12 thoughts on “Missing George Bush”

  1. I don’t miss W, but I miss a Republican Congress. During their 12 year tenure, the markets went from 3,800 pts to 13,800 pts. Pelosi and Reid have had 2 years (1.5 FY) and they nearly wiped away all of the progress of the last 2 decades.

    We can’t continue the failed policies of the last 2 year!

  2. If McCain had won, everything — including crap perpetrated by Nancy and Harry — would have been blamed on Maverick and the Republicans. As was demonstrated during the campaign there were way too many people voting who thought the GOP still held control of Congress.

    I would never use it as an excuse for voting one way or the other, but it’s undeniable that with Obama in the Oval Office the Democrats no longer have quite the cover they had in 2007-08.

  3. I bet he doesn’t miss us. I mean, seriously, it would take all the gold in the world, at least, to make me take that job for a day. You’re not just expected to see that the sensible functions of government — national defense, orderly immigration, a sound currency, honest judges — are done competently. You’re expected to be some avatar of Dad as seen by a two-year-old, willing and capable of fixing anything from bad luck to death itself, or else we’ll all hold our breath until we turn blue.

  4. I’m not so sure your portfolio would be in any better shape if Obama had lost. (Nor do I accept Leland’s implication that somehow Congress is responsible for the actions of the stock market.*)

    The economic issues that need to work out (and are doing so, even now) don’t really care who’s President.

    * I will grant, of course, that Congress can easily cause the market to tank – but I can’t blame the drops we’ve had on the 2006 election; the seeds were sewn long before.

    Congress’ ability to cause economic growth is slight, given that the best way they can do it is to do nothing, and that is directly contrary to their immediate interests as Representatives who wish to be re-elected.

  5. Sigivald, I don’t disagree with your assertion that the seeds were sewn before the 2006 election. Indeed, I said on this blog, at the time, that I supported the Republicans losing in 2006, because they obviously lost the concept of fiscal conservatism. I’ll also accept that the growth in the 90’s was likely enhanced by the fact that a Republican Congress and a strong Democratic President assured gridlock and less government intrusion.

    However, I did an evaluation of the stock market by fiscal year (when Congressional appropriations actually count) from 1992 (Last Congress and President to be both Democratic) to now, and I found the results interesting. Even during the wild spending of the W era, the stock market still went from about 8,200 right after 9/11 to over 12,000 on election day 2006 (and over 14,000 by the end of the last Republican Congress FY). It may be all coincidental, but the rhetoric of “failed policies of the last 8 years” falls flat when compared with actual numbers.

  6. I should also note the “failed policies of the last 8 years” in regards to GWOT seem, as the Anchoress well establishes, not to be the failed policies the Obama administration is working hard to change.

  7. The economic issues that need to work out (and are doing so, even now) don’t really care who’s President.

    I dunno, SIggy. You’re forgetting the very important psychological component of investing. To lend money at reasonable interest rates, you need to have confidence in a stable economic climate. If you fear random violent rule changes coming down from Washington, you pull back, you keep your liquidity, you are cautious.

    That’s exactly what we’re seeing from investors, big and small. And, given the Sturm und Drang talk we’ve heard from the Democrats for the past year, threatening all kinds of hellfire on eeeeeevil Big Business, is it any surprise?

    I think it would have been possible for the real estate bubble to have popped without as much reflected pain in other, sounder assets as we have seen. There’s no good reason for most stocks to have tumbled by 30%. Only people heavily invested in risky real estate need to suffer. The rest of the real estate market is actually OK. Most mortgages are sound. Most houses are worth owning.

    But the wild threats and clear naivete emanating from Washington have jinxed up the renormalization of the asset market. People might well want to sell mortgage assets and put their money somewhere else. But where? What will Congress decide needs “regulation” (= stifling)? What will be taxed? Where will the tax breaks and “stimulus” go? Maybe it isn’t even a bad idea to get out of “toxic” mortgage assets, since if the government is going to subsidize them, buy them at 102 cents on the dollar, whatever, they might still be valuable. Who knows?

    Not surprising, in this mad Alice in Wonderland melee, people with money to put places are simply waiting until the smoke clears. So…far fewer buyers for a wide variety of assets, and tumbling prices. Thanks, Congress! Thanks, Dear O-Leader!

  8. Given the problems in monetary investment (except perhaps gold), there are also disinvestment incentives to non monetary items such as time and effort. In a downturn, people try other things or start new businesses. But in the present idiocy, that seems as foolish as the investing in the market. If a real Reagan type would have won, the present situation would not be as deep and forbearing. Living though the early 80’s was tough enough, but new businesses could expect some potential for rewards, unlike now.

  9. Mr. Pham – The real problem as I understand it is that the toxic paper was sliced and diced so much in so many different ways as to make it impossible to tell which were good investments and which were good ones; or to put it another way, to spread the poison of the bad loans throughout the securities system. And it was done deliberately, because the greedy, irresponsible SOBs in their $2000 suits and with the multi-million dollar bonuses wanted it that way. After all, who would have bought the bad loans as securities if they had been able to identify them? Nobody.

    This was compounded by the rating “experts” who had a clear conflict of interest, in that they were being paid by the people they were rating.

    I am quite sure that none of what was done was illegal, but it should have been and probably will be. Of course, the chair-warmers will then find another way to rip off people who actually work for a living.

    I can see, in the future, bankers hanging from lamp posts – and I’ll be cheering on the people doing it.

  10. Actually, no, Fletch. What they did — as far as I understand it — is actually quite a good idea. The idea is this: we gather up a large number of loans made to people who in the ordinary way wouldn’t qualify for the loans, because of dodgy credit history, et cetera. We argue thus:

    Some of these people undoubtably are irresponsible fools, who will probably default on these loans. But human judgment is weak. There is an excellent change that , based on past experience, only about 20% of them fall into that category. The rest look like fools on paper, but are actually decent people who’ve just had a spell or two of bad luck. They’re actually good credit risks and will pay back the loans.

    Problem is, we don’t know which is which. But, on the other hand, maybe we don’t need to know. We’ll bundle all their mortgages together. Say that’s $10 mil of notes, of which we can guess $8 mil will almost certainly be paid back, while $2 mil is questionable. Maybe it will, maybe it won’t.

    Now, we sell $1 mil of securities based on these $10 mil of notes, with the understanding that any money that comes in from the notes will go to redeeming these securities before any other. These are our triple-A securities, based on crappy notes. Then we sell the remaining $9 mil as crappy securities in the usual way.

    The idea is that, since the triple-A holders get first crack at the money coming in from all the notes, it’s impossible for them not to get paid unless more than $9 mil (90%) of the notes go bad. That, we argue, is just damn unlikely. So we have magically transformed grade B paper into triple-A securities.

    It’s a good idea. It’s a way essentially of diffusing the risk, somewhat similar to the way health insurance does. (We charge a premium we know won’t cover your expenses if you’re in a terrible accident or get cancer, but we know that only 10-20% of the pool will do so, so we’re OK, unless by some bizarre accident all of our customers get sick at once.)

    There were, nevertheless, overenthusiasms in execution, a lack of historical perspective (because the whole scheme only started up when the housing market was rising), and other normal human follies. But do not demonize them. These creative instruments are basically the way in which people of modest means got a crack at owning houses, and most of them have profited thereby.

    Besides, the financial market didn’t cause the ultimate meltdown. The popping of the underlying real estate bubble did. It was the tumble in home prices caused by running out of optimists in the home-buying market. With all the optimists selling, and only pessimists left to buy, the price was bound to plummet. And then everything went banana-shaped.

    I know there’s the argument that since investors don’t know what these complex instruments are now worth, no one is buying and selling them, and so financial trading and credit have ground to a halt. I think it’s a somewhat reasonable POV, but not totally. Not knowing exactly what they were worth didn’t stop people from trading them six months ago. I think it’s a contributing factor, but I would look for the enduring roots elsewhere: in the pop of the real estate bubble, and the effect that has had on consumer spending, on the wild metastases of city and state budgets, fueled by unsustainable property tax growth, which has now left monster liabilities, and with the perception of capitalists everywhere that they’re in danger of being looted to solve government’s problems if they put their money in the wrong place.

    In short, I suggest that, just like the Great Depression, at this point it is the political uncertainty more than the financial uncertainty that has dried up capital flow. You should not be wanting to hang the damn bankers, but rather the damn meddling lawyers in Washington, who see a patient (the economy) with a bout of the flu — and right away want to bleed him, do a liver transplant, put him on a macrobiotic diet, force feed him with Laetrile and St. John’s Wort, and so forth, in defiance of the plain historical fact that no government intervention anywhere, anytime, over the entire 50,000 year history of the civilized species, has provably successfully cured an economic downturn.

  11. Is it not the case that a lot of the people who voted for President Obama have stock portfolios that they are counting on for a comfortable retirement? Are not all of these universities, bastions of liberalism, dependent on growth in stock prices for their endowments?

    On one hand you have these promises of socialism, and on the other hand, a lot of liberals are greedy capitalists like the rest of us. At what point does this translate into President Obama tacking rightward (cough, extend the tax cuts on investment income, cough) to head off a palace revolt?

    I mean President Clinton may have been a lot of things, but upon taking office he was famously to have said, “Do you mean my legacy depends on the actions of some bond traders?” He attempted mega-socialism in the form of health care reform, and he raised taxes some, but by and large he kept things on an even keel and continued the Reagan prosperity, even to the point of small budget surpluses towards the end, even though these need the “record-book asterisk” of “tech-bubble aided.”

    I bet a lot of people voting for the Democrats thought we were going to get the Bill Clinton years back — nothing too drastic, some minor increase in tax on high wage earners, some minor decrease in tax on investments, trim the sails some and head into Prosperity.

    When does Mr. Obama have his ” bond traders” moment and we can put money back in the markets?

  12. > When does Mr. Obama have his ” bond traders” moment and we can put money back in the markets?

    One difference between Pres. Clinton and Pres. Obama is that Clinton’s priority was power and ideology was merely a tool.

    Obama’s ideology drives him to power. (Of course, power is a significant part of his ideology, but….)

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