Friday, October 31, 2008
CREDIT CRUNCH???
The country did not run out of credit for loans. The country has loaned us to above our eyeballs. What did the financial institutions expect? We have been sponsoring this kind of debt culture since about 1965. Our payment balance on import/exports has been negative for 40 years. It is like we think money grows on trees. Most of our businesses are focused on capturing money from someone they think will continue to pay them. It is like the Carnival games that used to come to rural American in the 40's and 50's. The prizes were always worth less than the fee to play the game. If you want to be richer, you need to create more wealth than you use. It goes for people. It goes for business. It should go for government as well.
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I liken it to John D. Rockefeller's control dilemma of cash-flow, which began in circa, 1865. A lot of things frustrated his shear genius at capitalistic management. But nothing frustrated his control freak style more than his dealings in Standard’s cash-flow management in regards to investment bankers.
He hated financing the energy industry, he loved organizing it. You could say even then energy derivatives were out of control (Enron, circa 2001), because of the wild fluctuations in the futures market.
What did John do? He bypassed the banks and bankrolled his own at risk capital (with oil reserves and sweating the competition, I think).
Sometimes I still wish to live debt free in that little Baskerville cottage for two, but the "dream" temptation was too much. Now, I have postmortem derivatives of a mortgage barely in my life expectancy. I signed my life away.
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