Government “Out of Bullets?” or just out of the ones they want to use?
by Tom on December 8, 2009
in Market Musings, banks
An interesting and disturbing interview with Meredith Whitney. I don’t have time to go into it in great detail, but a couple of thoughts:
- I think she’s right in terms of consumers getting cut out of the system. On the one hand, some of those who were in the system were too far into the system and borrowed a lot of money they couldn’t handle. On the other hand, there are a lot of people who have had bad things happen and are in tough times that aren’t their own fault. There needs to be a “middle ground” for the second type.
- I don’t agree that the government is “out of bullets” yet. I think that they are out of traditional bullets and at this point, they don’t want to consider using the non-traditional bullets.
What would those non-traditional bullets be? That’s way too long of a topic for this morning…..
Tom Vanderwell
Government ‘Out of Bullets,’ Consumers in Trouble: Whitney – CNBC
The government is running out of ways to help the economy as the US faces major issues regarding credit and employment ahead, banking analyst Meredith Whitney told CNBC.“I think they’re out of bullets,” Whitney said in an interview during which she reinforced remarks she made last month indicating she is strongly pessimistic about the prospects for recovery.
Primary among her concerns is the lack of credit access for consumers who she said are “getting kicked out of the financial system.” She said that will be the prevailing trend in 2010.
Despite being able to borrow at near-zero percent interest, banks are not taking that money and putting it back into the marketplace. The Federal Reserve said Monday that consumer lending dropped 1.7 percent on an annualized basis in October, the ninth straight monthly decline.
The solution, she said, is for the government to take proactive steps that will give consumers more money to spend.
“I don’t think you can cut taxes enough to stimulate demand,” Whitney said. “For a 2010 prediction, which is so disturbing on so many levels to have so many Americans be kicked out of the financial system and the consequences both political and economic of that, it’s a real issue. You can’t get around it. This has never happened before in this country.”
Technorati Tags: Banks, meredith Whitney, Lending, Consumer Spending
“I don’t think you can cut taxes enough to stimulate demand,” Whitney said. “For a 2010 prediction, which is so disturbing on so many levels to have so many Americans be kicked out of the financial system and the consequences both political and economic of that, it’s a real issue. You can’t get around it. This has never happened before in this country.”
It would be funny if it wasn’t so predictably destructive for our economy, how far some will go to avoid doing what hasn’t failed to work in our lifetimes — cutting income taxes. Their ability to ignore the 900 pound gorilla in the room has gained my grudging admiration.