for the original article, see http://www.marketwatch.com/news/story/seventeen-reasons-america-actually-needs/story.aspx?guid=%7B08D803FF%2D60CE%2D4868%2DBDB8%2DD0CFFE9851B0%7D
On Nov 21, 2007 6:25 PM, ken hanly <[EMAIL PROTECTED]> wrote: > > Interesting article and commentary. Do you have the > URL for the original? Maybe it is there and I am blind > but I don't see it. > > Cheers, ken hanly > > --- Jim Devine <[EMAIL PROTECTED]> wrote: > > > [my comments in brackets -- I corrected some errors > > and added a final paragraph] > > > > 17 reasons America needs a recession Think positive, > > this 'slow motion > > train wreck' is good for the U.S. > > > > By Paul B. Farrell, MarketWatch > > > > Last Update: 6:53 PM ET Nov 19, 2007 > > > > ARROYO GRANDE, Calif. (MarketWatch) -- Yes, America > > needs a recession. > > Bernanke and Paulson won't admit it. And investors > > hate them. We're > > all trapped in outdated 1990s wishful thinking about > > a "new economy" > > and "perpetual growth." > > > > But the truth is, not only is a recession coming, > > America needs a > > recession. So think positive: Let's focus on 17 > > benefits from this > > recession. > > > > To begin with, recession may be an understatement. > > Jeremy Grantham's > > GMO firm manages $150 billion. In his midyear report > > before the credit > > crisis hit he predicted: "In 5 years I expect that > > at least one major > > 'bank' (broadly defined) will have failed and that > > up to half the > > hedge funds and a substantial percentage of the > > private-equity firms > > in existence today will have simply ceased to > > exist." > > > > He was "watching a very slow motion train wreck." By > > October, it was > > accelerating: "Train hits end of track at full > > speed." > > > > Also back in August, The Economist took a hard look > > at the then > > emerging subprime/credit crisis: "The policy dilemma > > facing the Fed > > may not be a choice of recession or no recession. It > > may be between a > > mild recession now, and a nastier one later." > > > > However, the publication did admit that "even if a > > recession were in > > America's long-term economic interest, it would be > > political suicide" > > for Fed Chairman Ben Bernanke and Treasury Secretary > > Henry Paulson to > > suggest it. > > > > Then The Economist posed the big question: Yes, > > "central banks must > > stop recessions from turning into deep depressions. > > But it may be > > wrong to prevent them altogether." > > > > Wrong to prevent a recession? Why? Because > > recessions are a natural > > and necessary part of the business cycle. Remember > > legendary economist > > Joseph Schumpeter, champion of innovation and > > entrepreneurship? > > > > Economists love Schumpeter's "creative destruction:" > > Obsolete firms > > get destroyed and capital released, making way for > > new technologies, > > new businesses, like Google. And yet, nobody's > > willing to apply > > Schumpeter's theory to the entire economy ... and > > admit recessions are > > a natural part of the business cycle. > > > > Instead, everyone persists in the childlike fairy > > tale that "all > > growth is good" and "all recessions are bad," a bad > > hangover of the > > '90s "new economy" ideology. So for the folks at the > > Fed, Treasury and > > Wall Street, "eternal growth" is still America's > > mantra. > > > > Unfortunately, the American investors' brain has > > also developed this > > blind obsession with "growth-at-all-costs," coupled > > with a deadly fear > > of all recessions, as if recessions are a lethal > > super-bug more > > powerful than Iran with a bomb. > > > > Our values are distorted: It's OK to be greedy and > > overshoot the > > market on the upside -- grab too many assets, take > > on too much debt, > > make consumer spending a religion, live beyond our > > means, ignite > > hyperinflation along the way. Growth is good, even > > in excess. > > > > [!!??!! -- hyperinflation is not currently in the > > cards. It also > > seems unlikely, unless the US government falls > > apart.] > > > > And yet, recessions are a no-no that drives > > politicians, economists > > and investors ballistic. > > > > Well, folks, you can block all this from your mind, > > you can argue that > > recessions are not a part of Schumpeter's thinking, > > that they are > > inconsistent with your political ideology. But the > > fact is, we let the > > housing/credit boom become a massive bubble, it > > popped and a recession > > is coming. So think positive, consider some of the > > benefits of a > > recession: > > > > 1. Purge the excesses of the housing boom > > > > No, it's not heartless. Not like wartime > > calculations of "acceptable > > collateral damage." Yes, The Economist admits "the > > economic and social > > costs of recession are painful: unemployment, lower > > wages and profits, > > and bankruptcy." But we can't reverse Greenspan's > > excessive rate cuts > > that created the housing/credit crisis. It'll be > > painful for everyone, > > especially millions of unlucky, mislead homeowners > > who must bear the > > brunt of Wall Street's greed and Washington's policy > > failures. > > > > [This author should quote Andrew Mellon, Treasury > > secretary during the > > 1920s: "liquidate labor, liquidate stocks, liquidate > > the farmers, > > liquidate real estate." His whole idea is that a > > recession would purge > > the imbalances from the US economy -- i.e., those > > factors that are > > screwing up financial and real-world markets. This > > is a very 19th > > century way of looking at things. For example, Marx > > saw the bankruptcy > > of thousands and the destruction of a lot of capital > > as the result of > > a recession ("crisis") and also as allowing a new > > recovery. > > > > [Of course, neither Mellon nor Marx anticipated that > > a cyclical > > recession could cause the US economy to jump the > > rails, going from a > > normal business cycle to a serious depression. Okay, > > Marx had some > > ideas along these lines. In some Marxian > > interpretations, a serious > > recession would encourage revolution.] > > > > 2. U.S. dollar wake-up call > > > > Reverse the dollar's free fall and revive our [i.e., > > US capitalist] > > global credibility. Warnings from China, France, > > Iran, Venezuela and > > supermodel Gisele haven't fazed Washington. > > Recession will. > > > > [I don't see why a recession would do this. If the > > US recession "goes > > global," it won't just be US imports that fall, > > helping the US$. It > > will also be foreign exports (US imports) that fall, > > which would hurt > > the value of the US$. ] > > > > 3. Write-offs > > > > Expose Wall Street's shadow-banking system. They're > > playing with $300 > > trillion in derivatives and still hiding over $100 > > billion of toxic > > off-balance sheet asset-backed securities, plus > > another $300 billion > > hidden worldwide. A lack of transparency is killing > > our international > > credibility. Write it all off, now! > > > === message truncated === > > > Blog: http://kenthink7.blogspot.com/index.html > Blog: http://kencan7.blogspot.com/index.html > -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante.