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View Full Version : In the absense of the IHOP Oracle...



Uncle Bill
02-23-2010, 12:38 PM
...comes a dispatch from the Omaha Oracle's office. Not good news, but since the OO is the richest Obama booster, the lefties on board might find this informative.

UB


Buffett's Partner: 'It's Over' for U.S. Economy


Monday, 22 Feb 2010 11:42 AM



By: Dan Weil
Charlie Munger, Warren Buffett’s longtime business partner in Berkshire Hathaway, warns in a new column that the U.S. economic empire is crumbling before our eyes, thanks to federal debt and poor planning.

In an article penned for Slate.com (http://www.slate.com/id/2245328/), Munger uses the form of a parable to explain how Wall Street’s love affair with gambling has destroyed America’s Main Street.

The article leads with this headline: “Basically, It’s Over.”

The Berkshire Hathaway vice chairman describes the economic history of Basicland, which happens to match U.S. history.

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.

Under this rational system, economic growth skips merrily along at a steady 3 percent, Munger explains.

Taxes are limited and pay for only “essential services” 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.

Then things take a turn for the worse.

“The 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,” Munger writes.

Financial services soon grow to account for too big a portion of the economy, Munger says.

“The 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.”

Then, a shock: Imported energy costs rise, and low-cost labor competition from abroad appears, Munger writes.

“Suddenly Basicland had to come up with 30 percent of its GDP every year, in foreign currency, to pay its creditors,” Munger writes.

The U.S. deficit — just the gap between spending and income in one year — is projected to hit $1.6 trillion in 2010. Total debt is project to exceed 100 percent of GDP starting in 2011.

In the parable, Munger strongly suggests that the United States 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.

“He 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 — and former casino patrons — to produce and sell items that foreigners were willing to buy,” Munger writes.

As the parable ends, none of the politicians listen, and Basicland turned into “Sorrowland,” Munger concludes.

badbullgator
02-23-2010, 12:53 PM
UB
He is busy today IHOP is giving away free pancakes........

Buzz
02-23-2010, 01:23 PM
So, do you support this guy's call for re-regulation of the financial markets?

http://www.marketoracle.co.uk/Article16976.html

paul young
02-23-2010, 01:29 PM
ahhhh, written by one who made his fortune on SPECULATION and GAMBLING on the outcome.........

i'm sure he does want all of "BASICLANDS" inhabitants to stop "GAMBLING" and get to work so he can make another BILLION or two.

if it IS over, it won't matter to him; he's got his!-Paul

Marvin S
02-23-2010, 05:00 PM
So, do you support this guy's call for re-regulation of the financial markets?

http://www.marketoracle.co.uk/Article16976.html

YES - & it's VolCker ;-). Probably the last Fed Chair that knew what to do!!!!!!!!!!!

BTW. when BAC wanted to takeover Countrywide & Merrill, as a stockholder I voted against it. Someone toady down in NC on this forum told me they at BAC knew what they were doing :), apparently they did not. Had BAC stayed out of speculation I would probably be getting a larger div than $.01 per share. So I am selfish in that regard, but i do hope they make these so called banks sell their speculative arms!!!!!!!!! :cool:

Buzz
02-23-2010, 05:41 PM
YES - & it's VolCker ;-). Probably the last Fed Chair that knew what to do!!!!!!!!!!!

BTW. when BAC wanted to takeover Countrywide & Merrill, as a stockholder I voted against it. Someone toady down in NC on this forum told me they at BAC knew what they were doing :), apparently they did not. Had BAC stayed out of speculation I would probably be getting a larger div than $.01 per share. So I am selfish in that regard, but i do hope they make these so called banks sell their speculative arms!!!!!!!!! :cool:


I should have added the surprised face to my post above. :eek:

I didn't expect to see support here for re-regulation.;-)

Wow, $.01 is painful. So if Volker gets his way, do you see that as a positive future for the value of bank stocks? It is interesting to see the blocks of C stock going to hedge funds. Even if they can avoid taking any more hits, I don't see them getting their house in order for a long time.

Marvin S
02-23-2010, 06:36 PM
I didn't expect to see support here for re-regulation.;-)

Wow, $.01 is painful. So if Volcker gets his way, do you see that as a positive future for the value of bank stocks? It is interesting to see the blocks of C stock going to hedge funds. Even if they can avoid taking any more hits, I don't see them getting their house in order for a long time.

I see it as banks doing what they are supposed to be doing, which is not speculation. Banks are supposed to be the drivers of loans to create commerce, not the vulture profiting from mistakes.

But my position in BAC is much larger :o, established in the $3-4 range, which is :cool:. One of the neat things about playing with the investor pro's. is even as a little guy in the market , you can pick up the occasional crumb :D.

As for the C stock, those pro's know the Government is not going to let their buddies fail!