Eight reasons why we are in a depression

1. We have zombie banks.

2. There is considerable regulatory uncertainty in banking and finance.

3. There is a negative wealth effect from lower home and asset prices.

4. There is a big sectoral shift out of real estate, luxury goods, and debt-financed consumption.

5. Some of the automakers are finally meeting their end, or would meet their end without government aid.

6. Fear and uncertainty are high, in part because they should be high and in part because Bush and Paulson spooked everyone.

7. International factors are strongly negative.

8. There is a decline in aggregate demand, resulting from some mix of 1-7.

I have two simple points,  First, a large fiscal stimulus addresses factor #8 but fares poorly in alleviating the other problems.  Of course it may give a band-aid for #5 or #6 and you can tell other stories but we are in a multi-factor depression.

Second, forecasting will prove very difficult.  These factors interacted with each other in a unique manner on the way down and they may well interact in an unpredictable manner on the way back up, whenever that comes.  Just for a start, who has a good model of #1, #2, or #6?  Right now we’re seeing a lot of good faith efforts to develop forecasts, but I say don’t believe any of them, whether they support your point of view or not.

Nacho – Day One

I rescued this fattie from being eat alive from a feed store. His previous owner didn’t want him anymore, so instead of surrending him to a rescue, he was going to be a giant albino boa constrictors dinner.

He is still very nervous, but he loves his new gigantic cage I built for him, and he loves all the treats and toys I buy him. He was living in a wire bottom cage the size of a shoe box and he was being force fed (he’s about 5 pounds, he should only be 2-3!).

I always told myself, I wouldn’t be one of those annoying pet parents, but I am! I like to dress Nacho up, and he really likes his shark outfit. He tries to put it on when he’s not wearing it. He’s the greatest thing that has ever happened to me, and I love him very much!

Anyhow, more Nacho stories and pictures to come. I promise