Tokyo,
Yes you are right.
But it needs a lot of courage (from Govt and regulators)to take that neccesary step.
What about all those entrenched interests which have firmly established themselves within the Govt and will do whatever it takes to maintain the status quo???
Tough one for sure;but definitely needs to be sorted out.
Regards
Ashish.
I agree we are heading into very uncertain economic times ahead and even the areas that should be performing in a recession are not—what are you prosing as the best plan to ride out the roller coaster ahead?
Is that even possible? Can we withstand losing another 2-300,000 jobs? Times are already invariably tough, so to have to make ends meet...this is too frustrating!
Re: What do we do?
tokyogai
10/12/2011 10:14:43 AM
I agree that mark to market is a good step. When I see a credit card statement that says my interest ( if I ever rolled over month to month) would be prime +14% and then the bank still can not make money- I get concerned. Not only about their assets, but how they do business in general. I think it is more about business than regulation.
Tokyo,
Waiting it out is not a good option.Primarily because you could end up waiting forever(Take the case of Japan for instance).
Everything is much-much more different than what it was during the Boom years.Entire Mass-pscychology changes as a result of which Growth tends to stagnate sharply.
One of the best ways to tackle this situation is forcing all the Banks to mark their assets to market value and writing the value of those assets/debts which will never be repaid.Consequently they should be allowed to raise capital too.
This should be done in an orderly manner.Which can be done if the Federal Reserve puts its mind to it.
Regards
Ashish.
Prof,
As Scott very rightly pointed out here.This is a Balance sheet recession and the best way to deal with it is to make sure companies(and especially the Banks) take their losses and clean up their Balance sheets preferably by Marking Assets to Market Value and writing off Debt.
In the process if some of the weakest banks go bust,so be it.
This is the best and easiest way to let the Financial Ecosystem cleanse itself.
In the process some of the weakest links of the chain (especially the severely undercapitalized banks)will get wiped out;so be it.
But the Net result will be a much stronger and healthier Financial Ecosytem as against the current malaise which is present today.America today is looking more and more like Japan following its bust in the 1980s.
Regards
Ashish.
Re: What do we do?
tokyogai
10/12/2011 8:45:38 AM
Not only isn't it pretty, but the old , conventional tools to fix it don't work very well. Until we decide to do something different ( or just wait it out), things will not show much improvement.
Re: What do we do?
Jacob
10/12/2011 3:14:27 AM
Lenore, I think common peoples are hearing and reading the same economic slowdowns from last couple of months. I think only the big corporate peoples, doesn’t heard about that news. Otherwise atleast they may done some precausition methods.
I've been looking for an explanation about why all types of assets seem so well correlated lately. Loose monetary policy is the best explanation I've heard. Since most of the price changes aren't caused by the underlying investments, but by the surplus of dollars flying around; this makes perfect sense. Wonder why I didn't think of it before.
Also agree that the recession is here or on the doorstep. And that the global debt devaluation, which Scott has explained here before, will be painful. Still, the question that ProfR asks is the right one - as individual investors, now that we know all this bad news; what do we do?
This is what a balance-sheet recession looks like. It ain't pretty.
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