Tuesday, September 23, 2008
First, a capsule analysis of the crisis.
1. It all starts with the bursting of the housing bubble. This has led to sharply increased rates of
default and foreclosure, which has led to large losses on mortgage-backed securities.
2. The losses in MBS, in turn, have left the financial system undercapitalized — doubly so, because levels of leverage that were previously considered acceptable are no longer OK.
3. The financial system, in its efforts to deleverage, is contracting credit, placing everyone who depends on credit under strain.
4. There’s also, to some extent, a vicious circle of deleveraging: as financial firms try to contract their balance sheets, they drive down the prices of assets, further reducing capital and forcing more deleveraging.
Starting with point #2 (I'll be returning to #1) let's unpack the language here. "The losses in mortgage-backed securities have left the financial system undercapitalized." Undercapitalized means short of cash. "...levels of leverage that were ... acceptable are no longer OK." leverage means borrowing or debt. Translation: we have too much debt and not enough cash. That's us - collectively, all of us. Sadly, we're all in this together.
Returning to point #1... Far be it from me to disagree with Paul Krugman, but it didn't start with the housing bubble. It started when we began to believe that it's acceptable to have more debt than cash. Even after the painful lessons of the 1930s, it was only ten short years before we began rewarding ourselves for the years of deprivation during World War II by turning to banks for mortgages for new homes. The Levittown housing boom was off and running. It was another ten short years before we began thinking, "Well, maybe if a home mortgage is okay, a car loan would be okay. After all, the car has value, too."
And then came credit cards. Yep. Just thirty short years after the worst credit crisis in history, came credit cards. At first they were loosely backed by bank accounts. I know this 'cause I had one of those first credit cards. I was seventeen years old when the bank where I had a checking and savings account sent me, unsolicited, a shiny new BankAmeriCard. Its credit limit was less than I had in my savings account. So, that was pretty safe. But, of course, as I used the credit card and paid the full balance every month, the bank increased the credit limit. By then I was a grad student. In those days, if you were smart and you worked hard enough, you could actually get through college and grad school without student loans.
It's been all downhill since then. And make no mistake about it, we're all in it together.
Monday, September 22, 2008
Today is Autumnal Equinox. At 15:44 GMT (or 11:44 EDT) the earth is at a point in its journey around the sun where it is not tilted toward or away from the sun. Everywhere on the earth today will have roughly twelve hours of daylight and twelve hours of darkness. In that one respect, we're all equal today. I think that's worth celebrating.
Leaving my office near sunset last week, I noticed the sun coming straight in the west facing atrium window, all the way down the east-west hallway to the east facing back door. The United States is such a young country that many streets and roads laid out due east and west or north and south. Consequently, many buildings facing the road are mini-temples to the rising and setting sun.
Autumn Equinox means the busy summer season is drawing to a close and we're headed toward the shorter days of the season of rest and reflection. If you've been growing things, you'll now be celebrating the harvest, as I was yesterday.
I get a sort of mini spring cleaning drive this time of year. The housecleaning I haven't had time for all summer is glaring. There's plenty of outdoor clean-up to finish. Oh, my. It's time to get at it.
Sunday, September 21, 2008
Belinda may be right that a lot of things I plant die. But the ones that don't, make the whole effort worthwhile.
I've tried unsuccessfully several times in several places to grow this Japanese Anemone. This is its third year in this spot. So, I'm beginning to think I've won and I'm really happy with it.
This birdbath is another great success.
There's something very warm and fuzzy about seeing the birds enjoying the running water. While they don't often bathe in it, they do regularly drink from it.
(P.S. The seed stalk in front of the birdbath is another gardening success. Like the Anemone above, I had tried to grow Cardinal Flower in several places. I finally hit on this spot where the water spashing out of the birdbath keeps the soil moist. Here the Cardinal Flower is thriving and self-sowing. I can't believe I forgot to take a picture of it. Oh, well. Maybe next year.)
Sunday, September 07, 2008
Magda, the smallest of the four, still dominates - perhaps by seniority alone. Or perhaps by being cautious. She sometimes plinks across the piano to get from one side of the room to the other while maintaining the best possible vantage point. Last week Jake tried it. He didn't like the noise at all. But he finally just settled down, ignoring the weird sustained chord.
Murphy, also variously known as Winston, Rocky, White, Casper and, recently, Sneaker, continues to be King of the Cars.