Tuesday, April 21, 2009

Tom Toles -- True Brilliance

True brilliance, again by Tom Toles at the Washington Post simple short and to the point. I don't even know where to begin with the current state of affairs, but this cartoon is a nice starting point. Much more to come on why the current rally has no fundamentals behind it, why volatility is resulting in traders leading the momentum, mark-to-market is saving capital ratios of otherwise insolvent banks, and profits are true accounting artifacts without real economic merit behind them.

Fear and greed.

The bailouts remind me of the show "Extreme Makeover" with that idiot Ty running around screaming at everyone, etc. I know, I know, it's TV, which is sold to the dopey masses (yes that's me watching Idol and Lie to Me). Create drama, push product. But here's the reason I hate this show; it's the same reason why I hate the bailouts.

If you watch the show, the set-up is by and large always the same "car crash." Some family has gotten itself into some trouble, and they are living in "dire straits". So in comes the ABC crew, sends them on a vacation, and promises to build them the house they've always wanted, but could never afford, etc.

Now don't get me wrong, there is some genuine tragedy in this show and some of it is not self-generated, so I'm not disgusted by the family's situation. I find myself more annoyed by the house they end up building the family. I get it, a big gaudy house sells ad revenue from Sears, Ford, etc. We all feel better watching a family in need get what they otherwise can't. But in all honesty, they should just build the family a modest house, and set up a college fund with a financial advisor, so the family can gain the skills they need to be financially self-sufficient. What does giving someone a large house prove or teach the family? What does propping up a car company that makes cars no one wants to buy do besides allocate capital in a wasteful fashion? If moral hazard is a the only solution, then the situation must be incredibly bad, and much worse than you and I are even being told. Just watch what happens after the bank stress tests.

I suppose the best part is that the basis for the show is, to me, a subtle microcosm of present America and the path we took to get into the trouble we are in (BTW, google Glass-Steagall...the seeds for the credit bubble were sown long before Greenspan and Bush got here. They just kept the beer flowing.) Americans wake up thinking they should have huge material things to be considered successful. Blame the banks, yell at AIG and the TARP money, etc. the average American probably couldn't even explain the TARP or TALF programs. But I wonder how many of the folks that are yelling are the same people that got themselves an exotic mortgage with the intent to live beyond their means or flip a house for quick profit they can no longer flip? There was a market for this stuff, and markets need demand before supply is ever created. Forget about houses, just think credit cards. There's plenty of blame to go around.

Guns don't kill people, people do. It's like the drug addict that blames drug dealer but never themselves. But don't worry, superman is going to save the world.