November 21, 2007

Looks like someone's been reading HousingPANIC: Here's Paul Farrell at MarketWatch on "17 Reasons America Needs a Recession"

Yes, it's gonna suck. And yes, it's needed. America without a recession is like a bad kid who didn't get spanked.

Sometimes, when someone (or an entire country) has been bad, a little punishment is needed so that it doesn't happen again.

1. Purge the excesses of the housing boom

No, it's not heartless. Not like wartime calculations of "acceptable collateral damage." Yes, The Economist admits "the economic and social costs of recession are painful: unemployment, lower wages and profits, and bankruptcy." But we can't reverse Greenspan's excessive rate cuts that created the housing/credit crisis. It'll be painful for everyone, especially millions of unlucky, mislead homeowners who must bear the brunt of Wall Street's greed and Washington's policy failures.

2. U.S. dollar wake-up call

Reverse the dollar's free fall and revive our global credibility. Warnings from China, France, Iran, Venezuela and supermodel Gisele haven't fazed Washington. Recession will.

3. Write-offs

Expose Wall Street's shadow-banking system. They're playing with $300 trillion in derivatives and still hiding over $100 billion of toxic off-balance sheet asset-backed securities, plus another $300 billion hidden worldwide. A lack of transparency is killing our international credibility. Write it all off, now!

4. Budgeting

Force fiscal restraint back into government. America has been living way beyond its means for years: A recession will cut back revenues at all levels of government and cutbacks will encourage balanced budgeting.

5. Overconfidence

A recession will wake up short-term investors playing the market. In bull markets traders ride the rising tide, gaining false confidence that they're financial geniuses. Downturns bruise egos but encourage rational long-term strategies.

6. Ratings

Rating agencies have massive conflicts of interest; they aren't doing their job. They're supposed to represent the investors, but favor Corporate America, which pays for the reports. Shake them up.

7. China

Trigger an internal recession in China. Make it realize America's not going into debt forever to finance China's domestic growth and military war machine. A recession will also slow recycling their reserves through sovereign funds to our equities.

8. Oil

Force the energy and auto industries to get serious about emission standards and reducing oil dependency.

9. Inflation

Expose the "core inflation" farce Washington uses to sugarcoat reality.

10. Moral hazard

Slow the Fed from cutting interest rates to bail out speculators.

11. War costs

Force Washington to get honest about how it's going to pay for our wars, other than supplemental bills that are worse than Enron-style debt financing.

12. CEO pay

Further expose CEO compensation that's now about five hundred times the salaries of workers, compared with about 40 times a generation ago.

13. Privatization

Stop the privatization of our federal government to no-bid contractors and high-priced mercenary armies fighting our wars.

14. Entitlements

Force Congress to get serious about the coming Social Security/Medicare disaster. With boomers now retiring, this problem can only get worse: A recession now could avoid a depression later.

15. Consumers

Yes, we're all living way beyond our means, piling up excessive credit-card debt, encouraged by government leaders who tell us "deficits don't matter." Recessions will pressure individuals to reduce spending and increase savings.

16. Regulation

Lobbyists have replaced regulation. Extreme theories of unrestrained free trade plus zero regulation just don't work; proven by our credit crisis, hedge funds' nondisclosures, private-equity taxation, rating agencies failures, junk home mortgages, and more. Get real, folks.

17. Sacrifice

"We have not seen a nationwide decline in housing like this since the Great Depression, says Wells Fargo CEO John Stumpf. As individuals and as a nation Americans have always performed best in crises, like the Depression or WWII, times when we're all asked to make sacrifices. Pampering us with interest-rate cuts and tax cuts during the Iraq and Afghan wars may have stimulated the economy temporarily, but they delayed the real damage of the '90s stock bubble while setting the stage for this new subprime/credit crisis.

Wake up, the train wrecked. Time to think positive, find solutions, demand sacrifices. End of Story

28 comments:

Anonymous said...

Hey Keith, perhaps you + HP'ers want to participate to fight the corporate fascists:

Buy Nothing Day on 11/23/07 (Black Friday)

Buy Nothing Day is an informal day of protest against consumerism observed by social activists. In 2007, Buy Nothing Day falls on November 23rd in North America and November 24th internationally.


http://tinyurl.com/qz99y

Bitterrenter said...

You think people should suck it up and deal with the adversity brought about by a handful of greedy republican Wall Streeters, bad conservative fiscal policy and the greed culture promoted by this gutter ideology?

No, I think we should take this as an opportunity to do very bad things to republicans AFTER we take the rich for everything they have.

But I'm sure most of you will manage to blame illegals, liberals or some other strawman enemy.

KILL THE RICH.

Anonymous said...

Straight out of this blog

Anonymous said...

It's a necessary purge.

Let's get it started and over with.

Anonymous said...

You think the Chinese will take a US recession and "change their ways"?

BullS&&T.

In the middle of a US recession, the Chinese will defend their peg.

When US companies are having problems, they will fire even more US workers and outsource them.

They'll shut down even more factories and offices and send them to China. China will take their intellectual property too.

You can't out recession China.

They will exhaust the USA.

The Chinese are after strategic deindustrialization of the USA. This isn't the 18 month business cycle---"long term" to stupid capitalists. It's 30 years.

They won't stop until the USA is completely kaput and their internal market is robust and developed. Then they'll let the spring snap back.

Anonymous said...

It's like a bad kid who needs to be spanked... but unfortunately the wrong kids are going to get spanked.

Frank@Scottsdale-Sucks.com said...

Extreme theories of unrestrained free trade plus zero regulation just don't work

I would disagree with that. True, pure, unadulterated free markets work. The problem in America today is that our free market is contaminated by a looter mentality wherein people assume that they can make fatal mistakes and the government will always be there to bail them out.

Hence the cries for mortgage bailouts to failed flippers and desperate homedebtors.

Get rid of the government handouts and change people's mindsets to one that the government WILL NOT bail them out and free markets will work.

I noticed that this site is very pro Ron Paul. If you look at his platform and voting record, he is a strict Constitutionalist, and under the Constitution, there can only be a free market with no tolerance for government regulation and meddling.

Anonymous said...

AMEN....I especially like # 16. This is the most on the mark post yet.
Thanks Keith!

Princess Mononoke said...

Bravo... Bravo... Bravo!!!

APPLAUSE

Bravo... Bravo... Bravo!!!

Well executed, superbly written.

Anonymous said...

Uh... during this ENTIRE debacle Mr. Paul B. Farrell has busied himself (and his readers) with one column after the other obsessed with NOTHING but mutual fund fees!

Any level of awareness of the housing/credit bubble are a VERY recent revelation for Mr. Farrell. (What would we expect from someone that lives in Arroyo Grande, CA?)

No, more likely Mr. Farrell REJOICED in the ever escalating value of his SoCal home and if he had ANY concerns about the obvious and inevitable consequences, he kept them to himself.

Now that the battle is safely over and the dust is settling Mr. Farrell is only too happy to come in and bayonet the wounded.

Oh and best of luck with those no-load index funds Paul.

DinOR

Anonymous said...

I would disagree with that. True, pure, unadulterated free markets work. The problem in America today is that our free market is contaminated by a looter mentality wherein people assume that they can make fatal mistakes and the government will always be there to bail them out.

Hence the cries for mortgage bailouts to failed flippers and desperate homedebtors.

Get rid of the government handouts and change people's mindsets to one that the government WILL NOT bail them out and free markets will work.

I noticed that this site is very pro Ron Paul. If you look at his platform and voting record, he is a strict Constitutionalist, and under the Constitution, there can only be a free market with no tolerance for government regulation and meddling.

November 21, 2007 7:44 AM

Frank has been reading his own clippings for too long.

Listen Frank, America was founded explicitally against "Free Trade"!!

Have you ever heard of the "American System of Political Economy"?

Have you ever read Alexander Hamilton?

Boobs like you have gotten it all wrong all these many years which is precisely why we are faced with this crisis.

How in the world can you consider yourself some hot shot business guru and write something as stupid as our Constitution forbids any government interference with free trade? That shows just how stupid the average American really is.

Frank this country fought 3 wars against British Free Trade
1. The American Revolution
2. The War of 1812
3. The Civil War

Learn your nations history and then maybe you can become a citizen instead of a populist boob.

Anonymous said...

You cant have an unregulated post industrial economy. The austerity ideas posed in this thread show that the last 40 years lead to fascist austerity just like Hjalmar Schact's beast man Adolf Hitler.

Get rid of free trade, econ 101, de regulation, privatization, and return to a nation that produces high rates of physical wealth.

Tangelo Mozilo said...

Eric Janszen at itulip comments on this very article:

http://tinyurl.com/2gpeue

Anonymous said...

#15-
Homeowners need to learn that they are not Millionaires in Real Estate, just because they bought some overpriced POS in 2004

This younger generation is now going to learn about CYCLES - us older folks have been through a few of these, had our "smack-down" in the past, saw this one coming (BIG TIME!) & have hopefully learned that:

Real Estate doesn't always go up! (it can go to hell in a hand basket & you can be stuck with it for YEARS!)

RE Agents are not smart of looking out for your best interest!

Interest Only loans are dangerous!

Keeping up with the Jones' is a dangerous game! (give up the Hummer dumb ass)

Ah, a few good things come with age!!

Edgar said...

A recession? Ha! You wish. It's way too late for that.

Anonymous said...

Things will fall part after the holidays.

The stock market is on auto-pilot deadcat bounce.

Retailers will begin layoffs after Thansksgiving this year because sales will be so dismal, they'll need to cut staffing in order to keep some profit.

Corporations will be handing pink slips out for Xmas.

In January, the PPT wont be able to keep the market above 13000

bitterrenter said...

30 years of republican fiscal policies, rampant conservatism and market cultism are going to take us to the edge of collapse.

Here's hoping another republican gets elected in 2008 to push us over that edge. HARD.

Then the real fun begins. I envision work camps in the desert for the republicans who don't manage to flee the country. So glad to be alive to see it.

Anonymous said...

I have been listening to Paul Farrell for years, and it was one of his articles about 2 years ago, that convinced my husband and I that it WAS NOT (red lights flashing) time to buy!

He laid out every twist and turn of this "Perfect Storm" coming and it was all so factual, and made perfect sense. He dosent always tell the Sheeple what they want to hear, but his facts and knowledge are immaculate, and he will tell it like it is.

THANKS PAUL and Thanks Keith for running his recent article!!

lifeconsultant said...

1) The public has to ridicule and scorn all the key decision makers and players in Debacle. Key players in this racketeering must be stripped of assets and jailed swiftly. You know what some other countries would do.

2) U.S. must make and export; massively reduce
China imports;and use same taxes Japan, etc. has long used vs. U.S.products.

3) If can't get enough boomers, Xs, Ys + to get it and live with moderate values once again face same fate as, e.g., England.

Anonymous said...

This is SO true, extended periods of ballooned "prosperity" are very bad for all people. Trying to outperform each other, various scoundrels commit lots of fraud (like the mortgage fraud frenzy during the 2002-2007 "prosperity"), and people who rely on honest hard work for income feel like idiots for not cashing out like kings in various Ponzi schemes. My girlfriend used to tell me that most realtors and mortgage brokers don't have even a high school degree, but make much more money than me, a scientist with a PhD. This was her argument that the value of my education is only marginal. Now all these uneducated realtors and mortgage brokers are at best jobless. Some of them are in jail or under investigation for fraud. My girlfriend doesn't argue with me about my education anymore.

Anonymous said...

My girlfriend doesn't argue with me about my education anymore.
_____________________________
Nice GF.

Downtown O-town said...

"My girlfriend used to tell me that most realtors and mortgage brokers don't have even a high school degree, but make much more money than me, a scientist with a PhD. This was her argument that the value of my education is only marginal."

Man . . . you need a new girlfriend.

Anonymous said...

.


What we need is a good high colonic in Washington!


.

Anonymous said...

China is preparing to land their astronauts on the moon. They are doing all that by stealing US technology and with the money you give to Wal-Mart. Wal-Mar & Co is selling the entire US cheap to China, including your jobs.

So you keep being China's bitches, while they bankrupt the country and land on the moon.

Ken said...

There is a really good commentary and response to these 17 points over at iTulip.com - see http://www.itulip.com/forums/showthread.php?p=20511#post20511

Anonymous said...

Abraham Lincoln once was supposed to have said that "most people endure hardship fairly well, but if you want to test someones character, give them power."

Well, Americans have been given the power of prosperity, and they have failed the test. Prosperity has destroyed the fool, as the proverb says.

So often life administers the test first, then the lesson after.

We had the test, now prepare for the lesson.

BRING!!!
ON!!!
THE!!!
RECESSION!!!

Make it hurt, Lord - we have it coming.

B

devestment said...

HELL YEA! I AM ALLREADY ON IT.

Anonymous said...

Anon 5:09pm,

Yeah, great. Paul B. Farrell sees a "Perfect Storm" and prevents you from buying with his article 2 years ago at the EXACT PEAK OF THE MARKET!

Whoopie! The point is, by Fall of '05 the majority of the MSM had already embraced the fact that we were staring down a loaded shotgun. Hardly what I'd call a visionary. No, Paul is what I'd probably refer to as a 'financial politician'. He simply "gets in front of" whatever issue retail investors are moaning about and becomes "their voice" by chiming in with the choir.

There are legions of other "gurus" you could've gotten behind and have done infinitely better.

DinOR