I Am an Economic Girlie-Man

I Am an Economic Girlie-Man

By Bill Mann (TMF Otter)
September 1, 2004
http://www.fool.com/News/mft/2004/mft04090118.htm

In his speech last night at the Republican National Convention, 
California Gov. Arnold Schwarzenegger pinged folks who are pessimistic 
about the state of the U.S. economy, calling them "economic girlie-men."

On a personal level, I thought it was a pretty funny line, and there's 
certain comedy to the fact that Arnold gets to spoof a line that was 
used on Saturday Night Live to spoof Arnold.

Here's the exact line: "To those critics who are so pessimistic about 
our economy, I say: 'Don't be economic girlie-men!"'

But you know what? I'm pessimistic about the economy. I'm afraid that 
the Federal Reserve has backed itself into a corner. I'm afraid that 
lending discipline among mortgage companies has completely collapsed. I 
am concerned that low interest rates have been used to entice the 
American consumer to clean up a recession borne by an irresponsible 
corporate spending binge by going on one of his own. I'm afraid that the 
$200 billion-plus that Americans have cashed out of their houses has 
been spent, and the next drop in interest rates won't be concomitant 
with a rise in prices; rather, it will be because of a full-fledged 
financial emergency.

So fine, I'm an economic girlie-man. Here's another thing: I'm not 
someone rooting for things to be worse. I'm a four-alarm, full-fledged 
laissez-faire capitalist South Park Republican fiscal conservative. I 
don't think people can get rich by buying houses from one another for 
ever more money. I don't think that the path to ultimate financial 
success is to borrow more; it doesn't work on an individual level, and 
it sure as heck doesn't work on a national level. I think that the most 
exceptional thing about America's economic performance is its historical 
willingness to allow the successful to succeed and the failures to fail. 
The failures, of course, can jump back up, try again, and THEN succeed. 
But the talk of how many jobs some president has created or lost (as if) 
turns what is great about America right on its ear, because if I know 
one thing about economics, it is this: There aren't a few smart folks in 
a room somewhere controlling things. In fact, the more smart folks try 
to control the economy, the more things tend to get screwed up.

To borrow a phrase from Berkshire Hathaway's (NYSE: BRK.A)(NYSE: BRK.B) 
Chairman Warren Buffett, we live in "Squanderville." More importantly, I 
believe that the efforts to forestall the cleansing of the billions of 
dollars of horrendous investments in bad businesses from the last decade 
will ultimately wreak more destruction. The longer such cleansing is 
delayed, the more wrenching it is going to be. What we've seen in the 
last two years is the return of speculative excess, if you will, another 
layer of miserable capital allocation decisions. ARM interest-only 
mortgages. Debt spending. Mamma.com (Nasdaq: MAMA).

If believing that makes me an "economic girlie-man," well, so be it. 
I'll just take this opportunity to test just how big that "big tent" 
really is.

There, I said it. I feel better.

Bill Mann owns shares in Berkshire Hathaway.
_______________________________________________
heads mailing list
[email protected]
http://your.ballistichelmet.org/mailman/listinfo/heads/
http://ballistichelmet.org/donate/