If Nothing Changes, Nothing Changes

If ever there was a fair-weather friend it’s the body politic, the what-have-you-done-for-me-lately crowd. The dust will not be settled by tomorrow, but today, the United States elected its first black President. The wedding was fun, but we shall have no honeymoon. In fact, this fair-weather friend might as well be the Devil himself.

Americans have much to process in the next two months. It will not be easy no matter whom you voted for.

If you voted for John McCain, do you think the world will end sooner because we’re now hearing the words “President-Elect Barack Obama? If you voted for Barack Obama, are you really glad he won, given the tremendous pile of debt, blackness and bleakness both men worked so incredibly hard to inherit?

Now comes the real work. Now, too, comes the real pain as we Americans – real and unreal – get down to the business of un-screwing what has been so very well screwed so recently. Be clear, I blame neither party; we are all at fault. The time has come for bold sacrifice, and the price is on all our heads. Our Federal Gubment just spent $1 trillion on sand and stilts with which to prop up the listing, sinking wreck we once referred to as our economy. It won't be enough. It's not nearly enough, because our solution amounts to applying more problem.

STOOPID.

I could bore you with all the little details and list the myriad bombs going off all around us Earthers, but today I’ll just briefly mention the big picture… the world has lost half of its equity market wealth since last October. How much money is that? How much?

$29 TRILLION. Twenty-nine trillion dollars. $29,000,000,000.000.00. 2.9 x 10-to-the-twelfth-power-dollars. Twenty-nine thousand-billion dollars. The negative wealth effect of this unwinding will be devastating and WE HAVE NOT EVEN BEGUN TO FEEL IT. Not really. We have had only the tiniest taste of our terrible financial fate.

(T)he most frightening chart we have seen is one that compares total credit market debt to U.S. GDP. The average of this ratio over the last 100 years has been around 155%. This ratio peaked first heading into the Great Depression at 260% (after then falling back to 130%) but has now risen to an unprecedented 350%! We would imagine that Paulson has a calendar on his wall with a red marker marking off each day with a big red “X” on it. He has January 20th circled with party hats, confetti, and champagne on it. His last day won’t come fast enough.
Over the last 10 days, we have seen Hank Paulson and his international colleagues put away their policy bazookas and reach for the red button to launch ICBMs, but the fundamental flaw in the governmental response is that it is trying to re-lever an already massively overleveraged system in a short-term attempt to halt an unavoidable cycle of asset price deflation.
This policy prescription is like treating the withdrawal symptoms of our global credit addiction with another hit of heroin. Like any addict, one hit is never enough and the only question remains is how long it takes the global economy to ask for just one more…
J. Kyle Bass, Managing Partner
Hayman Advisors
http://ftalphaville.ft.com/blog/2008/10/20/17216/time-for-the-darwinian-flush/

I believe America's present good mood, however fleeting, will help us enjoy the last bear market rally we will see in quite some time. The markets and consumer sentiment will conspire to keep us under the ether’s happy spell at least until the first waves of new credit card debt show up like hungry wolves along about February of 2009. So in the meantime, have some eggnog. Be merry! Be bright! Live today as if tomorrow might never come. This advice is just as good for you and me as it is to America's 44th President, who, through no fault of his own, is about to inherit a 95% un-fixable mess, in exchange for which he gave two prime years of his life to the inbred and wickedly ungrateful breath- hair- and life-stealing campaign trail. Today, he is President-Elect. Tomorrow, President. But before the first term is over, he may wish he had spent his time on something more rewarding than winning an election.

Barack Obama won the election because he had an idea and American voters bought into it. But ideas alone change nothing. Faith without works is dead. If we cannot agree on how to work together on a plan of action designed to weather the stormy winter ahead, the 'winds of change' that brought us here will retroactively morph into the 'farts of fiddle-with.' Let us hope the next chapter of America's big book will be titled Into Action. Real, lasting change, as always, must come from within. Everyone must participate; everyone must sacrifice.

Obama's ideas need more than the sheer force of will; they will quickly become worthless without the people's muscle behind them. We must change, because to do otherwise will bring our once-great nation to its knees. One thing is certain: if we keep doing what we're doing we'll keep getting what we're getting. We stand at the turning point. The work will be difficult. But if we fail to act now, history -- and our progeny -- will judge us most harshly.