CNBC Features a Money Manager of Gloom. 
Martin Hennecke, a manager of the formerly high net worthies at Tyche, grimaced into the camera on CNBC and suggested that the US, to hold off having its debt downgraded from AAA to AA, must recall all its troops and start selling assets. No one laughed. The gloom settled
over the screen. I connect this unusual morning performance with the random weird credit problems reported on my favorite gloom blog, Calculated Risk, and my favorite gloom broadsheet, New York Times: AMEX becomes bank holding company in order to secure Fed help; Circuit City is a bankrupt; ninety percent of the mortgages in a town in California are under water; housing prices nationwide will decline at least 32% from the top; and perhaps a fifth of all major retailers this Christmas will be gone by spring to bankruptcy or liquidation; and finally a comment from October 9 in a new Washington Wire on Wall Street Journal that AIG was the real problem on Black Swan weekend September 12-14 (right, Lehman Brothers as the clock struck the end, September 14) , it is still far worse than the Treasury supposes, and it is not fixed. In fact the whole Treasury-cooked bailout scheme, rushed through Congress like an invasion of Iraq, is now challenged openly as inadequate or worse, contrived. The news is so one-way despairing that I rushed to my choice new hideaway, the microfilm room at Columbia University's Butler Library, to scroll though 1933 in the London Times for what it was like the last time the word "depression" was not about the weather. What I found in late October and early November 1933 were two suicides that bothered the Times seventy-five years ago and bother me now, because they made no sense, except that in times of global financial collapse, ordinary, honest, responsible, lonely people seek to destroy themselves without a farewell.
Under the Locomotive Piccadilly Station
The first mystery was Phillip Henry Chetwynd, 27, graduate of New College, Oxford, a barrister in the City, the only child of a widow and a late Royal Navy captain, who one afternoon in early November 1933 stood alone on the Piccadilly station platform watching a train chug to a stop. The engineer told the court that he saw this tall young man throw his umbrella aside and leap
directly under the slowing locomotive. No note was found. No romance mentioned. No debts, with two trust fund paying him six hundred pounds a year. The court ruled death by temporary insanity. One fellow commented, "He was trying to get work, but in the city, that's pulling a dead horse." The second mystery was a widow, 54, who was found dead in her bed in a bedsitter. No note. Her chin was wrapped in the style of the time to fight off a double chin. Death by overdose of a sleeping sedative. Her banker attested she was stable with comfortable money in a local account and income from Canada. There was a romance, a man who had gone on to North America, but no foul play. The corner ruled it death by accident, but everyone shrugged and asked again, "Are you sure there was no problem with money?" In both cases, the Times featured headlines that suggested the deaths were a result of the troubled economy; however no evidence was found to support the thesis. I puzzle now, when you see a headline of a substantial professional suddenly dead by what appears suicide, do you suppose strongly that it was caused by the market crisis? The tale of the late Barry Fox in the Wall Street Journal over the weekend, a successful man in his fifties who lost his job at Bear Sterns and was not going to be hired by J.P. Morgan Chase, was written exactly to the theme of crisis and despair; yet there was no note mentioned, and there was no mention of overwhelming debts. At 51, Fox was more equipped than most to seek other employment. Yet Fox is pictured in the article as disturbed by the gloom: he tried an overdose, and then he leaped from the window -- like Chetwynd diving under the Piccadilly locomotive. Did the gloom get Fox? The gloom is spreading and thickening. I am on a gloom watch for a culture of plenty as in 1933, as in 2008. My eye is especially on one former investment bank at 30 Hudson Street, New York, New York (right). Goldman Keeps Falling as Analysts Cut Views.
yeah, very bad news...
http://www.helenair.com/articles/2008/11/11/weekly_features/business/65bz_081109_suicide.txt
It is necessary to look behind any story given in print or on air and ask oneself, "Why is this story here?" What impression is the story calculated to leave on the reader? And how is the story structured to identify heroes and/or villains.
Clearly, my own contributions to the "John Batchelor Show" blogs have tried to point out the dangers posed to our nation by run-away liberalism and by the people who espouse this point of view. Therefore, I have tried to pick examples in support of my beliefs. (It would have been absurd for me to pick examples that would disprove my own views on this or any matter, though such examples can be presumed to exist.)
Since there has been great interest in the media to paint Bush black and Obama white, the stories we have seen reflect this reality. Why then, with the objective of the media met with certainty, does "the gloom watch" continue? Could it be that media organizations are now bemoaning their own balance sheets as well as their severely shredded integrity? Could it be a case of "beware of what you wish for" setting in? Perhaps the fabled beast - capitalism - stands only wounded and has therefore become only more dangerous and unpredictable.
Suicides during market crashes make compelling copy; so do the faces of the starving on the TV screens of the privileged. One points to the evils of capitalism; the other, to the evils of America. Both themes have been done to death. You would have thought with the results of the past election already certain, the narrative would change. Perhaps old habits die hard and we will have to wait a while for the good news to begin.
Depression--the economic kind, I mean--can be as contagious as chicken pox.
Perhaps we ought to seal the bankers in their mansions and brick the doors and windows shut, to contain the epidemic that is brewing.
The media's agenda in pushing the doom and gloom is obvious: Just look at the mess the evil Bush administration left us with, thus when the new Messiah fails to deliver on his myriad campaign promises, He is not to receive the blame. The MSM will work long and hard to out-do one another with tales of woe and misery.
While the crises may be bad, the "medicine" they are feeding us may be worse than the disease.
WE have had a credit crisis which is born from a lack of trust. Maybe we should look back at the dollar and the saying "In God We Trust". We have lost all faith in the financial institutions and Barack's embrace of the titans of Wall Street give us no solace.
Speaking just for myself, John Batchelor is the best and brightest news analyst I know, and there's no place else to go; so if John gets gloomy, I just have to wait until he gets over it! But I myself am not gloomy. Living here in L.A., the worst you can ever have is a s---ty day in paradise.
"Barack Obama the next President?
He's already got all my taxes spent?
Don't worry.... be happy!"
Back to the lead entry here - Chetwynd - our old friend Taleb would have plenty to say on this point. If the same story came out during boom economic times, nobody would suspect money problems. Since it comes out during the Great Depression, we assume that it's caused by it. In my opinion, and I believe Taleb concurs, it's the most frequent error in human thinking, to gather evidence of a theory and then assume that the existence of the evidence proves a cause-effect relationship, without searching for evidence that would disprove the theory.
Proof is in John's final statement: He is on a gloom watch in 1933 and 2008. Of course if you watch for gloom in those years you're going to find it. However, in order to truly determine whether suicides like Chetwynd's and the double-chinned woman's were caused by economic downturn, John would have to look in newspapers from boom years, average years, and recession years, and see if there are similar stories. Looking at only 1933 and 2008 proves nothing.
The credit crisis is due to a lack of confidence. Thus we elected a confidence man. We selected the wrong George C. Scott character instead of Patton we got the Flim Flam Man. So now we have the black swan under the Paper Moon.
Much whistling past the graveyard going on here.
The fact that the gloom is not more pervasive speaks
more to the indomitable spirit of our citizenry than
an understanding of economics.
The eagle will soon be replaced by the ostrich as the
national bird. We have allowed 2 trillion (with a t)
to be added to our national debt in less than 11 weeks
without even a whimper of protest.
This was not accompanied by increased production, saving,investment, etc. Quite the opposite. It was of course caused by the usual suspect...throwing money at the problem. But this remedy has become the problem in and of itself.
The 36/7 printing of cash, notes, bills and bonds will
eventually tip this sinking Titanic of debt over the
abyss to credit downgrade. If and when this happens, the recession will immediately become a depression. As an earthquake measure increases by a factor of 100 every point, what we face will remove the rose colored
tint from even Lou's specs. His State predicted an 8
bill deficit one week before the election; one week
after that figure is 28 billion. Unlike the Feds, the
states must "balance" their budgets. They will need
to do it the old fashioned way, borrow it, or the new fashion way and get in
line at the Feds window. Either way it is printed money adding to the vicious cycle.
Hyper expansion of money in circulation always ends
badly, one need only look to germany during reparation
and france after the revolution; or continue to the
last great empire..Rome.
John is right, gloomy is good 'cause what's coming
is not going to pretty. And gloomy is going to look
pretty darn good in comparison.
Somebody wake me when the voters kick out the first Democrat for these moronic stimulus plans and union bailouts and Wall Street bailouts.
This whole business strikes me as the financial equivalent of climate hysteria. Every issue of the Economist or New Scientist I pick up has at least half a dozen references to the pending climate catastrophe and what an opportunity this economic crisis or the election of Obama presents to save the planet. The attempts to save the economy have come to naught so far as either the markets don't believe the attempt will be successful or the money sits on the sidelines waiting for Obama to signal something. Meanwhile, the Dems continue to paint themselves as the savior of the middle class, the economy, everyone, just by throwing open the Treasury doors to anyone and everyone. When will they be held accountable for failure?
Tom,
Spot on. There is a LOT of ostrich like behavior going on here.
Aristotle said "It is the mark of an educated mind to be able to entertain a thought without accepting it".
He didn't say "It is the mark of an educated mind to assume an espoused thought is actually a lie if I don't happen to agree with it"
Conspiracy talk and closed mindedness is what I associate with the Black Helicopter crowd - not with JB.
I provided a link to an award winning video portraying just how bad our debt situation is but the comment didn't get approved.
Not very web 2.0 (to say the least) and usually I would walk from an lame old school old media move like that.
However, I respect JB so I'll just chime in that if you RULE OUT the possibility that things COULD be as bad as they appear - you are behaving in a manner that is not intelligent as defined by our friend Aristotle.
(I guess Aristotle had a reason for lying and was just a no good lib...)
Since I'm the only person who's said anything remotely optimistic here I'll assume that the "whistling past the graveyard" and "ostrich" comments were intended at least in part for me.
I am not in denial; I see the same things you guys see; I'm just trying to find a way out. I don't see where it makes any positive contribution to our mutual situation to indulge in one's gloominess.
In response to the quote from Aristotle, I'll simply answer with a quote from one of my heroes, the late, great pianist Arthur Rubenstein:
"Most people, in my opinion, have an unrealistic approach toward happiness because they invariably use the fatal conjunction "if" as a condition. You hear them say: I would be happy if I were rich, or if this girl loved me, or if I had talent, or, their most popular "if": if I had good health. They often attain their goal, but they discover soon some new "ifs."
. . . As for myself, I love life for better or for worse, unconditionally. [Arthur Rubinstein, My Young Years (New York: Alfred A. Knopf, 1973), p. 362
See:
http://www.wisdomportal.com/Enlightenment/Rubinstein-CC.html
for more details.
I would suspect that Pres. Obama will act more like Thatcher than Roosevelt (or even Reagan), at least at first.
There will be a good dose of austerity coming, then recovery.