Vic Socotra

08 October 2008

Rainy Day

I thought Obama had the edge in the debate last night, but that would not have been hard, considering the week this has been in the markets around the world.

I was only mildly surprised when I heard that Iceland was considering going out of business. The hardy islanders must have been pretty heavily leveraged to consider is as a sovereign nation-state, but imagine the yard sale. I just wish I had some additional resources to take advantage of someone else's misfortune.

The markets in Japan didn’t think much of the debate, and apparently don’t care which American gets elected. The market lost ten percent overnight there, and in response The20Fed got up early. The Board voted unanimously to drop the Federal Funds rate and the discount rate to 1.5%.

Interestingly, the central banks across Europe joined in lock-step. Such cooperation is unusual, at least in such a public manner, and indicates to me that the finance guys have journeyed to the abyss and would prefer not to see what is at the bottom.

It would be a challenge for John McCain to look good against this backdrop, but he still was game and determined. Senator Obama did not make any significant gaffes, and that is victory in itself. He looks very earnest when he says there will be “no new taxes” for people making less than a quarter million a year.

That is complete horse-shit. Everyone with any sense knows that we are all going to pay, have already, and are going to pay a lot more for what has been done by the smart guys on Wall Street, the bastards who ran Fannie Mae and Freddie Mac and all the politicians who enabled them since the Johnson Administration.

The price we have already paid is illustrated by the little passion play I like to call my life. The housing bubble cost me a paper cushion of about $50 grand, the difference between the mortgage and the purchase price. You can’t care that much about the loss of paper profits.

Easy come, easy go. But the harder part is the real money that is represented by the difference between the mortgage balance and20the market price. Based on the real debt on Tunnel Eight, compared with recent sales in Big Pink, that amounts to another fifty grand that will have to come out of my paycheck.

Ouch. Can’t refinance my way out of it any more than the owners of those McMansions out in the County can. I’m lucky that the scale of my life is a lot smaller, and I never thought that having a smaller green footprint might be a blessing. I have to consider that this unofficial market-based tax just the price of admission to being a member of the Boomer generation, the greedy pigs who invented the means of fiscal mass destruction.

I can’t say that I am bad off at the moment. The bills are all current, and there is exactly three months grace tucked away for a rainy day. Unfortunately, the storm clouds are not on the horizon anymore. Lightning is hitting the ground a few blocks away and you can feel t he air moving.

The two candidates last night were talking about health care and taxes like it was a moment in the campaign six months ago. Of course health Care and Education are important, but they are arguing about something way higher up Mazlo’s hierarchy of needs than what we have got to deal with right now.

Senator McCain tried to introduce a new policy about buying up bad mortgage paper to let people stay in their houses, but it sounded a little tentative. There was nothing new on the subject from Senator Obama, since all he had to do to win the debate was play rope-a-dope and let the feisty McCain punch himself out like Joe Frazier against Muhammed Ali.

I honestly believe neither of them has a clue about what to do. That is scary, but what if they both have some secret scheme that they don’t want to talk about until after the election? If it is like Richard Nixon's secret plan to end the Vietnam War, God help us all.

It is one of the tenets of my working life that you never go to the Boss with a problem without a proposed solution. It is only fair. But this one doesn't appear to have any easy answers. The "sacrifice" question has come up a couple times lately, and no one has managed to answer it honestly.

The unified action of the central banks may indicate that we could be shutting the banks if this goes on much longer. I have not yet actually decided to take my remaining money out of the credit union, but it is getting to the point where w e ought to have all the options on the table.

Government pension? Completely dependent on the Government’s solvency. That may be the safest bet at the moment, but inflation is the way that the smart guys normally try to flim-flam their way out of disaster, and we have seen it all before.

Look back to Weimar Germany and billion mark notes, or at Zimbawe today, where the money is worth more as fuel for the cook-stove than it is as currency.

I know it is too much to ask for some leadership on the matter, but Goddamit, I am getting too old to move back into my parent’s basement.

That sounds a little petulant, but after all I am a Boomer and that is my birthright. I’m glad my folks are alive and have a basement. We seem to be getting to the point where all the options must be on the table.

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