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Notes to myself, possibly of interest to others.
-- Bill Northlich

Friday, September 5, 2008

My comments...

So, let me chime in. Of course, I think Gross is right. A couple of points:

Mish: One does not cure problems by throwing money at them
Me: One of about eight standard "Free market" chauvinist sound-bites. What this mean, Kimosabe?

Mish: The housing boom, the commercial real estate boom, and the shopping center economic model are all malinvestments that resulted from the misallocation of capital.
Me: Maybe true; what does this have to do with Gross? (Presumeably the Gross plan will increase Capital somewhere, somehow, which will then just be misallocated by the dumb, evil, ...who, exaxctly?)

Mish: The Shopping Center Economic Model Is Now History and a Growing Herd Of White Elephants is left in its wake.
Me: Probably correct. Has nothing to do with Gross...

Mish: Throwing more money at houses does not create lasting jobs or productive capacity, nor does it create wealth...
Me: So what? Gross is addressing a clear and present danger. Pontificating about the morality of "Throwing money" does not address the danger. In fact, this is the disconnect between the realists (Gross), and the free-market religionistas (Mish, et. al.)

Mish: Furthermore, Bill Gross's proposal for lawmakers to forgive debt is unconstitutional ... Banks, pension plans, individual, and foreign investors are owed that debt. It is not Congress's place to forgive that debt
Me: "Forgive Debt"? "Unconstitutional"?? Mish should read Gross's actual words. The plan is so simple I can understand it. The Treasury would essentially create a market for the moribund debt (since the vaunted free market has not deigned to do so), and then buy that debt in that market. If/when the private sector gets over its current terror of doing anything, it can, and probably will (like Gross did), get back into the market and buy or otherwise deal in the debt parked at the Treasury. When the free markets start working again, we the people (the Treasury) will likely make some money on all these transactions, since the pricing of a lot of debt nowadays includes a panic factor which should (dangerous word) abate when markets start to function.

Me: Blah blah. I could say more, but I just don't understand the yelling about thre Gross plan, given that the alternative is much more than likely a huge depression, the end of the world financial system as we know it, the end of American prosperity for a very very long time, etc etc. Mish is a great commentator on the current economic scene, and provides a lot of excellent information, but he frequently elides into a kind of libertarian mania that, IMO, has very little to do with actual reality. Of course, its just MO.

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