During the Greenspan era the Federal Reserve took it upon itself to vigorously fend off recession by lowering the prime rate to unprecedented levels. This made it prudent for people to borrow and spend rather than save. The ratio of private debt to the Gross Domestic Product rose by 50% in five years, while the personal savings rate fell to 0. This kind of “stimulus” to the economy was like so much caffeine (by the way, did you know that the average German drinks 77,000 cups of coffee over a lifetime? You didn’t? Well, now you do.), which we all know can only keep you pumped up for so long. Now it’s time for an enforced economic nap, folks, so nix that planned trip to Montserrat and learn to like cozy evenings in front of a fire (fuelled by your furniture, natch…) with a book. And be sure to read the provocative (dare I say ‘inflammatory’?) books first, before they’re banned and you get to burn them for warmth, too. Just like in the 30s, reactionary prudes will be sure to blame social permissiveness for financial woes and the vigorous finger-pointing will begin.
Of course the received wisdom of the crowds is that depression is what happens to me while recession is what happens to you, but either way the numbers for GDP, employment, industrial production and the wholesale-retail sales are all bound to – and should if you ask me, which everyone persists in not doing – fall, $700 billion or no $700bln. Your standard of living will fall as well, just like the head of the Bank of England (too lazy to look up his name just now) said the other week. At least he’s being realistic, while on this side of the pond Ben and Hank (have you noticed that Mr. Paulson is referred to as “Hank” by some news sources and “Henry” by others? I think it says a lot about the news source in question, don’t you?) are valuing expediency over effectiveness, with the Senate seconding the motion. Good financial ideas continue to exude from over there, as Gordon Brown, the, um, lets say, if you will – less than charismatic? – proud leader and storied economist of Britian figured out that what is needed is cash into the banks, since liquidity was less of a problem than solvency, and now the rest of the world is following suit. $200bln more just got sucked out of our pockets.
This credit crisis, arguably caused by both a dearth of regulation and anti-recession tinkering by the Fed, is becoming voracious, and is now stalking economies across the Atlantic and in Asia as well. It’s counting coup on France, Germany, Britain, Spain and, of course (who knew?) Iceland. France, where Sarkozy proposed a 300bln Euro bailout for the region has practice with all this, after dealing with the famous case of Jerome Kerviel, the famous little trader (who happens to be hot, by the way. Much hotter than Palin, and smarter, too, but how hard is that?…)who lost something like 5 billion Euros for France’s premiere bank, Societe Generale earlier this year. Meanwhile, Germany’s Chancellor Angela Merkel bites back with a refusal to even entertain the notion of “writing a blank check for all banks regardless of whether they behave in a responsible manner or not”. A statement which was followed shortly by a 480 billion Euro bailout package (which Deutschebank’s director scorned to accept any of because it was ‘too embarrassing’ before he grabbed his share). The last time I checked Italy, Spain, Turkey and Germany all claim to have the healthiest banks in Europe, though it is only Socialist Spain whose banks haven’t needed bailing. Go figure. Did someone say that Capitalism is dead? Or was that Libertarianism?
That being said, now’s the time to buy, buy, buy!!! Unless, of course, all your money has already gone bye-bye. Even if you aren’t Warren Buffet, you can get a deal today, and since I’m not a trader or anything, I wouldn’t take one word of my advice, but while you’re shopping do stay away from Russian stocks, won’t you? Those Russians always seem to be poisoning someone, and it just makes investing over there so … temperamental. You never know when a CEO could be emerging from the intensive care unit all pock-marked like Ukrainian President Viktor Yushchenko, who started the whole color revolution craze over there, ticking off the Russians. Then there was Alexander Litvinenko, who came down with a sudden case of radiation poisoning from (the hard-to-get now, but commonly used in the USSR) Polonium 210 after marching out of the country with something to say. After that it was Ana Politkovskaya, who came down with a mysterious case of delirium after drinking tea on the way to report on the Beslan School crisis in ’04. Having survived that, she was shot outside her apartment in ’06.
Next it was Karina Moskalenko, a human rights lawyer who represents not only the survivors of Politkovskaya, but Mikhail Kodarkovsky, the oligarch currently cooling his heels for publicly clashing with Puti-Put, and chess champ Gary Kasparov, who is currently being prosecuted for… what is it? I forget. But it really doesn’t matter. He’s a political opponent of President Medvedev. So besides representing these folks, Moskalenko specializes in representing Chechnyan (did you know -I bet you didn’t- that Grozny is not only the capital of Chechnya, but the word grozny, in Russian, means “terrible”? Now you do.) downtrodden/separatist/Islamist/valorous guerrillas/criminal miscreant whatevers, and she and her family have come down with a case of nausea, dizziness, headache and general malaise, thanks to a surreptitiously placed hunk of mercury under the front seat of their car. Who do you think would do such a thing?
All I’m saying is that if you’re going to buy, buy, buy! take a look at gold, which is usually a good deal when the dollar is strong, which it is now. You missed the sweet spot on 9 Oct, when it bottomed at $703, but it’s still a safe bet if you have cash, since you wouldn’t want to sell any of your portfolio now, while it’s a worthless heap, would you? Or go into Spanish acquisitions. Or, if this dizzying array of jargon-infested information has you clutching your head and reaching for the bottle, just stuff all your filthy lucre under your mattress. You could have a “sleep-number” bed that way.