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MythBusting

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How many times have you heard politicians or mainstream media pundits dump on “The Internet” as an unreliable source of information, due to an abundance of unchecked, dubious reports, which are touted as the truth?  To the contrary, politicians are the least reliable sources of information in our society because – as everyone knows – they are crooks and liars.

The mainstream media have been vested with unchallenged credibility for too long.  It wasn’t until the advent of on-line news reporting (and blogging) when the news “authorities” were subjected to a regular scheme of serious fact-checking.  Nevertheless, the mainstream media still persist in promoting erroneous stories that seem to take on a life of their own – partly because so many news outlets stumble over each other for the sake of parroting the same meme reported by a competitor.  Remember the “Balloon Boy” story?  For an entire afternoon last year, the nation stayed glued to the television, watching a UFO-styled balloon float across Colorado with helicopters in hot pursuit.  Throughout that entire episode, no news reporter or TV commentator saw fit to raise the question:  Is that balloon really large enough to lift a little boy into the sky and haul him through the air like that while it is obviously deflating?  Of course not.  That would have killed the story.

This week brought us a few commentaries, which have done a good job of running against the mainstream media-generated consensus reality to show us what is hiding under the rock.  The first item was something I found on The Big Picture website:  a 50-page, on-line book by Jonathan Tasini entitled, It’s Not Raining, We’re Getting Peed On:  The Scam of the Deficit Crisis.  Tasini went beyond deflating the hype of the deficit crisis to challenge nine other myths, referred to as “Stupid Statements”.  He followed that with his discussion of a disease afflicting politicians and media commentators:  Elititis Experitits.  Tasini covered a lot of ground in a mere 50 pages, concluding with the point that the only deficit being experienced by America right now is a deficit of moral leadership.

Another fine example of mythbusting was provided by Brett Arends in a piece for MarketWatch entitled, “The Truth about California”.  Brett Arends took a noble step forward to challenge the popular myth that California is about to default on its debts and that the Golden State is in desperate need of a bailout from Uncle Sam.  Arends began the essay with this statement:

I know that facts and truth seem to be optional these days.  I know that in the exciting new world of infinite media everyone can choose to believe whatever fantasies they want. But in the case of California, it’s getting on my nerves.

Arends relied on data from the Tax Foundation to go beyond debunking the myth that “California needs a bailout” – to argue that California has been bailing out the rest of the country:

The numbers are simply staggering.  In the quarter century through 2005 (the most recent year for which we have data), Californians bailed out the rest of America to the tune of about $620 billion in today’s dollars.  In 2005 alone it came to nearly $50 billion.

That is 30 times next year’s forecast “budget shortfall” in Sacramento. The only reason California has a budget problem at all is because they have, foolishly, spent so much money subsidizing everyone else.

If it weren’t for that, California could cut its state and local taxes by around $1,300 a person.  That’s a $1,300 tax cut for every man, woman and child. Hmmm.  Funny you never read about that anywhere, isn’t it?

Our third example of mythbusting comes from recent California expatriate, Jr. Deputy Accountant, who exposed the “man behind the curtain” in Catherine Rampell’s article for The New York Times entitled, “Corporate Profits Were the Highest on Record Last Quarter”:

Filed under:  totally unbelievable headlines that are even less believable once you actually dig into the truth behind the big fancy headline.

As Jr. Deputy Accountant points out, Reading Rampell’s article as far as the third paragraph brings you to the disclaimer, which lets the air out of this UFO balloon:

The government does not adjust the numbers for inflation, in part because these corporate profits can be affected by pricing changes from all over the world and because the government does not have a price index for individual companies.

Beyond that, near the end of the Times article, the reader is confronted with an unpleasant fact, which undermines the optimistic tone of the headline:

“The economy is not growing fast enough to reduce significantly the unemployment rate or to prevent a slide into deflation,” Paul Dales, a United States economist for Capital Economics, wrote in a note to clients.  “This is unlikely to change in 2011 or 2012.”

At least the ugly truth was available to those willing to actually read the article.

As Jonathan Tasini pointed out in his on-line book, the traditional media are “uninformed, lazy and always desperate to be part of the insider crowd”.  Perhaps that is another reason why traditional media outlets are finding themselves replaced by Internet-based news sources.


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Fedbashing Is On The Rise

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It seems as though everyone is bashing the Federal Reserve these days.  In my last posting, I criticized the Fed’s most recent decision to create $600 billion out of thin air in order to purchase even more treasury securities and mortgage-backed securities by way of the recently-announced, second round of quantitative easing (referred to as QE2).  Since that time, I’ve seen an onslaught of outrage directed against the Fed from across the political spectrum.  Bethany McLean of Slate made a similar observation on November 9.  As the subtitle to her piece suggested, people who criticized the Fed were usually considered “oddballs”.  Ms. McLean observed that the recent Quarterly Letter by Jeremy Grantham (which I discussed here) is just another example of anti-Fed sentiment from a highly-respected authority.  Ms. McLean stratified the degrees of anti-Fed-ism this way:

If Dante had nine circles of hell, then the Fed has three circles of doubters.  The first circle is critical of the Fed’s current policies. The second circle thinks that the Fed has been a menace for a long time.  The third circle wants to seriously curtail or even get rid of the Fed.

From the conservative end of the political spectrum, the Republican-oriented Investor’s Business Daily provided an editorial on November 9 entitled, “Fighting The Fed”.  More famously, in prepared remarks to be delivered during a trade association meeting in Phoenix, Sarah Palin ordered Federal Reserve chairman Ben Bernanke to “cease and desist” his plan to proceed with QE2.  As a result of the criticism of her statement by Sudeep Reddy of The Wall Street Journal’s Real Time Economics blog, it may be a while before we hear Ms. Palin chirping about this subject again.

The disparagement directed against the Fed from the political right has been receiving widespread publicity.  I was particularly impressed by the pummeling Senator Jim Bunning gave Ben Bernanke during the Federal Reserve Chairman’s appearance before the Senate Banking Committee for Bernanke’s confirmation hearing on December 3, 2009.  Here is the most-frequently quoted portion of Bunning’s diatribe:

.   .   .   you have decided that just about every large bank, investment bank, insurance company, and even some industrial companies are too big to fail.  Rather than making management, shareholders, and debt holders feel the consequences of their risk-taking, you bailed them out. In short, you are the definition of moral hazard.

Michael Grunwald, author of Time magazine’s “Person of the Year 2009” cover story on Ben Bernanke, saw fit to write a sycophantic “puff piece” in support of Bernanke’s re-confirmation as Fed chairman.  In that essay, Grunwald attempted to marginalize Bernanke’s critics with this statement:

The mostly right-leaning (deficit) hawks rail about Helicopter Ben, Zimbabwe Ben and the Villain of the Year,   . . .

The “Helicopter Ben” piece was written by Larry Kudlow.  The “Zimbabwe Ben” and “Villain of the Year” essays were both written by Adrienne Gonzalez of the Jr. Deputy Accountant website, who saw her fanbase grow exponentially as a result of Grunwald’s remark.  The most amusing aspect of Grunwald’s essay in support of Bernanke’s confirmation was the argument that the chairman could be trusted to restrain his moneyprinting when confronted with demands for more monetary stimulus:

Still, doves want to know why he isn’t providing even more gas. Part of the answer is that he doesn’t seem to think that pouring more cash into the banking system would generate many jobs, because liquidity is not the current problem.  Banks already have reserves; they just aren’t using them to make loans and spur economic activity.  Bernanke thinks injecting even more money would be like pushing on a string.
*   *   *

To Bernanke, the benefits of additional monetary stimulus would be modest at best, while the costs could be disastrous. Reasonable economists can and do disagree.

Compare and contrast that Bernanke with the Bernanke who explained his rationale for more monetary stimulus in the November 4, 2010 edition of The Washington Post:

The FOMC decided this week that, with unemployment high and inflation very low, further support to the economy is needed.

*   *   *

But the Federal Reserve has a particular obligation to help promote increased employment and sustain price stability. Steps taken this week should help us fulfill that obligation.

Bernanke should have said:  “Pushing on a string should help us fulfill that obligation.”

Meanwhile, the Fed is getting thoroughly bashed from the political left, as well.  The AlterNet website ran the text of this roundtable discussion from the team at Democracy Now (Michael Hudson, Amy Goodman and Juan Gonzalez – with a cameo appearance by Joseph Stiglitz) focused on the question of whether QE2 will launch an “economic war on the rest of the world”.  I enjoyed this opening remark by Michael Hudson:

The head of the Fed is known as “Helicopter Ben” because he talks about dropping money into the economy.  But if you see helicopters, they’re probably not your friends.  Don’t go out and wait for them to drop the money, because the money is all going electronically into the banks.

At the progressive-leaning TruthDig website, author Nomi Prins discussed the latest achievement by that unholy alliance of Wall Street and the Federal Reserve:

The Republicans may have stormed the House, but it was Wall Street and the Fed that won the election.

*   *   *

That $600 billion figure was about twice what the proverbial “analysts” on Wall Street had predicted.  This means that, adding to the current stash, the Fed will have shifted onto its books about $1 trillion of the debt that the Treasury Department has manufactured.  That’s in addition to $1.25 trillion more in various assets backed by mortgages that the Fed is keeping in its till (not including AIG and other backing) from the 2008 crisis days.  This ongoing bailout of the financial system received not a mention in pre- or postelection talk.

*   *   *

No winning Republican mentioned repealing the financial reform bill, since it doesn’t really actually reform finance, bring back Glass-Steagall, make the big banks smaller or keep them from creating complex assets for big fees.  Score one for Wall Street.  No winning Democrat thought out loud that maybe since the Republican tea partyers were so anti-bailouts they should suggest a strategy that dials back ongoing support for the banking sector as it continues to foreclose on homes, deny consumer and small business lending restructuring despite their federal windfall, and rake in trading profits.  The Democrats couldn’t suggest that, because they were complicit.  Score two for Wall Street.

In other words, nothing will change.  And that, more than the disillusionment of his supporters who had thought he would actually stand by his campaign rhetoric, is why Obama will lose the White House in 2012.

The only thing I found objectionable in Ms. Prins’ essay was her reference to “the pro-bank center”.  Since when is the political center “pro-bank”?  Don’t blame us!

As taxpayer hostility against the Fed continues to build, expect to see this book climb up the bestseller lists:  The Creature from Jekyll Island.   It’s considered the “Fedbashers’ bible”.


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Call Him The Dimon Dog

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November 16, 2009

It seems as though once an individual rises to a significant level of influence and authority, that person becomes “too big for straight talk”.  We’ve seen it happen with politicians, prominent business people and others caught-up in the “leadership” racket.  Influential people are well aware of the unforeseen consequences resulting from a candid, direct response to a simple question.  Mindful of those hazards, a rhetorical technique employing equivocation, qualification and obfuscation is cultivated in order to avoid responsibility for what could eventually become exposed as a brain fart.

Since last year’s financial crisis began, we have heard plenty of debate over the concept of “too big to fail” —  the idea that a bank is so large and interconnected with other important financial institutions that its failure could pose a threat to the entire financial system.  Recent efforts at financial reform have targeted the “too big to fail” (TBTF) concept, with differing approaches toward downsizing or breaking up those institutions with “systemic risk” potential.  Treasury Secretary “Turbo” Tim Geithner was the first to use doublespeak as a weapon against those attempting to eliminate TBTF status.  When he testified before the House Financial Services Committee on September 23 to explain his planned financial reform agenda, Geithner attempted to create the illusion that his plan would resolve the “too big to fail” problem:

First, we cannot allow firms to reap the benefits of explicit or implicit government subsidies without very strong government oversight.  We must substantially reduce the moral hazard created by the perception that these subsidies exist; address their corrosive effects on market discipline; and minimize their encouragement of risk-taking.

So, in other words … the government subsidies to those institutions will continue, but only if the recipients get “very strong government oversight”.  In his next sentence, Geithner expressed his belief that the moral hazard was created “by the perception that these subsidies exist” rather than the FACT that they exist.  At a subsequent House Financial Services Committee hearing on October 29, Geithner again tried to trick his audience into believing that the administration’s latest reform plan was opposed to TBTF status.  As Jim Kuhnhenn and Anne Flaherty reported for The Huffington Post, representatives from both sides of the isle saw right through Geithner’s smokescreen:

Others argue that by singling out financial firms important to the economy, the government could inevitably set itself up to bail them out, and that even dismantling rather than rescuing them would take taxpayer money.

“Apparently, the ‘too big to fail’ model is too hard to kill,” quipped Republican Rep. Ed Royce of California.

Rep. Brad Sherman, D-Calif., called the bill “TARP on steroids,” referring to the government’s $700 billion Wall Street rescue fund.

On Friday the 13th, Jamie Dimon, the CEO of JP Morgan Chase, stole the spotlight in this debate with an opinion piece published by The Washington Post.  Dimon pretended to be opposed to the TBTF concept and quoted from his fellow double-talker, Turbo Tim.  Dimon then made this assertion:  “The term ‘too big to fail’ must be excised from our vocabulary.”  He followed with the qualification that ending TBTF “does not mean that we must somehow cap the size of financial-services firms.”  Dimon proceeded to argue against the creation of “artificial limits” on the size of financial institutions.  In other words:  Dimon would like to see Congress enact a law that could never be applied because it would contain no metric for its own applicability.

Criticism of Dimon’s Washington Post piece was immediate and widespread, especially considering the fact that his own JP Morgan is a TBTF All Star.  David Weidner explained it for MarketWatch this way:

In other words, Dimon favors a regulatory system for unwinding failing institutions — he believes no bank should be too big to fail — but doesn’t seem to like the global effort, endorsed by the G-20, to encourage smaller, less-connected institutions.  He wants to let big institutions be big.

The best criticism of Dimon’s article came from my blogging buddy, Adrienne Gonzalez, a/k/a  Jr Deputy Accountant.  She pointed out that the report for the first quarter of 2009 by the Office of the Currency Comptroller revealed that JP Morgan Chase holds 81 trillion dollars’ worth of derivatives contracts, putting it in first place on the OCC list of what she called “derivatives offenders”.  After quoting the passage in Dimon’s piece concerning the procedure for winding-down “a large financial institution”, Adrienne made this point:

Interesting and a great read but useless in practical application.  Does Dimon really believe this?  With $81 TRILLION in notional derivatives exposure, I don’t see how an FDIC for investment banks could possibly unwind such a tangled mess in an orderly fashion.  He’s joking, right?

For an interesting portrayal of The Dimon Dog, you might want to take a look at an article by Paul Barrett, entitled “I, Banker”.   It was actually a book review Barrett wrote for The New York Times concerning a biography of Dimon by Duff McDonald, entitled The Last Man Standing.  I haven’t read the book and after reading Barrett’s review, I have no intention of doing so — since Barrett made the book appear to be the work of a fawning sycophant in awe of Dimon.  In criticizing the book, Paul Barrett gave us some of his own useful insights about Dimon:

The Dimon of  “Last Man Standing” emerges as a brilliant but flawed winner, one whose long and psychologically tangled apprenticeship to another legendary money man, Sanford Weill, helped lay the groundwork for the crisis of 2008.  In recent days, Dimon’s conduct suggests he is someone who puts the interests of his company ahead of those of society at large, which will be surprising only to those who naively look to modern Wall Street for statesmanship.

*   *   *

JPMorgan under Dimon’s leadership allowed home buyers to borrow without having to prove their income.  The bank did business with sleazy mortgage brokers who would lend to anyone with a heartbeat.  These habits ended only in 2008, when it was too late.  McDonald lauds Dimon for cleverly unloading huge volumes of the toxic subprime mortgages JPMorgan originated.  But that’s like praising a corporate polluter for trucking his poisonous sludge into the next state.  It doesn’t solve the problem; it merely moves it elsewhere.

Paul Barrett’s book review gave us a useful perspective on The Dimon Dog’s support of the administration’s financial reform agenda:

McDonald notes that the C.E.O. publicly endorses certain financial regulatory changes proposed by the Obama administration.  But critics point out that lobbyists employed by “Dimon and his team are actually stonewalling derivatives reform in order to protect the outsize margins the business generates” for JPMorgan.  The derivatives in question include “credit default swaps,” transactions akin to insurance policies that lenders can buy to buffer against loans that go bad.  In the wrong hands, credit derivatives become a form of gambling that can lead to ruin.  They need to be checked, and Dimon’s self-interested resistance isn’t helping matters.

Dimon may be the best of his breed, but when it comes to public-spirited leaders, today’s Wall Street isn’t a promising recruiting ground.

Well said!



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Spread The Word

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September 29, 2009

I’ve seen quite a few articles and broadcasts from “mainstream” news sources during the past few weeks that have actually made me feel encouraged about the public’s response to the financial crisis and our current economic predicament.  Six months ago, the dirty picture of what caused last year’s near-meltdown and what has continued to prevent the necessary reforms, was something one could find only by reading a relatively small number of blogs.  Michael Panzner wrote a book entitled Financial Armageddon in 2006, predicting what many “experts” later described as unforeseeable.  Mr. Panzner now has a blog called Financial Armageddon (as well as another: When Giants Fall).  At his Financial Armageddon website, Mr. Panzner has helped ease the pain of the economic catastrophe with a little humor by educating his readers on some novel measurements of our recession level — such as the increased use of hair dye and “The Hot Waitress Index”.   (He ran another great posting about the increasing number of disastrous experiences for people who tried to save money by cutting their own hair.)   Meanwhile, Matt Taibbi has continued to serve as a gadfly against crony capitalism.   Zero Hedge keeps us regularly apprised of the suspicious activities in the equities and futures markets, which are of no apparent concern to regulatory officials.   Some bloggers, including Jr Deputy Accountant, have criticized the manic money-printing and other inappropriate activities at the Federal Reserve — which resists all efforts at oversight and transparency.  One no longer experiences the stigma of “conspiracy theorist” by accepting the view that our financial and economic problems were caused primarily by regulatory failure.

On September 23, Dan Gerstein wrote a piece for Forbes, about the impressive, 25-page article concerning last year’s financial crisis, written by James Stewart for The New Yorker, entitled:   “Eight Days”.  At the outset, Mr. Gerstein noted how the New Yorker article provided the reader with some shocking insight on someone we all thought we knew pretty well:

But the biggest eye-opener was that the most incisive and damning questions raised by any of our leaders during this existential crisis came from none other than the era’s top free-market cheerleader in Washington, George W. Bush.

*   *   *

Paulson and Bernanke alerted Bush that AIG was about to fail, warned of the massive ripple effect AIG going bust would have on the global economy, and explained why the Fed could not intervene with an insurance company to stop this systemic threat.  In response, Bush asked  “How have we come to the point where we can’t let an institution fail without affecting the whole economy?”

The question raised by President Bush is still tragically apt, since nothing has been accomplished in the past year to break up or downsize those institutions considered “too big to fail”.  Mr. Gerstein’s experience from reading the New Yorker article helped reinforce the understanding that our current situation is not only the result of regulatory failure, but it’s also a by-product of something called “regulatory capture” —  wherein the regulators are beholden to those whom they are supposed to regulate:

Once disaster was averted and the system stabilized, Paulson, Geithner and Bernanke had no excuse for not laying down the law to Wall Street — figuratively and literally — in the ensuing weeks.  By that I mean restructuring the deals we struck with the banks to get far better returns for taxpayers and rewriting the rules governing the financial system to prevent them from ever thinking they could gamble risk-free with our money again.

*   *   *

There’s no apparent sense of apartness or independence between regulator and regulated.  To the contrary, there’s a power imbalance in the wrong direction, with the regulators dependent on and even at the mercy of the regulated.  What does it say about the integrity and even the sanity of this system when the doctors have to ask the inmates how to restructure their treatments?

I was particularly impressed by Dan Gerstein’s closing remarks in the Forbes piece.  It was encouraging to see another commentary in a mainstream media source, consistent with the ranting I did here, here and here.  Mr. Gerstein expressed dismay at the lack of attention given to the unpleasant truth that we live in a plutocracy which won’t be changed until the people demand it:

That’s why I was so disappointed to find Stewart’s epic article buried in the elite pages of the New Yorker.  It should have been serialized on the front pages of every newspaper in the country last week, so every American would be reminded in full detail of just how warped and rigged our financial system has been — and why it still is.  Maybe then it might sink in that getting mad won’t get us even in the power struggle with the financial elites for control of our economy, and that change won’t happen until taxpayers demand it.  You want public accountability for Wall Street?  Let’s start with an accountable public.

Each time an article such as Dan Gerstein’s “Too Close For Comfort” gets widespread exposure, we move one step closer to the point where we have an informed, accountable public.  It’s unfortunate that his commentary was buried in the elite pages of Forbes.  That’s why I have it here.  Spread the word.



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Spinning Away From The Truth

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May 14, 2009

Wednesday was a rough day on Wall Street.  The Dow Jones Industrial Average dropped 184 points (just over two percent) to 8284; the Standard and Poor’s 500 index gave up over 24 points (2.69 percent) closing at 883.92 and the NASDAQ 100 index gave up 51.73 points (3.01 percent).  One didn’t have to look very far to find the reason.  At The Daily Beast website on Wednesday evening, item number 2 on the Cheat Sheet was a link to an article from The Wall Street Journal by Peter McKay, entitled:  “Signs of Consumer Strain Hit Stocks”.  The morning’s bad news was described by Mr. McKay in these terms:

The Commerce Department reported that retail sales fell 0.4% in April from the prior month, a steeper decline than the 0.1% gain economists expected.  Sales in March were revised down, falling 1.3% instead of 1.2% as previously reported.

The Wall Street Journal also ran an article on this subject by Justin Lahart:  “Retail Sales Stall on Consumer Caution”.  Mr. Lahart’s piece underscored the message reverberating through the evening’s financial reporting:

Indeed, retail sales rose in January and February after sliding for six straight months.  But those hopes were undermined by the 1.3% drop in retail sales in March as well as April’s decline.

The data suggest that a recovery won’t come until the second half of the year, and that when it does arrive it will be sluggish, said Michael Darda, an economist at MKM Partners in Stamford, Conn.

As I scanned through a number of websites to peruse the evening’s news stories, I was quite shocked to see the following headline on the Huffington Post blog, with screaming, bright red, upper-case, oversized font:  “BLOOMBERG NEWS:  CONSUMERS FEELING ‘INSPIRED’ TO SPEND MORE”.  Huh?   Just below the headline were three large photos.  The photo on the left featured a lineup of luxurious yachts, reminiscent of what can be found along Indian Creek during the Miami Beach Boat Show.  The middle picture showed that guy from Lifestyles of the Rich and Famous, raising a silver goblet in a toast to the photographer.  The photo on the right depicted a headless woman, adorned in enough jewelry to turn Ruth Madoff green with envy.  Had someone hacked into the HuffPo website and put this up as a gag?  (Later in the evening, I checked back at the site.  Although there was a new main headline relating to a different story, the link to the “inspired consumers” story was still there, although down the page.)

Clicking on the “inspired consumers” headline brought me to a story from Bloomberg News, entitled:  “‘Good Bad’ Economy Inspires Consumers As Slump Eases”.  “Good bad economy”?  I had trouble figuring out what that meant because I lost my George Orwell Decoder Ring.  Looking at this slice from the story told me enough about what they were trying to say:

Investor Exuberance

A Bloomberg survey of users on six continents showed that confidence in the global economy rose to the highest level in 19 months.

Antarctica and what five other continents?

The Huffington Post‘s BizarroWorld headline struck me as an attempt to imbue readers with a perception of Happy Days in Obamaland.  That headline and its incorporated story reminded me of a point recently made by one of my favorite bloggers, Jr. Deputy Accountant:

You know, there are times when I wonder just how difficult it is to keep the PR machine running at full speed and keep the market propped up artificially and massage Goldman’s nuts all at once.  Somehow, the powers-that-be are pulling it off, and I imagine that a large part of the dirty work, at least when it comes to PR, is taken care of by our moronic friends in mainstream media who feed up gems like this:  Citi using most of TARP capital to make loans.

(As an aside:  the reference to “Goldman” is Goldman Sachs, the second largest contributor to President Obama’s election campaign.)

Instead of relying on “the PR machine” to feed me propaganda about the economy, I rely on some of the sources included on this website’s blogroll.  Most of the writers for those sites are credentialed professionals, regarded as experts in their field (as opposed to the dilettantes, who cheerlead for Wall Street in the mainstream media).  One of these experts is Yves Smith of Naked Capitalism.  If you want to keep up with what’s really happening in the financial world, I suggest that you read her blog.

The truth of what the economy has in store for us is not pretty.  If you are ready to have a look at it, read Jeremy Grantham’s most recent report.  His bottom line is that late this year or early next year there will be a stock market rally, bringing the Standard and Poor’s 500 index near the 1100 range.  After that, get ready for seven really lean years:

A large rally here is far more likely to prove a last hurrah — a codicil on the great bullishness we have had since the early 90s or, even in some respects, since the early 80s.  The rally, if it occurs, will set us up for a long, drawn-out disappointment not only in the economy, but also in the stock markets of the developed world.

Unfortunately, it’s already too late for President Obama to accept the following rationale from Mr. Grantham’s essay:

We should particularly not allow ourselves to be intimidated by the financial mafia into believing that all of the failing financial companies — or very nearly all — had to be defended at all costs.  To take the equivalent dough that was spent on propping up, say, Goldman or related entities like AIG (that were necessary to Goldman’s well being), as well as the many other incompetent banks and spending it instead on really useful, high return infrastructure and energy conservation and oil and coal replacement projects would seem like a real bargain for society.  Yes, we would certainly have had a very painful temporary economic hit from financial and other bankruptcies if we had decided to let them go, but given the proven resilience of economies, it would still have seemed a better long-term bet.

After reading Jeremy Grantham’s recent quarterly letter, ask yourself this:  Do you feel “inspired” to spend more?