Yoga & Off-Balance Sheet Financing

This post is a response to Quasi-fiscal scoundrels 4: helping banks by Willem Buiter on the Maverecon blog at Financial Times on April 13, 2008.

The word “balance” has significant meaning here. When you take something “off-balance,” you are doing just that. In other words, balance is good (think yoga or buddhism), off-balance (think checkbook) is not good. On that note, what do you call Fannie Mae, Freddie Mac and Sallie Mae. Do they qualify as “off-balance sheet financing?” How about the Bear Stearns portfolio. The U.S. government did about 36 hours of due diligence on that one, is that one off-balance sheet too?

I still want to know when we are going to start talking about employment and jobs and stop talking about saving Wall Street and their housing derivative ponzi scheme. The first shoe of unemployment is hitting now with the loss of jobs related to the housing downturn (construction, materials and related transportation industry) and the second shoe to drop is coming real, real soon (Wall Street, mortgage brokers and “derivatives” of).

This is where the U.S. consumer will slow abruptly, as the rich guys are the ones still generating most of the consumption momentum. Directly related manufacturing driven economies such as India, Korea, Japan and China will feel it next and the commodity driven regions of Africa, South America and the Middle East will not be too far behind. Globalism is a beautiful thing, isn’t it.

The smart economists are spending their time thinking about how to put the very soon to be available labor around the world back to work. There is the most incredible economic opportunity out there today given all the heavy baggage the bourgeoisie is carrying around. The question is, will the entrepreneurs take advantage of it?

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