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Thread: CFO of USA, Inc. says "We're screwed."

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  1. #1
    Join Date
    Mar 2006
    Boston, Mass.

    Default CFO of USA, Inc. says "We're screwed."

    CFO of USA, Inc. says "We're screwed."

    Well, that's not exactly what he said on CBS last night, but close enough. David Walker, comptroller general of the United States, totaled up our government's income, liabilities, and future obligations. He has concluded that the numbers "don’t add up." If you haven't listened to Walker, he makes iTulip sound downright optimistic. To wit:

    "The most serious threat to the United States is not someone hiding in a cave in Afghanistan or Pakistan. It's our own fiscal irresponsibility."

    "We suffer from a fiscal cancer. It is growing within us. If we do not treat it, it can have catastrophic consequences for our country."

    "The country is starved for two things: truth and leadership."

    "The survival of the country is at stake."
    AntiSpin: What a nut. He's only the CFO of USA, Inc. He's been screaming about reckless fiscal policy for years. Your Congress-critter hasn't been paying any attention to him, so he's out on the rubber chicken circuit pleading his case to you and I, the voter. He's hoping that somehow it will matter in 2008 whether you or I pin the tail on the donkey or ride an elephant, even though both political parties have been stalwarts since the early 1980s of the FIRE Economy that got us into this mess.

    We can fool ourselves, but more and more we can no longer fool others. As our John Serrepere recently pointed out, foreign investors are pulling out of U.S. markets, thus the "volatility" (read: decline). The symbolic DJIA index is getting ready to go through 12,000... backwards. Time to revisit the iTulip Real Dow.

    The Real DOW is the result of an analysis that shows the inflation-adjusted value of the DJIA going back to 1924. Still sounds crazy, but we still expect a 50% correction over the next ten years or so. That's what is needed to get the DOW back to its 1.64% trend line. As you can see, it is still elevated from the stock market bubble of the late 1990s and government monetary policy since then that was needed to save it from a Japan 1990s-style collapse. But then the prediction of the NASDAQ crash and the August 2002 identification of the housing bubble and prediction in 2004 of its demise sounded crazy, too.

    The Desperate Optimism of the Invested is fading in the housing market, a sure sign that we are entering Step C of our seven step housing market decline that started mid 2005. The Desperate Optimism of the Invested is the enthusiasm that one over-weighted in any asset–whether in stocks, bonds, gold, or houses–develops when confronted with the real prospect of a catastrophic loss. When on a tightrope over a gorge, everyone believes in windless days and immortality.

    The latest from our real estate expert Sean O'Toole does not show a housing market that is "bottoming out." No, the correction continues relentlessly, as homes returned to lender at auction continue to climb.

    On the good news front, the Wall Street Journal gets religion, as Justin Lahart does another bang-up job reporting on the economy in Housing Bubble: Toil and Trouble Follows Pattern (subscription).
    Seven years after the stock-market bubble busted, the troubles in the housing market look strikingly familiar. In fact, everything is going according to the textbook -- the textbook in this case being Charles Kindleberger's 1978 classic, "Manias, Panics, and Crashes."

    Mr. Kindleberger found speculative bubbles tended to follow similar patterns. First, there is some "displacement" -- such as the development of the Internet or a prolonged period of ultralow interest rates -- that radically improves the outlook for some area of the economy. People take advantage of the opportunity, fueling a boom that is fed by progressively easier access to cash. At the height of the bubble, there's "pure speculation"; assets are bought to quickly sell them again at a higher price -- day-trading in 2000, condo-flipping more recently, tulips long ago.
    Welcome to our world, Justin.

    Real DOW embed for bloggers:
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    Last edited by FRED; 03-06-07 at 11:43 AM.



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