California
Charter Member
I wish I had better news!
There are huge unknowns. Nobody really knows what happened to the economy and how to get the downward slide turned around. Everyone woke up one morning and discovered they couldn't get loans for working capital. (To vastly oversimplify!) Or for car loans, or to refi the house, or to place an order overseas. Suddenly nobody trusted the reliability of commercial paper so the house of cards collapsed.
I think the present stimulus measures, both as started in the Bush administration and continued by Obama, are better than doing nothing. But it will be for the historians to tell us whether they really softened the downturn. We are sure to see some tactical mistakes and mis-allocations such as subsidizing building inefficient cars. It's almost like war strategy except political pressures are more of an an input to the decisionmaking. Expect to see some dumb projects whose purpose is only to sustain employment in the worst hit, or most politically powerful, states. I hope that a lot of the money goes into infrastructure like it did under WPA so we have something to show for it.
Nationalization of banks, auto manufacturers, etc is a last ditch defense against letting them fail and shutting down operation. It's a clear sign how bad things are that government ownership is even on the table for discussion. The way I see it, if a large company's management has run its share value down past zero, wiped out the equity of everyone invested in the company (and probably its suppliers as well), no new investors can be found, and the management still wants government handouts to keep the doors open, then those handouts buy the entire company and it is in effect nationalized. Some of the banks are in this situation but the reality is papered over. I hope it doesn't come to this for many industries, and I hope if it does that government can turn the companies into something they can soon sell to willing investors, recover the taxpayers costs, and get the heck out.
I think it's still better to handle mortgage guarantees for example through an insolvent nationalized bank that remains intact, than to set up a new bureaucracy under say Homeland Security and let them learn how to do the same task. Remember Brownie? How long would it take to get a new government agency up to speed, and could it match the efficiency and focus of an existing, experienced institution? I doubt it. So simply letting major businesses fail and disappear may be worse than taking them over, in some cases. We still need the expertise accumulated in the firm, even if it is financially valueless.
I don't so much mean to be gloomy, as to say be aware of changes underway, and revise your strategy so it meshes with current reality.
And there will always be really smart people who discover how to get along, even prosper, no matter what the circumstances. If anyone sees an example, please start a thread here!
