Blog on the Run: Reloaded

Thursday, October 15, 2009 9:59 pm

Dow back to 10,000? Big deal; or, Why things are going to get worse …

Filed under: We're so screwed — Lex @ 9:59 pm
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and NOT get better without, basically, some public hangings.

Put simply, the economy runs on trust.

When there is fraud, trust is undermined.

And there has been fraud, perhaps historically unprecedented levels of it. There is no way in hell our economy crashed the way it did without massive, systemic fraud having played a part in all areas and at all levels.

Thus, the market is not, and properly should not be, trusted.

So the economy is not going to get better until trust is restored.

How do you restore trust? By 1) holding those responsible accountable and 2) making systemic changes to ensure that it never happens again.

So far, Bernie Madoff is the only person I know of who has been held accountable … and he confessed.

The SEC has done nothing. The Justice Department has done nothing. The markets themselves have done nothing. And Congress has done nothing.

Meanwhile, a whole bunch of adjustable-rate residential mortgages will be resetting soon, many of them to payment levels their holders cannot afford. Those homeowners will be out of houses. That won’t help the economy.

Meanwhile, $300 billion in commercial real estate credit is coming due, badly needs a refi or has balloon payments coming up. And there is no chance the current system will be able to accommodate more than a small percentage of it. (Some of it wouldn’t merit accommodation even in better credit circumstances.) The property owners won’t be able to keep the properties financed and will be foreclosed upon.

And nobody is being held responsible.

And nobody is being held accountable.

And no one trusts the market.

And so the economy is not going to get better.

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