Re: On the financial meltdown

[David Farber <dave () farber net>]

Begin forwarded message:

From: odlyzko () dtc umn edu (Andrew Odlyzko)
Date: October 12, 2008 11:19:01 PM EDT
To: newmedia () aol com, dave () farber net, dewayne () warpspeed com
Subject: Re: [Dewayne-Net] re: On the financial meltdown

Hmm, if I am "much better on telecom," then at least my comments on
telecom may have some value.  That's reassuring!   :-)

But Mark is certainly right that I "failed to illustrate what the  
ECONOMIC
consequences are likely to be."  I have no idea, and I was not trying to
do that.  All I tried to do was to explain our current situation, and  
that's
hard enough.

As for the future, all I can do is speculate.  And my speculations  
should
not be taken too seriously.  But given this caveat, while I see lots of
dangers (including a really scary freeze of the world financial system),
my guess is that we'll muddle through.  Stocks may crater, and inflation
may explode (if governments start printing money), and it seems we are
getting into a bad recession, but it is not clear that a couple of years
from now there will be any really dramatic changes in how the economic
system functions, or how people behave.  The bubble that is deflating
right now is smaller (relative to the size of the economy) than that of
Japan in the 1980s, for example.  And while Japan did suffer from some
tough times, the "lost decade of the 1990s," people did not starve, and
in many areas of science and technology Japan is still the world leader.

The federal government can increase the national debt substantially,
just as Japan did its debt in the 1990s.  (If our debt were to grow, as
a fraction of GDP, like Japan's did, we would be dealing with an  
increase
on the order of $10 trillion.  That seems sufficient to deal with the
bubble that is now deflating, even if the $0.7 trillion plan proposed
by Paulson and Bernanke is too small.)

Of course, there would be costs to the muddling through scenario  
outlined
above, but that is a long term problem.  Politicians and Wall Street  
types
are not wont to think too far ahead.

This is just my 2c worth of speculation,
Andrew



        -----Original message-----
        From dewayne-net-request () warpspeed com  Sun Oct 12 17:47:43 2008
        Return-Path: <dewayne-net-request () warpspeed com>
        From: dewayne () warpspeed com (Dewayne Hendricks)
        To: Dewayne-Net Technology List <xyzzy () warpspeed com>
        Subject: [Dewayne-Net] re: On the financial meltdown
        Date: Sun, 12 Oct 2008 15:33:36 -0700

        [Note:  This comment on Andrew Odlyzko's original post comes from a
        reader of Dave Farber's IP list.  DLH]

        From: David Farber <dave () farber net>
        Date: October 12, 2008 3:14:52 PM PDT
        Subject: [IP] on the financial meltdown

        Since this is so long Mark's reply Mark is an OLD , in time not age,
        Wall Streeter who was involved with taking Apple public.

        Dave

        Date: Sun, 12 Oct 2008 13:00:36 -0400
        From: Mark Stahlman<newmedia () aol com>
        Subject: Re: any comment on this?

        Dave:

        Andrew is much better on telecom! <g>

        Clearly "stabilizing" home prices is very important.  In addition,
        giving those people who are "under-water" on real estate need time to
        let all this happen.  This is pretty well known and in the headlines.

        No one -- including the US Treasury -- actually knows what they will
        do with the $700B.  That's one of the reasons why it was so hard to
        pass in Congress.

        We are in a FINANCIAL crisis and will probably be in one for 6-12
        months.  However, Andrew has failed to illustrate what the ECONOMIC
        consequences are likely to be.

        The "problem" is the old rules are gone and new ones haven't been made
        up yet.  So lots of people are on the sidelines waiting to see what
        the new rules are going to be.

        What I'm most interested in is the *permanent* changes in consumer
        behavior that this will provoke and how that will change the direction
        of the global economy.  Yes, it's way too soon to know.

        Mark
        RSS Feed: <http://www.warpspeed.com/wordpress>





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