My readers, named “Davidson” by me has submitted the following piece…
He writes:
The panic in Obama’s recent speeches as he attempts to railroad the Democratic spending bill is without thoughtful analysis. Unfortunately, this reflects the misunderstandings of his advisors who believe that throwing spending at the lack of liquidity is the solution.
How wrong can so many people be!!!
The issue is that Mark-to-Market is providing a false view of the value of assets. Brian Wesbury and others have suggested a “Cash Flow” methodology, i.e. if the debt security is paying its interest and principal streams then it should be valued according to the risk of non-payment along bonds that are paying. This is a simple model and one that can be trusted as it is based on the realities of commerce.
This does not require another $800bil of spending. This requires 20min of discussion and a flip of the accounting switch. We may need a few guarantees as well.
Just where do we get people who cannot see the simplicity of this! It is Mark-to-Market that has caused many $billions of write offs. These need to be reversed and then let the market pricing mechanism get to work.
It is frustrating to watch so much intelligence go to waste and even do great damage because they are panicked.
For more on mark-to-market, here is a post I wrote in March 2008.
Here is a bit of a rant I wrote on it in May of 2008
Disclosure (“none” means no position):
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One reply on “"Davidson": Panic at The White House”
That’s a very good assessment of the situation. They are being reactionary and not realizing that the stimulus effect from the last was was negative.
We are now facing the start of what is most likely a depression based upon the effect. The last time it was done there wasn’t a full plan in place to be certain where the dollars would go and this time it’s worse with all of the Pork rolled into it.
An Accountability plan is what needed to be in place before anything was put together. ie. for the banks needing funds the dollars need to be loaned out 1st and then reimbursed equally to help them cash flow while gaining lending power. …
jstratford