Microsft's Ballmer Expects "A Fundamental Economic Reset”

[World Traveler]

He definitely seems to agree with the general iTulip thesis. In a speech yesterday, he said:

"For the past 25 years, the world has certainly enjoyed incredible, incredible global growth. Average incomes around the world grew at unprecedented rates, millions of people moved from out of poverty into the middle class for the very first time.

I think that expansion was built on three things: innovation, globalization, and debt, increasing debt...

But over time, over the last period of time, the balance has really shifted. Instead of innovation and productivity driving growth, it’s really been unsustainable levels, particularly of private debt, that have been a key driver of economic growth...

At Microsoft, we've studied these developments. We believe this is a once-in-a-lifetime economic event, but it's not unique frankly in U.S. history. The current situation looks a lot like several -- not one but several previous cycles of long-term private sector debt...

In my view, what we now have will be a fundamental economic reset. The economy is going to have to re-establish itself at a level of spending that reflects the real value of underlying assets before we can all start growing again at a healthy rate.

This may not be the thing that people really want to hear, but it's certainly what we're planning on, and it's the truth on which we're basing sort of our model, if you will, at Microsoft.

In our opinion, in order to reach the reset point, three things need to happen. First, the economy must be deleveraged. Private debt as a percentage of GDP has to be reduced. Restoring health to the nation's financial system is a fundamental part of this.

Just for historical note, not only during the Depression, but actually in 1837 and in 1873 we had similar style resets in the economy. We actually have at least three historic periods that we can study in which similar phenomenon occurred. I think it was 1873 where even the state of Florida filed for Bankruptcy. So, we need to be thoughtful about being students I think of the history..."

Full speech:

http://www.alleyinsider.com/2009/2/b...economic-reset

[Starving Steve]

Re: Microsft's Ballmer Expects "A Fundamental Economic Reset”

Why did the Alan Greenspan Fed, the Bank of Canada, and all of the other central banks around the world just sit back in the 1980s and 1990s and let this real estate bubble just get to be The Hindenburg?

Of course this is not the first time we have been through a real estate depression, but central bankers were to prevent this from ever happening again. Why did they let it happen? And when they were warned over and over again that this was a bubble, the persons warning of the bubble were laughed at and dismissed.

Wasn't it apparent to Alan Greenspan that with unions broken and jobs exported, wages falling, that no matter how much we earned, we couldn't afford to buy a home? And so women went to work too, then homes became too expensive for even two incomes. Weren't the alarm bells ringing off the wall at the Federal Reserve right about the time women went to work to keep the house? This was at the end of the 1970s.

I blame Greenspan more than anyone else because he had the balls to lower interest rates to re-enforce the real estate boom in the 1980s. What in the hell was this so-called economist thinking, or was he intoxicated on Reagan's supply-side economics too?

Of course assets, especially house prices, are too high for what the American economy produces. Where do we go from here, Mr. Greenspan?

Are you and Bernankee planning a print-a-thon? A de-valuation?

What does the U.S. produce? That is a good question, indeed. Why wasn't this being asked earlier, especially at the Federal Reserve Bank? Why isn't a similar question being asked by the Bank of Canada in Canada, the Bank of England in the UK, and so on?

At least Volcker broke the real estate bubble in 1980 with his tight money, but then Greenspan had the balls to re-inflate the real estate bubble again. And look at this mess now: a worldwide depression, apparently!

[Mega]

Re: Microsft's Ballmer Expects "A Fundamental Economic Reset”

I blame "Skynet" myself...........the Manchine got smart!
Mike

[Mega]

Re: Microsft's Ballmer Expects "A Fundamental Economic Reset”

I think "HAL" had something to do with it as well.
Mike

[Starving Steve]

Re: Microsft's Ballmer Expects "A Fundamental Economic Reset”

Maybe here in Canada what we should be asking is how much real wealth do we have to export from the country ( oil, lumber, wheat, gas, gold, whatever ) before we have something more than a real estate bubble to show for our exports? When does our purchasing power as workers and savers go up?

I have worked all of my life in Canada and America, I have saved, and I have so many bank accounts that I can not keep track at tax time; and yet, what do I have to show for my so-called wealth? What can I actually purchase, especially in Victoria? Vancouver? San Francisco? Honolulu? New York City? Toronto? Edmonton?

I am losing confidence, and I think that is the real story of the day: how many people are now losing all confidence in this economic system.

[steverino11]

Re: Microsft's Ballmer Expects "A Fundamental Economic Reset”

Pleas don't loose confidence, because, at the end of the day, it is all we have. Everything in the world economy is based on group psychology. Unfortunately, this acts like a pendulum swinging from one extreme to another with very brief periods in the middle of the range. Obviously, the pendulum has now swung far off it epicenter and otherwise rational people are beginning to loose faith and confidence in the one economic system (capitalism) that has enriched the world for centuries. The good news, as a life-long contrarian, I view posts professing to "throw in the towel" as a leading indicator that we are fast reaching a bottom. Remember, other than a few like Eric, nobody saw this disaster coming and now the same pundits are attempting to "fix" the economy or predict the next iteration. All I can say is once bitten, twice shy. One final point, the media basically was complicit in the election of Obama, like his policies or not, and continues to report and behave as their whipping boy George Bush is still in office - ask yourself: "When was the last time I saw a positive article on the economy in a national or local newspaper or featured on a television show?" Misery loves company and since no one is buying or watching the mainstream press, ratings and circulation is down, ad revenue is down and jobs are being lost - hard to be objective when your own butt is on the line on a day to day basis, so bias creeps in and so goes the story. BUT and this is the big BUT one day very soon these reporters who are admittidely liberal in their political leanings, will wake up and realize that if they keep reporting bad news, their guy Barak Obama (our guy too since he is the prez) will fail miserably if they do not get behind him and start fanning the flames of recovery. Positive articles will begin to appear and then, mark my words, the recovery will begin in earnest. So, take heart, all is not lost, we are not going down the abyss as a country, my heart goes out to those who have or are about to loose jobs, but these are individual situations. Don't believe the hype that this is the "worst economy" since the Great Depression - remeber 1982? Inflation in the teens, interest rates the same and unemployment in the double digits under Jimmy Carter. Paul Volker came in under Reagan and cleaned up the mess - who by the way has been hired by Obama - maybe we can expect some crazy "run away" inflation (Remeber the WIP buttions under Pres. Gerald Ford - Whip Inflation Now?) and then Paul V. makes one last stand, raising rates, tightening money supply and resetting the whole economy in one fell swoop.

[Spartacus]

Re: Ballmer, Ballmer, Ballmer ....

it's called a "BSOD"

BWAHAHAHAHAHAHAHAHAHHA !!!!!!!!!!!!!

and your inability to call it that is telling and speaks volumes about a certain corporate attitude

Steverino, turn on "hybrid" mode - that shows you who is replying to which post.

Find the green bar with white lettering -
click on "User CP"
then find (down the left hand side) "Edit Options"

You'll see I'm replying to Steve Ballmer, not you

[steverino11]

Re: Microsft's Ballmer Expects "A Fundamental Economic Reset”

sorry, new to this forum, BSOD? stands for? thanks, and thanks for your thoughtful reply, by the way, not a corporate attitude - I am a small bness guy, who realizes we are all in this together and will sink or swim based on our collective attitude/expectations - just like the last time and the time before, etc.

[snakela]

Re: Microsft's Ballmer Expects "A Fundamental Economic Reset”

BSOD is "Blue Screen of Death"...a common sight for users if Microsoft flagship products.

sorry, new to this forum, BSOD? stands for? thanks, and thanks for your thoughtful reply, by the way, not a corporate attitude - I am a small bness guy, who realizes we are all in this together and will sink or swim based on our collective attitude/expectations - just like the last time and the time before, etc.

[Spartacus]

Re: Microsft's Ballmer Expects "A Fundamental Economic Reset”

Maybe here in Canada what we should be asking is how much real wealth do we have to export from the country ( oil, lumber, wheat, gas, gold, whatever ) before we have something more than a real estate bubble to show for our exports? When does our purchasing power as workers and savers go up?

That's not real wealth, dudel Get with the program. Just ask Julian Simon & most of the Chicago boys.



Who to blame?

http://itulip.com/forums/showthread....5168#post75168

Start with the economists that for 30 years praised and over-valued Japan, the United States, London, Singapore, Hong Kong as paragons of virtue to be admired and emulated, and financial engineering as THE thing to do, and Canada as a backwater, an "imminent basket case".

Cut throat business was the thing to aspire to. Restraint (financial, political and personal) was to be abandoned. The only god worth worshiping? Money. $$$$$$ Money.

the money worshippers and Canada haters. I remember more than a couple of those profs from U of T.

Those places and people are to be admired, but not to be copied wholesale without sober reflection on what one might lose by doing it.

[Spartacus]

Re: Microsft's Ballmer Expects "A Fundamental Economic Reset”

sorry, new to this forum, BSOD? stands for?

Steverino, turn on "hybrid" mode - that shows you who is replying to which post.

Find the green bar with white lettering -
click on "User CP"
then find (down the left hand side) "Edit Options"

You'll see I'm replying to Steve Ballmer, not you



The attitude is Steve's and MS's.

http://fakesteve.blogspot.com/2007/1...bsod-shot.html

http://www.wired.com/science/discove.../1998/07/13987

[Shakespear]

Re: Microsft's Ballmer Expects "A Fundamental Economic Reset”

The good news, as a life-long contrarian, I view posts professing to "throw in the towel" as a leading indicator that we are fast reaching a bottom.

I don't want to throw in the towel but I am asking myself one simple question

"Who made money on this mess?" I can not believe that such a huge mess did not result in some making insane gains in money and power as a result.

Who are they?

It certainly is not the little guy ready to throw in the towel as he was the one stripped of that towel.

[vanvaley1]

Re: Microsft's Ballmer Expects "A Fundamental Economic Reset”

I forgot what the definition of 'terrorist' is again. A relatively small group of people that initiated and sustain politicies that caused the lost of between three and four trillion dollars in real estate values, a 40+% drop in stock values bout the world, bring down governments, immolate the international banking system, and enhanced the ability to expand this endeavor about the world to cause economic havoc...do folks like these fall under the category of terrorists? Or do ya have to shoot or blown somebody up with a gun rather than a financial instrument to qualify for entry into this category?

[Spartacus]

Re: Microsft's Ballmer Expects "A Fundamental Economic Reset”

bad stuff ...
...
litany of woes
...
a 40+% drop in stock values bout the world

then there's this

bring down governments,
immolate the international banking system,

You say this last stuff like it's a "bad" thing ...

[labasta]

Re: Microsft's Ballmer Expects "A Fundamental Economic Reset”

I had perhaps an insight or better understanding as to what is going on last night and posted them on the propertypin. Then I read this thread and thought it matched it quite well. I think I might have finally understood it. I know you all get it, but it has taken time for me to let it sink in.

I wrote:

A quick summary
In the boom years the amount of debt expanded to dwarf the size of businesses and private customers ability to pay.

So we had a creditor: huge, debtor: tiny, situation.

Then, the size of the credit mountain became too big for the first few debtors to pay, creating bad loans which were invisible courtesy of CDSs. This in turn caused the banks to freeze up and make either lending very expensive or way too restrictive (which would have happened anyway as asset prices began to go in reverse snowballing the debt mountain).

Now, the debt is too expensive to get for those overleveraged businesses or businesses which require overleveraged customers (construction and car related industries especially).

They go bankrupt or fire people to reduce costs which snowballs as reduced spending creates less income for other businesses, so they fire people which snowballs again and so on. Those businesses with low costs (debt) and/or cash reserves survive longer than the overleveraged ones. Those businesses then grab the indebted businesses' customers. Unemployment begins to stabilize but is at a very high level. That level depends on the number of overleveraged businesses and those businesses whose customers rely on credit. See note below:

We are probably talking about bankruptcies on a level never before seen.

How do you stop armagedon? The only way is to reduce the indebtedness of the overleveraged so they can at least survive and stop the downward spiral. But money is debt. For every dollar saved is a dollar lent. Savers will have to get screwed. The easiest way to do this politically without pensioners and the prudent throwing petrol bombs on the politicians is inflation. Debt is being written off when someone goes bankrupt anyway, if it can be done before they go bankrupt, they at least survive. By guaranteeing the savers but writing off the debt you get inflation as the savers' money isn't backed by debt anymore. So savers lose out through inflation.

It looks like an (hyper)inflationary depression/recession. It seems on a simplistic level, that the more inflationary, the less bad the unemployment situation and vice versa.

So at the end of this debacle, we will see: creditor: tiny, debtor: huge.

And the game begins again.

Note: I heard an interview on the radio this morning with the guy who runs enterprisesales.ie. (stock wholesaler) It's a small family business which he said had trouble getting capital to expand during the boom years because his businesses was too small for the banks to be bothered about. Now, even though the market is tough, the business is starting to grow (probably due to an oversupply of cheap stock which they can sell on). I bet there are thousands of businesses like this in Ireland. The small ones couldn't get credit and so now have no debt burden whereas their large competitors are starting to struggle with too much debt.

Also, I actually know of one small business who is doing really well and his competitors are disappearing left, right and centre. He says it's because he has no debt and very low overheads (offices on his own property).

It seems like it is these businesses which will stabilize Ireland and stop it going to the mad max stage. They probably make up around 50% of businesses (if finfacts is right http://www.finfacts.ie/irishfinancen...10007513.shtml) so there is hope yet. McWilliams said in a 2006 interview that 90 odd percent of loans in 2005 went into property (in Ireland). This is actually an indicator of the number of bankruptcies. Hopefully, most businesses which are overleveraged or affected by it are only the house and car related ones, even though these were probably overrepresented in Ireland. We may be looking at 30 or 40% of businesses which are affected... hopefully.

It'll still cause horrendous unemployment though (if sufficient debt isn't forgiven beforehand).


I think I finally understand.