Monday, November 02, 2009

Domo arigoto, Mr. Roboto...

The biggest problem I've had with our national response to the financial crisis is that regardless of who is in charge, Republican or Democrat, we seem determined to repeat the mistakes of the Japanese during their lost two decades.

We would not force our banks to deal with their problem assets and instead we kicked the can down the road through debt issuance and capital infusion. Japan appears to be entering an even darker period for their own economy as debt levels cross critical points as indicated here....

"Japan wasted its immense fiscal firepower, scattering money for 20 years on half-baked spending projects to keep the economy afloat. QE was too little, too late, and this is the lesson for the West. We must cut borrowing drastically over the next decade, and offset this with ultra-easy monetary policy.

Does Downing Street understand this? Does the White House? Does the European Central Bank? Clearly not.”

“The primary difference between Japan and the United States at this point of their respective monetary malaises is that whereas Japan created a nation of zombie corporations, the United States is creating a nation of zombie households.” - James Aitken, Aitken Advisors

In the early 90's, the US ratio of household liabilities to disposable personal income was about 85%. Today is at 130% and rising. The official response (from both parties) during this crisis has been an attempt to artificially engineer the same boost to housing markets that previously occurred naturally.

The Fed bought nearly a $1 trillion of agency debt to pull down mortgage rates, tax credits for homebuyers have been expanded to solve the problem of too much debt with MORE DEBT!

In a statement that must send chills up the spines of other tech CEOs, Microsoft’s Steve Ballmer said that the vicious recession may have reset IT spending to a level which will never recovery to where it was in the period just before the downturn.

This is another huge concern of mine. The longer companies start surviving or thriving without the latest whiz bang tech gadget, CFO's are going to get more and more reluctant to open their purse strings. I hear this consistently, that people are experiencing a new normal, one that will never look like 2007.

In a related story, Apple continues to stick their thumb in Microsoft's eye at every turn. One of the tricks of advertising with Google is that if you are willing to pay the most, you get the premium ad space. When you search for various terms like "download Windows 7" the third ad to pop up is "Avoid Upgrade Problems" from

Too funny.
Finally, for all my readers in NY23, get out and rock the vote today!! I'm not terribly excited by either candidate, but I'll still be voting even if it's just to write in Mr. Grindstone ;)


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