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

Friday, September 5, 2008

The not-so-loyal opposition chimes in...

Gross desperately needs to read a book on Austrian economics. One does not cure problems by throwing money at them. The housing boom, the commercial real estate boom, and the shopping center economic model are all malinvestments that resulted from the misallocation of capital. The Shopping Center Economic Model Is Now History and a Growing Herd Of White Elephants is left in its wake.

Throwing more money at houses does not create lasting jobs or productive capacity, nor does it create wealth. All throwing money at housing would do is squander what little capital is left in the system.

Furthermore, Bill Gross's proposal for lawmakers to forgive debt is unconstitutional (not that Bill Gross or anyone else cares much about the constitution these days). Banks, pension plans, individual, and foreign investors are owed that debt. It is not Congress's place to forgive that debt, it is the creditor's place to forgive or not forgive that debt. Yes, much of that debt will be defaulted on, and when that happens it will be forgiven the correct way, in bankruptcy court.

Giving money to homeowners is highway robbery of legitimate homeowners who would have to foot the bill for the bailout. Besides, the true purpose of any handouts would be to bail out banks, not the consumer.

The reality is banks need to fail and financial wizardry needs to come to a screeching halt. The party is over and the spiked punch should be put away. The best way (in fact the only way) to cure malinvestment hangovers is to save capital for productive purposes and not squander that capital in foolish attempts to prop up the markets.

--- Mish Shedlock, 9/5/08, (his blog)

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