Simon Johnson makes an excellent point:

Remember this.  If you run an expansionary fiscal policy (building bridges), I have an incentive to free ride (selling you BMWs) and not engage in a similar fiscal stimulus.  But if you run an expansionary monetary policy, your exchange rate will tend to depreciate, putting pressure on my exporters and I’ll be pushed – by BMW-type producers – towards providing a parallel monetary stimulus.

Europe will come around.  But 1 trillion to Eastern Europe and Latin America from the IMF will help a lot for now.

Useless fingerpointing

February 3, 2009

Unrest is kicking in already, and it’s going to get much worse.

Thing is, it’s easy to blame the Masters of the Universe.  It’s easy for Chinese, Russian and French crowds to blame America.

But let’s not bring that guillotine back just yet.  The quicker we all take responsibility the quicker we’ll get through it.  Let’s keep in mind that …

…we are all guilty:

  • My friend who flipped 3 houses in 4 years, installing tile and wood with her bare hands, literally building her nest-egg.
  • The guy who bought a condo in Las Vegas or Miami instead of playing the stock market (and how is the stock market not speculation also?).
  • My other friend who took out a home equity loan to start a business.
  • All those who used a HELOC for a new car, a Mexico trip, daughter’s wedding and a 50″ LCD TV.
  • The low-income family that used an option-ARM to grab a piece of the American dream.
  • The brokers and agents that made an easy buck.
  • The mortgage bankers who thought they had created legitimate groundbreaking financial innovations.
  • The Wall Street bankers who securitized the loans.
  • The European bankers who couldn’t get enough MBSs and lobbied our government hard so they could get more.
  • The Chinese, Japanese and Russians whose governments invested almost 1 trillion in Freddy and Fannie bonds for a delicious return.

…we all benefited:

  • The consumers worldwide (you and me) who got a better rate on a CD, money market or savings account from a bank that that was buying MBSs.   Ditto for those that got a lower insurance premium, free or lower tuition at a suddenly well-endowed private college, or even a lower interest credit card.
  • The Chinese workers who made the TVs and iPods we bought with our home equity ‘wealth’.
  • The Arab Sheiks, Venezuelans and Russians, when we needed more oil to propel the boom and were willing to pay more for it.

It was all an illusion.

It was fun while it lasted FOR EVERYONE.

Now please let’s not all go pointing fingers at each other.  It helps noone.