Wednesday, October 15, 2008

Wither Goest Thou?

This is bad news... the slump is headed toward a very serious recession...
or presented in a way that shows both real sales changes versus nominal sales changes over a longer timeline to let you appreciate how much trouble we are really in...

The problem with a recession/depression is the psychology of it. Once everybody is convinced that things are going bad, they tighten up. It becomes a self-fulfilling prophecy.

Unfortunately Bush is yet again a dollar short and a day late. His administration has a long record of responding slowly to emergencies letting this grow from a small problem into a huge problem. Like they say "an ounce of prevention is worth a pound of cure". But unfortunately with Bush you have to spend many, many dollars desperately trying to cure a deathbed patient because he responds so late that the patient is on death's door before it gets his attention.

This economy is like all those poor folks in New Orleans. We've now been on the overpasses or trapped on rooftops or huddled at the Superdome and Convention Center for two or three days wondering why the government hasn't responded. Those poor folks didn't realize that they had another 3 or 4 days to wait before Bush would mobilize any serious emergency aid. Well, the same thing is going on today. Back in Dec 2007 Paulson put forward a "plan" to deal with the rising mortgage default rate. It was so constrained and so poorly targeted that nobody could take advantage of it. Now foreclosure rates are astronomically high. The problem which could have been solved with $200 billion is now costing over $1 trillion and -- because it is so late to the rescue -- will probably cost closer to $3 trillion. Bush has consistently been a dollar short and a day late. And the American people (and the whole world) pay a price for his incompetence. What a tragedy!

Here is what Paul Krugman has to say about the above graphs in his NY Times blog...
This reinforces a point I’ve been trying to make: even if the rescue now in train succeeds in unfreezing credit markets, the real economy has immense downward momentum. In addition to financial rescues, we need major stimulus programs.

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