I have, and will send you a copy if you ask nicely, an article I wrote for a client's newsletter dated November 2008 just as Congress finally caved in and passed the bill bailing out Wall Street while the rest of the country went to hell in a handbasket.
Back then I wrote:
“There are three camps when it comes to where we go from here. The first group says the current crisis has already outstripped our available social resources to deal with it and that any political attempt to solve it will just make things worse. This camp believes that a prolonged period of discipline and austerity is inevitable.
The second camp – including the Bush administration – argues that the financial markets are the problem and that the state must mobilize its resources to impose a solution, inject liquidity into the system as a preface to any further solution. They believe the problem can be contained.
The third group believes the state solution is an attempt to save the very financial institutions that caused the problems in the first place and that letting them off the hook easily will not rectify the problem in the long run. Some members of this group also believe that this crisis is overblown and that a relatively simple change to the accounting rules would resolve it in short order…
If you are bullish on America in the long run, there is reason to hope that the tab will be less than $700 billion. After the Treasury buys up those troubled mortgages, it will try to resell them to investors. The Treasury’s involvement in the crisis and the speed with which Congress is responding could generate long-range optimism and raise the value of those mortgages, although it is impossible to say by how much. Make no mistake, the rebound will come eventually, but no matter what direction this country takes to resolve the problem, it will take time and will probably be painful.”
So where are we today? Well, I think some of this has played out as it was foreseen. These were not original predictions. I just found this in my research for the article. And it looks like the only vision that DIDN’T come to pass was that Bush’s Bailout would save us. Probably because rather than buying up the mortgages and making new loans they were supposed to, the big banks put the money in their vaults to shore up their bottom lines and pay executives their inflated salaries while the rest of us lost our jobs and our homes.
Under normal circumstances, it takes time to reestablish trust in the credit markets, create new jobs and sell off the bad debt in an orderly manner. Moody’s Economy.com estimated that U.S. banks made 15 million questionable mortgage loans from 2004 to 2007. Many loans were adjustable-rate, interest-only for the first five to seven years, so their defaults will only start being felt next year. It is estimated that 10 million – or two-thirds – will default. And it will take more than just another year for the housing market to recover.
The good news: Americans are waking up from the bubble dreams. The bad news is that America’s image as the world’s greatest economy has been damaged and regardless of what anyone says, nobody, ABSOLUTELY NOBODY, knows how to fix it. If you ask me it’s time we stopped worrying about solutions to the big wound and just treat with the best medicine we have. Love.
Love of country, love of your fellow men. If you want to throw in love Jesus, you can do that too, but understand the other two are equally important now. I don’t know what’s going to happen. That's another thing no one knows. How bad does it have to get for people to come out of their homes and march in the streets? Well, we've had that already. And if they can’t fix it before next year, then maybe the next folks to Occupy Wall Street won't be as peaceful. Next year – election year – is shaping up to be a watershed.
Stay tuned...
