This blog was begun late in 2008 with the motto as titled above. It is nice to see a somewhat mainstream economist speak out in favor of lest debt and more equity. Here is an excerpt from Andrew Smithers in We need to turn to equity financing:
We are surely running up against the limits of debt, not only in the private but also in the public sector. . . We must therefore turn to other ways. One of the two possibilities is to rely on more equity and less debt for financing investment. The other is to transfer wealth from debt owners to equity owners through inflation.
People say default in some sort, such as through inflation or more overtly, is inevitable for the U. S. Federal Government. Yet the application of common sense, the cessation of market-distorting activities by the government at the implicit point of a gun and the restoration of an economy designed to serve the people rather than their masters in Washington will allow their government to get back to where it once belonged.
Smithers' article is very much on the right track. There is little time to lose.
Copyright (C) Long Lake LLC 2010
Showing posts with label Equity. Show all posts
Showing posts with label Equity. Show all posts
Tuesday, June 29, 2010
Thursday, June 11, 2009
Common Sense from Nassim Taleb
CNBC reports on an interview it had Wednesday morning with the author of "The Black Swan", Nassim Nicholas Taleb, Ph.D. Here is the text of CNBC's summary of the interview in its entirety:
The Obama administration's attempts to fight the financial crisis with more cash is like treating a bad tooth with Novocain instead of a root canal, Nassim Taleb, author of "The Black Swan," told CNBC Wednesday.
The main problem is the level of debt, and Taleb compared the authorities' efforts with those of a not very skilled pilot who is trying to land a Concorde on a narrow strip, between an ocean of deflation and a mountain of hyperinflation.
"These people failed us, they're going to fail us again," Taleb told "Squawk Box."
"They tell the banks to lend more but have less leverage," and expect people to go out and consume while unemployment is rising, he added.
"The way to restart everything is restructuring, conversion of debt into equity, convince people that debt is not good," Taleb said.
"Do not delay a root canal," he added. "Don't do piecemeal solutions to a problem that is fundamental."
"The solution is there, convert debt to equity. Usually it happens with Chapter 11, let's do it faster, and across the board," Taleb said.
Dr. Taleb is my number one man in this crisis. One reason is that he looks at matters in a system-wide fashion.
No one knows whether the recession/depression/banana will end this month, next quarter, etc., and no one really needs to know. How does the long-term value of, for example, IBM or McDonald's, or a medical technology company, change if the abstraction called the "economy" bottoms in one quarter or another?
What really matters is risk-reward, which Taleb has been top-notch at.
There's no doubt at Econblog Review that the U. S. needs to move to equity rather than debt. Piling debt upon debt will fail. When? No one knows. But it will fail. Is the President or Congress listening to this advice? No.
More's the pity.
Copyright (C) Long Lake LLC 2009
The Obama administration's attempts to fight the financial crisis with more cash is like treating a bad tooth with Novocain instead of a root canal, Nassim Taleb, author of "The Black Swan," told CNBC Wednesday.
The main problem is the level of debt, and Taleb compared the authorities' efforts with those of a not very skilled pilot who is trying to land a Concorde on a narrow strip, between an ocean of deflation and a mountain of hyperinflation.
"These people failed us, they're going to fail us again," Taleb told "Squawk Box."
"They tell the banks to lend more but have less leverage," and expect people to go out and consume while unemployment is rising, he added.
"The way to restart everything is restructuring, conversion of debt into equity, convince people that debt is not good," Taleb said.
"Do not delay a root canal," he added. "Don't do piecemeal solutions to a problem that is fundamental."
"The solution is there, convert debt to equity. Usually it happens with Chapter 11, let's do it faster, and across the board," Taleb said.
Dr. Taleb is my number one man in this crisis. One reason is that he looks at matters in a system-wide fashion.
No one knows whether the recession/depression/banana will end this month, next quarter, etc., and no one really needs to know. How does the long-term value of, for example, IBM or McDonald's, or a medical technology company, change if the abstraction called the "economy" bottoms in one quarter or another?
What really matters is risk-reward, which Taleb has been top-notch at.
There's no doubt at Econblog Review that the U. S. needs to move to equity rather than debt. Piling debt upon debt will fail. When? No one knows. But it will fail. Is the President or Congress listening to this advice? No.
More's the pity.
Copyright (C) Long Lake LLC 2009
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