Image Courtesy of CNBCYikes! Meredith Whitney's report on CNBC is a draconian spin on current events if I ever heard one! Head for the hills!! (Of Utah as Meredith has done...)
In my opinion the only thing to fear at this point is fear itself.
I smell an agenda in between the lines of Meredith's report. She is now a private investment consultant. She doesn't hold positions in stocks, but she advises her clients and profits to some extent by how successful they are, and so she indirectly holds the positions they hold, but doesn't have to report that.
What is she advising them to do? Who is she working for now? These are interesting questions, because her words carry a lot of weight on Wall St. Is she talking down the financials so her clients can take more favorable positions? Is she under contract with the banking industry and lobbying against financial regulation? Either scenario is plausible. A third scenario is that we are headed for a double-dip recession, which will make this period equal to or worse than the Great Depression.
I refuse to believe the third hypothesis. I see Americans staying busy at all costs, even if it means heading back to learn a new skill. I feel that we, as Americans, are universally sympathetic and empathetic to our common plight and are not headed down the self-destructive road of infighting and recrimination.
I believe that we will use recent events, such as the collapse of Lehman Brothers and the Gulf Oil Disaster, to innovate and invigorate our economy in new and exciting directions. I believe that our central bank will ward off deflation by inflating the M1 money supply and will protect the bottom line of the money center banks by keeping the Fed Funds rate as close to zero as possible.
I believe that the European response to the credit crisis (fiscal restraint and budget cuts) spells a nuclear winter for Europe and a disaster for the European banks. And, weakness in Europe spells a slow-down for China, and continued demand for U.S. Treasuries as China fights to keep the renimbi weak.
At the end of the week, all this is good news for the United States and U.S. financial institutions.
I disagree with Meredith about the impact of U.S. Senate banking regulation. The regulations are populist in nature, but they are common-sense and operate at the margins in any event. If a particular state limits interest rates below the market and its residents can't get credit, then the limits will rise or people will move. This is not bad, but good. To charge less for debit card transactions is also common sense. To regulate merchant fees against an oligopolistic servicing market is also common sense.
The road out of this crisis is for Americans to keep their spirits up, keep busy, and keep building things. If we continue to design, innovate and produce we will be just fine.
Just ridding ourselves of our dependence on fossil fuels is the work of a generation, and that work is really just getting under way in earnest. Let's use rallying points like these to launch ourselves into a saner future.
