase orders that were strained through 6 service providers before getting to the person doing the work. Everyone marks up the invoice, in the end costing 2-3 times more than the actual work. That is dying. But it is good for us at the end. We can get one of the multipliers ourselves and make very good. There ain’t many of us. There are far more middleman paper pushers. Or were.
Another factor is that there is a serious shortage of skilled labor. Our stuff is getting more and more complex. And the minimal labor was swallowed up by the demands of a construction bubble. Anyone with any sense at all deferred any construction maintenance until they could get qualified people at a decent price. All that stuff is coming on line now, keeping us busy. And it is different; new equipment sales and installs are tight margin work. Maintenance and repairs are not. Rarely quoted, parts suppliers have good margins, etc.
And I’m starting to see the smart ones, the companies that didn’t over leverage during the boom start taking advantage of their comparative health and pushing their weak competition. There won’t be anything as major as the bubble, but serious work for serious people.
As you said, it is amazing how quickly the economy adjusts to the new floor. There will be some defaults and bankruptcies; we have one of our client on nearly COD. They are short of money and taking a long time to pay their bills. I expect them to disappear soon.
What the real problem will come from is that everyone in the real economy is adjusting to the reality, cutting costs and staff to live with the new floor. But government, which has been growing a 5-10% a year everywhere is still going to grow, actually faster now. But their tax base, economic base that has grown steady 3% or so for many years is shrinking. But they won’t.
I see two things happening. One is the natural tax increases to maintain current expenses on a diminishing tax base, which will end up being a vicious circle of diminishing returns. Second is governments everywhere who are addicted to the 3-5% growth rates will do everything to try to get it back, including creating bubbles where they can. They will kill any real economic growth and go for speculative stimulus. Which will end up in radical inflation.
Derek
U.S. manufacturing output far outstrips that of China. The things made over there are small enough, light enough, and simple enough to be manufactured at a distance – often to U.S. designs – and then shipped here.
But I wonder how much of the production will migrate back to the U.S. An old friend of mine owns a brush company, and they recently shut down their overseas plants and reopened a closed Rubbermaid factory in NC; they can make more money doing it that way. Another old friend works for a company that makes automated machining equipement. US companies are finding that with those simple to operate and relatvely low cost machines they can produce some things more efficiently at home.
I think that the rush toward making U.S. designed products overseas was based more on it being the “in” thing, the Harvard MBA way, the Latest Fad way of doing things rather than what really made sense or made profits.
With the U.S. workforce being freed up by the current crisis and it no longer more profitable to build, buy, and sell homes or work the margins of the financial world, perhaps U.S. manufacturing will continue to make gains. But it won’t do that with a Marxist President determined to make sure the rich get poorer, an army of committed bureaucrats adding 50,000 pages of new regulations every year, unions trying to increase their power at the expense of the workers’, and a host of new taxes supposedly intended as a sacrifice to Gaia but in reality a way to soak everyone to pay for Socialist schemes.
Oops!
elby, my response was intended for truepeers. Here’s my response to your post:
I think the President’s policies are completely wrong-headed on the fiscal front. They will make the recovery much slower, if enacted. In addition, the raise the possibility of a real long-term economic decline. So, I hope they don’t get through – and it’s too early to say if they will. There are a lot of Democrats who have to start running for re-election in about a year, and they’re nervous.
But the bottoming out is really driven by the end of the financial meltdown. If it really happens, this is good news, and provides a good chance for us to get back on the road to growth.
I share your fear of socialism coming from the Obama Administration. But the bigger short-term threat was a meltdown of our financial system. That’s all I was referring to as starting to pass.
Hope this makes sense.
Cheers.
L3
Unfortunately, the long term effects of the financial meltdown will be felt for years to come in more government intervention in the economy, larger debts, more people ensnared by government handouts, possibly governtment run health care and rationing, higher energy prices and an economy that never really recovers. The housing market might come back, but will our country?
Sorry, I’m just in a real blue mood today. My Eeyore side is really coming out.
SoCal year over year percentage change.
4 Economic Trends and Stories Impacting the way you Live: Retail Sales up Because of easing in Credit Standards, Millionaires no More, Bankrupting on Foreclosures, and Bear Market Rallies come out of Hibernation.
Economist’s View Bernanke on 60 Minutes
AIG’s Not Very Transparent List of Counterparties
It’s good that AIG has released a list of its counterparties. But if it really believes in “the importance of upholding a high degree of transparency with respect to the use of public funds”, this is a very odd way of releasing the information.
If you’re not already familiar with the intricacies of AIG’s operations, it’s very easy to just start adding up the numbers in the various appendices, coming up with a kind of bailout league table: Goldman Got $12.9 billion! Barclays got $8.5 billion! But in fact it’s much more complicated than that.
There are four appendices in all. Before we get to them, it’s worth reading a bit of Gretchen Morgenson today:
Even A.I.G.’s own independent directors haven’t been told which of the counterparties were paid…
Such secrecy raised hackles because the insurance claims were paid off in full, even though widespread defaults on the underlying debt have not occurred. Why, many people wonder, did the Fed make A.I.G.’s counterparties whole on losses that have not happened yet?
What Morgenson is talking about here is the second of the four appendices: the payments made by the company known as “Maiden Lane III”.
After banks insured their assets against default, AIG essentially used Maiden Lane III to take those assets onto its own books, thereby allowing it to cancel out the insurance contracts. The big winners here are SocGen and Goldman Sachs — and it’s worth noting that unlike the first appendix, where the counterparties are helpfully listed in order of size, in the second appendix there seems to be no particular order at all, and the two biggest recipients of government money are hidden in the middle of the list.
—
In any event, so many of the counterparties on this list had hedged their AIG exposure that it’s massively oversimplifying matters to conclude that even the banks with the biggest exposures on the second appendix are the ones which effectively got the biggest government bailout.
It’s not nearly as simple as that — and AIG should be much more upfront about such matters than it is being with this release.
Fair Game – At A.I.G., Good Luck Following the Money –
Representative Carolyn B. Maloney, Democrat of New York, said she had twice asked for a full accounting from Ben S. Bernanke, the chairman of the Federal Reserve, which arranged the A.I.G. rescue. She has not received it.
“They have told others it is proprietary information,” Ms. Maloney said in an interview. “But we are the proprietors now. Taxpayers own the store, and we should be able to see the books.”
When the only tool you have is a hammer, every problem looks like a nail. Our economists are uniformly of the left and they have no solutions for anything other than to tax, and spend, and borrow, and inflate, and bankrupt. Indeed nothing has been done to address the root of the problem… the government insures mortgages regardless of ability to pay. This gives worthless debt value that it does not warrant and leads to all of the market distortions we have seen recently. Add to that the fact that we punish the accumulation of capital and reward the accumulation of debt through our tax system and you get the disaster we have now.
The answer is simple… the government needs to stop mucking about in the markets and people need to be able to keep the fruits of their labor. Things would not be perfect then but each intervention only makes things less so.
Simple Ben
Too Easy
Reality Won’t Do
We’ve got Webs to Weave