Small silhouette of Doug Wolkon WELCOME TO PLURANOMICS, THE ECONOMICS OF MANY.

Construction

Economic Detox

So what is an Economic Detox? Raw green vegetables consumed through a straw is the food equivalent. Think diarrhea. I know what you are thinking, “yuk”. But as Wall Street has learned the hard way, we have no choice in the matter. Our economy is detoxing whether we like it or not; dropping our excess weight in order to regain our balance; flushing our obese corporate and government costs down the toilet in support of the long-term prosperity of the quicker, lighter, faster and more profitable Mom and Pop entrepreneurs. Continued »

The Flea Market

A developer once told me that if you do a deal with someone that has fleas, your bound to get fleas. For example, Bear Stearns and AIG have fleas. I understand the fear-based argument for getting fleas, “We have no choice”. But borrowing more money to participate in the Flea Market can’t be our only choice. What if the “Free Markets” posed another choice? What if there was a much better way than borrowing more time and money just to get fleas (and these are big and scary fleas)? Continued »

A Solar Panel: The Neutralizer

The real reason that oil consumption has slowed down is once again – the housing market. Think about how much less oil is needed to move all those materials (wood, steel, concrete, appliances, etc.) as well as construction laborers for all those houses and condos we were building. All that consumption from our housing construction has come to a stop, and with it the end of a major consumer of oil. The next oil demand decrease is on its way from both China and India. Continued »

Yoga & Off-Balance Sheet Financing

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? Continued »

Recession Smession

Dramatic unemployment increases in financial services, construction and autos will be the real shoe to drop. Who will pay for all these billions of dollars of writedowns? Oh, I forgot, the Fed has the ability to actually print more food and oil – yeah right, was Bernanke ever taught the first rule of Economics: Land is Scarce.

So how much of our newly printed paper is currently being bought by our social security system – talk about drinking your own blood. The welfare state will inevitably be forced to solve their huge inefficient costs of entitlements and armed forces. Continued »

Subprime is a Fancy Word for Too Much Debt

Subprime is a fancy word for too much debt. Adam Smith would actually say that housing over and above shelter has no utility value. If that is true, we are in for some serious additional write downs (think second homes).

On another note, Subprime could have worked if the loans stayed true to their risk and were made at “loan shark” type rates (5% “money-down” should have warranted a 20% rate; instead we were lending it at 7-10%). As a result, we were only realizing less return on a greater expense in the form of lower and lower investment rates (Menger, Say, Smith, Jevons and others), but more risk. Continued »