MY LETTER TO A FRIEND ...: My Dear Friend, The "baby boomers" have impacted every single thing they have touched. In the 1950s and 1960s it was schools. You saw them built at an incredible pace. In the mid 60s it was community colleges, which prior to that time simply did not exist. Then in the late 60s through the late 70s it was housing. In and around every metropolitan area you saw housing boom...subdivisions going up everywhere ... cities growing like popcorn in a pan. Then it was in jobs and investment. It would have been almost impossible for either Reagan or Clinton to "do it wrong" because they enjoyed being President during the "boomers" peak years. Bush saw the last of it. Now Obama is there to "clean up the mess". Every "boom cycle" creates excesses. That is true of schools, housing, stock prices, commodity prices, and consumption. It will take quite some time for those to be "shaken out of the system" and as that happens it will not be a pretty picture at all. Obama correctly observed that during the Great Depression the Fed focused on FISCAL POLICY. He said that was a mistake. They should have focused instead on MONETARY POLICY. The fundamental problem in both cases was "excesses" and there is no cure for them from government. Virtually any action which government takes will only exacerbate the problem. With Obama, the monetary policy stood a chance of better success than fiscal policy. Unfortunately it was directed to "bail out" or "save" large companies. They got saved ... sort of. They got lean and (very) mean. They cut millions of workers in the process. Banks, like all corporations, have an obligation to shareholders. The lending standards have reached the point where banks cannot make enough money by lending even though they have access to a ton of zero or zero.two five percent money. They instead have opted to make many very risky, highly leveraged investments. The problem is these investments are based on a return of growth which will not happen till the mid 2020s. Bad plan. Worse consequences. There are many days, my friend, when I truly wish I did not know what I know ... that I could not see the "big picture" with such clarity. All the things I have told you here in this and the previous e-mail are almost pre-ordained to happen. I think it would be accurate to say that while Obama may have had the right idea, his implementation of it caused it to be a dismal failure. He set out to "fix" an unrepairable demographic with financial policy and the only end result will be utter disaster for close to a decade. And, with that, I will bid you a good evening (or, properly, a good morning). Love you! Greye
Posted on: Tue, 30 Jul 2013 19:50:36 +0000
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