{"id":357167,"date":"2010-02-24T04:42:00","date_gmt":"2010-02-24T09:42:00","guid":{"rendered":"tag:blogger.com,1999:blog-1752027331714385066.post-4668770704822007964"},"modified":"2010-02-24T04:42:35","modified_gmt":"2010-02-24T09:42:35","slug":"buffet-partner-believes-its-over","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/357167","title":{"rendered":"Buffet Partner Believes ‘Its Over”"},"content":{"rendered":"
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I really hate to say much about the developing condition of the <\/span>USA<\/span><\/st1:place><\/st1:country-region> economy.  Read this and weep.  Somehow economic planning in the <\/span>USA<\/span><\/st1:place><\/st1:country-region> devolved upon financial engineers who inevitably produced a house of cards of which I have said plenty.<\/o:p><\/span><\/span><\/div>\n
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I repeat, our only way out is to reconstitute the mortgage foreclosure process as per earlier postings.  I think though it is getting late.  We must now suffer through a second wave of debt liquidation in the banking system.  This will take us through to the next president.<\/o:p><\/span><\/span><\/div>\n
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Personal credit will be scarce at the end because of the complete lack of action by the government.  This is a repeat of <\/span>Hoover<\/span><\/st1:place><\/st1:city>\u2019s actions in the early thirties.<\/o:p><\/span><\/span><\/div>\n
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A year ago we did not know how bad the situation was.  The bills have been counted and we now know.  The fraudsters have been uncovered and this includes <\/span>Greece<\/span><\/st1:place><\/st1:country-region>.  We now know the cost.  It is awesome and the credit system is contracting because of it.<\/o:p><\/span><\/span><\/div>\n
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Mr Obama has announced further actions on health care.  He has forgotten that millions are out of work and will soon be on the street.  They are becoming desperate.  It is going to get ugly and congress bleating over health care is right up there with Marie Antoinette\u2019s admonition to let them eat cake.  This whole crowd is out of touch and clueless.<\/o:p><\/span><\/span><\/div>\n
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I still think it can all be put right.  I just do not see anyone able to do it and most certainly not in the teeth of the attitudes of the nation\u2019s politicians who live as though entitled.  Here we have Charlie Munger trying to get someone to listen.<\/o:p><\/span><\/span><\/div>\n
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Buffett’s Partner: ‘It’s Over’ for <\/i>U.S.<\/i><\/st1:place><\/st1:country-region> Economy<\/o:p><\/i><\/span><\/b><\/div>\n
Monday, 22 Feb 2010 11:42 AM<\/o:p><\/i><\/span><\/div>\n
by: Dan Weil<\/i><\/span><\/b><\/o:p><\/i><\/span><\/div>\n

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Charlie Munger, Warren Buffett\u2019s longtime business partner in Berkshire Hathaway, warns in a new column that the <\/i>U.S.<\/i><\/st1:country-region><\/st1:place> economic empire is crumbling before our eyes, thanks to federal debt and poor planning.<\/o:p><\/i><\/span><\/div>\n

In an <\/i><\/span>article penned for Slate.com<\/i><\/span><\/a><\/span><\/b>, Munger uses the form of a parable to explain how Wall Street\u2019s love affair with gambling has destroyed <\/i>America<\/i><\/st1:country-region><\/st1:place>\u2019s <\/i>Main Street<\/i><\/st1:address><\/st1:street>.<\/o:p><\/i><\/span><\/div>\n

The article leads with this headline: \u201cBasically, It\u2019s Over.\u201d<\/o:p><\/i><\/span><\/div>\n

The Berkshire Hathaway vice chairman describes the economic history of Basicland, which happens to match <\/i>U.S.<\/i><\/st1:place><\/st1:country-region> history. <\/o:p><\/i><\/span><\/div>\n

Early in its history, debt is unknown except for home mortgages and some consumer loans, and people live within their means. Speculation is discouraged, and commodities markets are small and tightly regulated.<\/o:p><\/i><\/span><\/div>\n

Under this rational system, economic growth skips merrily along at a steady 3 percent, Munger explains.<\/o:p><\/i><\/span><\/div>\n

Taxes are limited and pay for only \u201cessential services\u201d like fire protection, courts, and defense. Most taxes are collected on imports, and government spending matches that tax income. Debt via government bonds is limited.<\/o:p><\/i><\/span><\/div>\n

Then things take a turn for the worse. <\/o:p><\/i><\/span><\/div>\n

\u201cThe extreme prosperity of Basicland had created a peculiar outcome: As their affluence and leisure time grew, Basicland’s citizens more and more whiled away their time in the excitement of casino gambling,\u201d Munger writes.<\/o:p><\/i><\/span><\/div>\n

Financial services soon grow to account for too big a portion of the economy, Munger says.<\/o:p><\/i><\/span><\/div>\n

\u201cThe winnings of the casinos eventually amounted to 25 percent of Basicland’s GDP, while 22 percent of all employee earnings in Basicland were paid to persons employed by the casinos, many of whom were engineers needed elsewhere.\u201d<\/o:p><\/i><\/span><\/div>\n

Then, a shock: Imported energy costs rise, and low-cost labor competition from abroad appears, Munger writes. <\/o:p><\/i><\/span><\/div>\n

\u201cSuddenly Basicland had to come up with 30 percent of its GDP every year, in foreign currency, to pay its creditors,\u201d Munger writes.<\/o:p><\/i><\/span><\/div>\n

The <\/i>U.S.<\/i><\/st1:place><\/st1:country-region> deficit \u2014 just the gap between spending and income in one year \u2014 is projected to hit $1.6 trillion in 2010. Total debt is project to exceed 100 percent of GDP starting in 2011.<\/p>\n

In the parable, Munger strongly suggests that the <\/i> United States<\/i><\/st1:country-region><\/st1:place> take seriously the campaign of Reagan-era Fed Chairman Paul Volcker, who wants the big banks to cease pretending to be banks if they expect the freedom to trade securities on the side.<\/o:p><\/i><\/span><\/div>\n


\u201cHe suggested that Basicland should strongly discourage casino gambling, partly through a complete ban on the trading in financial derivatives, and it should encourage former casino employees \u2014 and former casino patrons \u2014 to produce and sell items that foreigners were willing to buy,\u201d Munger writes.<\/o:p><\/i><\/span><\/div>\n

As the parable ends, none of the politicians listen, and Basicland turned into \u201cSorrowland,\u201d Munger concludes.<\/i><\/span> <\/div>\n
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I really hate to say much about the developing condition of the USA economy.  Read this and weep.  Somehow economic planning in the USA devolved upon financial engineers who inevitably produced a house of cards of which I have said plenty. I repeat, our only way out is to reconstitute the mortgage foreclosure process as […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-357167","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/357167","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=357167"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/357167\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=357167"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=357167"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=357167"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}