Tough Financial Medicine

Over at Big Orange, front pager Devilstower has an interesting article about a letter to “President Obama” from PIMCO CEO Bill Gross. You can read the whole letter here.

It’s some interesting commentary on the state of high finance in America. Here are some snippets:

You have inherited a mess. Your predecessor, fixated on emulating a former Republican icon from a far different economic era, chose to emphasize tax cuts for the rich and excessive consumption for all Americans. He promoted deregulation and free markets when, in fact, the markets and their institutions needed tough love. Over eight years, he failed to put forth a coherent energy policy. He needlessly invaded Iraq and lowered worldwide esteem for this nation as a symbol of freedom and benevolence.

…Granted, you’re going to raise tax rates on the rich, give a break to the lower/middle class and rebalance the scales of economic justice somewhat. I myself won’t enjoy paying that near 50 percent marginal tax rate after you remove the current cap on the payroll tax, but my wealthy neighbors and I in Newport Beach should just look at it this way: we’ve had an eight-year lease extension on the “high life.” Now it’s time to give something back…

…While the Republicans will blame you for years and label you “Trillion Dollar Obama” in future campaigns, there is in fact not much that you or any other President can do. You’ve inherited an asset-based economy whose well has been pumped nearly dry with lower and lower interest rates and lender of last resort liquidity provisions that have managed to support Ponzi-style prosperity in recent years…

He goes on and on. The thing that makes me happy about this is the realism. Our farts are not going to magically smell like roses once Obama is elected. Our financial mess ain’t gonna be fixed overnight. Hell, by the time he takes the oath of office, we’ll be at the end of the 4th month of President Bush’s last budget. Not much he can do with that, huh?

Seeing any positive movement by the mid-terms is unlikely too. On election day in 2010, we’ll be in the 1st month of the second Obama budget, and the HUGE tax increase on the ultra wealthy, will motivate them in a way we haven’t seen since 1994. To make matters worse, the financial state of the nation will probably actually be worse than it is today. We had better be ready.

If you’ve ever seen the Kill Bill movies you know it takes a long time to punch your way out of a grave. That’s the reality that about 2/3rds of Americans are potentially facing as the currency continues to devalue and interest on savings goes into the negative. And once you’re out, you’re still not done. You’ve gotta kick the asses of two trained killers, damn it’s hard out there for a pimp (to quote from a movie made by a neighbor)! But that’s what has to be done, we can’t renew the lease on the “high life” forever.

So while you’re out there bitching about trials and triangulations, I know I will be, don’t forget the harsh reality that gas has surpassed the price of milk, which will most certainly start rising faster. That means everything else gets more expensive, and I need to start lobbying to allow farm animals in the city with all my backyard space. I should probably fix the fence first…

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