Jesse Eisinger notes that the politicos still don’t get the enormity of the Financial crisis yet: 

"There will be blood. In March, the markets got a reprieve, as hope rose that the crisis had passed. Unlikely. Over the next year, we will continue to see home-price depreciation. And much worse. We will have more failures similar to that of Bear Stearns. Since the banking system is pulling back, it will be much less willing to lend to consumers and, more significantly, to companies, which won’t have the money to invest in new plants and research and development. That means layoffs are just beginning. Personal bankruptcy is rising, and corporate bankruptcies are starting to go up. State and local governments will enter financial crises. The future holds massive pension shortfalls and retirement agonies. The problem is that the Fed has fired most of the bullets from its six-shooter, yet the enemy advances. The next president may well be dealing with markets in a continued free fall and a Fed that’s out of ammo and suffering serious damage to its reputation.

The landscape has been utterly transformed, yet the political establishment has barely grasped the enormity of the crisis. Washington isn’t solely to blame—all the supposed financial wizards on Wall Street missed it too. Treasury Secretary Hank Paulson has announced a regulatory overhaul, but it hardly addresses any of the sources of the problem. President Bush has given a handful of typically tone-deaf speeches about the economy. But the proposals from this administration have been characteristically slow, myopic, and nowhere near ambitious enough to address the problem."

Go read the full piece . . .


It’s (Really) the Economy, Stupid
Jesse Eisinger
Portfolio Apr 14 2008

Category: Economy, Politics

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

25 Responses to “It’s (Really) the Economy, Stupid”

  1. Red Pill says:

    I really don’t know why anyone would want to be the next president.

    If I was elected I would send out a legion of spokespeople to bluntly dump on the US population all the terrible statistics the previous administration had been so “deviously hiding.”

  2. Pat G. says:

    Pissonme reported today that trader’s thought the news about Wachovia was the beginning of the “kitchen sink” quarter.


  3. Paul Jones says:

    I have a theory:

    Never before have people lived so long. In the past, wealth and power passed to the child-rearing aged people pretty much as they became mature enough to handle adult situations.

    Now things are different; the aged hold on into senility (Kissinger anyone?) while child-rearing is often delayed due to the lack of confidence that comes with lack of abundance.

    Those of us who have a vested interest in the long-term future (we’ll actually be alive) have the least say in it; those who have no stake in it have the maximum influence based on outdated and sclerotic world views.

    As this imbalance is unprecedented it represents an experiment; as an experiment it can fail, or better said is currently failing.

  4. Marcus Aurelius says:

    “The landscape has been utterly transformed, yet the political establishment has barely grasped the enormity of the crisis. Washington isn’t solely to blame—all the supposed financial wizards on Wall Street missed it too.”


    They didn’t miss a thing – in Washington or on Wall St. The ones acting surprised and playing stupid are those who gained the most during this Great Fleecing of the Treasury. We’ll be hearing claims of being “out of the loop.” Lots of retirement for “medical” reasons (too damn sick to go to court, too).

    As for reacting to the crisis, why would they? It’s not like the authorities are going to show up and stop the looting.

    Eisinger is right, there will be blood. More than likely, it’ll be ours.

  5. I’d love Eisinger to do a follow-up entitled: “It’s (Really) the Currency(Money Substitute), Stupid!”

  6. Sam Perry says:

    seems to me sending a blind man(no offense mean’t)to a shooting range and telling him to hit the target downrange would do better
    than give a bunch of people some money to spend….will right the boat that is dangerously close to capsizing…..there has just got to be a better way…..

  7. Will Lewis says:

    A “New New Deal”? Hmm…. I don’t know what that means and I don’t feel like debating the net gain from the Old New Deal (SEC and Social Security, and, sort of, FDIC and FHA). What I do know is that I hope the author only means political realignment and not a massive expansion of government oversight and control.

  8. AGG says:

    Marcus Aurelius is right. The elites are getting so nervous that Oprah is out pushing another book about all those “poor” unconscious materiialistic rich people we should feel sorry for. Also how the Zen types who live from air and nothing else are so lucky because they are enlightened. How a billionaress can push a book like that is beyond me but I guess it’s more of the cognitive dissonance of our modern society.

  9. Question:

    I’m trying to gauge the full meaning when you guys say “modern society”.

    Have things really changed that much over X amount of time? Haven’t crooks always been around? Is it possible the information age has simply shined a light on activity that’s been going on for centuries?

    Please advise. Thanks

  10. SFH says:

    This economic crisis is really starting to become worrisome. Honestly, I was of the mindset that in due time we would make it through this crisis in tact. However, as this continues to unfold and as the policy miss-steps continue, I wonder if this will turn into a full blown economic collapse of the United States. By economic collapse I mean dollar failure/crisis, emergency actions, and chaos. Are the Federal Reserve’s actions a hopeless attempt to hold the house of cards together? I always joked that if a black man were ever elected president of the U.S. it would be on the eve of Armageddon.

  11. Alfred says:

    This is an overly pessimistic view. Eisinger’s article is one big pessimistic guesstimate. While the storm clouds are gathering it is by no means certain that the worst case scenario will materialize. Today’s retail sales although no reason to cheer do not fall of a cliff just yet. Corporate bankruptcies are at record low levels and balance sheets outside financials and homebuilders are healthy.

  12. Pat G. says:

    “I always joked that if a black man were ever elected president of the U.S. it would be on the eve of Armageddon.”

    That’s a very insensitive, moronic, racist and naive comment for you to make. By the way; I’m white.

  13. Francois says:

    “I hope the author only means political realignment and not a massive expansion of government oversight and control”

    Well, we got to admit that some realignment of government oversight and control is long overdue. Mind you, I’m not talking about expansion, but more about doing things smarter.

    For that to happen, we’ll need to realign, first and foremost, the incentives our un-representatives get right now, a.k.a. special interests money to finance their campaigns.

    As things stand now, these idiots can’t even bring themselves to prevent hunger and food insecurity in this country because the farm and commodities lobbies want even more bondoogles from Uncle Spam.


  14. jombi says:

    I have a theory:

    This type of society is not sustainable :
    - 60% of the population rise everyday to produce something of value and provide useful service
    - The other 40% rise everyday to gamble and bet on the outcomes of their success
    - The 40% gamblers make the most amount of money.

    Seems as though the 60% will live like serfs in order to support themselves and the other 40%’s lavish lifestyle of money creation. Doesn’t seem to far from what’s going on right now.

    The revolution or step of progress will come when all of these clowns on wallstreet wake up to a real job on a daily basis instead of inflating their way into a legitimate society

  15. Winston Munn says:

    The U.S. chain-letter economy has run out of new suckers – how is that a surprise?

    Oh, I remember. The same way that Wachovia’s losses were a surprise, GE’s miss was a surprise, …..

  16. km4 says:

    Perhaps edging closer to American Civil War 2.0

    The elite class Have’s ( 1% of America with 50% of wealth – Bush’s base, who McCain is married to, and much of Clinton’s base – discounting the ignorant and clueless middle or poor classes ) and hired their mercinaries like Blackwater vs the Have Less & Less or the fast diminishing middle American middle class ( most of Obama’s base ).

  17. The U.S. economy will never “collapse” unless innovation ceases. The fact that a guy is making money off of publishing his thoughts on an internet web log of macroeconomic trends while his readers worry over a cyclical crisis tells me innovation is alive and well…

  18. Karl K says:

    When W.W. Grainger is losing money — you know them, the sell STUFF, THINGS — is losing money, I’ll get as worried as this internet Cassandra with a really really bad goatee.

    By the way, Grainger reported nice earnings today. Shocking in the middle of this rant, I know, but there you have it.

    Meanwhile, here’s a prediction for you.

    Some companies are going report good profits. Some are not. Probably most.

  19. What do I know. But it seems to me that nobody — nobody – not the leaders of Wall Street, and certainly not the politicians, *really* understand what the hell’s gone on in the last decade…and we can’t very well regulate what we don’t really get, can we?

  20. AGG says:

    Every aircraft, ship, train or other machine that moves does so because of workers on wages. When their wages are no longer enough, things don’t run properly. When a city can’t afford sufficient police or pays them so poorly that they become corrupt, who is number one on the hit list? Some people benefit from anarchy. Most people don’t. You’ll always have people that have the gall to say everything is fine but as time goes by their voices will become fodder for sarcasm and irony. The 1% that owns 38% of the USA are in deep trouble. They mostly crapped on everybody on the way up. Nobody is going to save their over leveraged asses on the way down. To you rich fellows reading this, how much do you think your security budget is going to go up next year? Your security providers know that they are the only thing between you and all those that want your stuff. Why don’t you make it easy on yourself and start giving your employees some decent wages before they decide to just take them?

  21. SFH says:

    “That’s a very insensitive, moronic, racist and naive comment for you to make. By the way; I’m white.”

    I apologize if you or anyone else was offended my commentary. However, within the historical context of the United States that line of thought is not too far off the mark. Please keep in mind until 1965, only 43 years ago, in roughly 50% of this country the possibility of even attempting to cast vote was a near impossibility let alone running for elected office. The point is the mindset of that time still persists to this day in varying degrees and if I’m totally wrong then it would not be raised as an issue on the national forum. My intent was to put a positive spin on what is otherwise a gloomy economic outlook; that substantial changes usually occur during trying times. That change does not happen unless there is a crisis. That future leadership will learn not to take policy action without thought to possible future consequences and that the masses do so as well. Otherwise, this grand experiment that is the U.S. could end up being just that.

  22. SinoFUBAR says:

    >>>nobody – not the leaders of Wall Street, and certainly not the politicians, *really* understand what the hell’s gone on in the last decade.<<< Somebody does. This shit is too choreographed to be chance. Think about it. China sitting on over a Trillion of Treasuries and the dollar sinks lower by the second. Food inflation driving instability in countries all over the world. Global warming brainwashing to make it impossible for new or small players to enter heavy industry where pollution is a byproduct. Peak oil bs to drive the energy market higher. Consolidation of raw material mining/harvesting. We’ve seen all these in the playbook before. We must assume the Great Game hasn’t changed. It’s all about control. I’m sure it’s the same perps behind the wheel as it always has been. Anyone seen Mr Rockefeller?

  23. alexd says:

    the current economic situation is like sand. The kind that gets on your bathing suit and you have to brush off. The kind that gets inside your bathing suit which you have to take off and rinse it and your body. Sand that abrades machines causing them to function improperly until they grind to a standstill. Sand where a small amount you traction in snow and a large amount bogs you down.
    Sand that used to be rocks now becoming uniform without real shape and substance. Like the electorate.
    We seem to have a lot of financial sand that is running through the economy and we are going to have to remove it and repair the damage it has done before things are working smoothly again.

    We are also going to have to add a lot of directed heat to the sand if we want to make it transparent.

  24. RealityCheck says:

    All this negative doomsday discussion makes it really hard to stay on the sidelines. My cash, CDs, bonds are all loosing to inflation. I’m not here to brag, but I’m still doing well in stocks. My self directed 401K is up 26% for 2008. BR’s tip on commodities and natty gas are part of this return. Every time I read the Big Pic I am tempted to liquidate everything, but when I have chosen to stay invested, I’ve been rewarded. Do I stay the course or cut and run?

  25. Philip says:

    The banks didn’t take the money, force loans on people, or (despite what some might claim) appoint the government. What is different over these X years is that as people live in comfort they get soft. People blindly dump money into 401ks and just assume it isn’t be stolen. People take big loans and assume they can repay them. People assume that because P/E ratios have been out of whack so long that they can stay that way for ever. People will learn that money that isn’t watched closely gets stolen. The bankers will be both perpetrators and victims. Bankers and politicians, in their private lives, are just normal citizens of the sort who have gotten soft. Hopefully we will make it through this without Armageddon, but there is NO way we will make it through this without pain. Because pain itself is the missing feedback that would have kept the system in check. Without pain you cannot warn yourself of major injury, and the government has set itself out to protect everyone from pain. Prepare for major injury.