Thursday, December 25, 2008

The current financial crisis, and the comming financial crisis

I was asked today what I thought about the current recession: are we at the bottom, or is there still farther to fall. I speculated that there is still farther to fall. That said, I just don't know. If I really believed there was farther to fall I would not keep buying stocks and mutual funds, yet I do. I just don't know.

However, the current recession isn't what bothers me, its the crazy inflationary period we are heading to.

"Wait!" you say, everyone is talking about deflation, why are we worried about inflation. Well, the Fed is fixing the deflation problem. In fact, that fix is going to cause the inflation problem that is coming. Here is the scenerio: The financial pipes of capitol flow are clogged. People have been saying this for a long time. Whats going on is people are not spending their money, lots of people have it, no one is spending. Because so much of our economy depends on consumer spending, and corprate investment, everyone is suffering. Think of this analogy, we all live along a nice river eating fish and growing vegtables by the side. The river got plugged up. Things are pretty dry right now, all the fish are gone and our gardens are drying up. However, there is still alot of water, its all damed up at the source of the river. The Fed has a solution, pump more water into the river. To some extent this helps. High pressure watter will help dislodge the jam, but when it all clears up, we are all about to be flooded.

When capitol starts to flow agin, there is going to be a suplus of money out there, thanks to the FEDs huge push to increase liquidity. When this flood of liquidity unleashes its going to damage our economy, its going to drive serious inflation. The fed will have to put the breaks on things. The breaks means the Fed will work as hard as possible to suck up access liquidity, like a big spunge.

Here is the problem, when the flood starts it won't be easy to tell, people will be very happy and everyone will start consuming. When the Fed finally gets around to applying the breaks, they are going to have to slam them on. And that will drop us back into a recession... Which will be bad, much like this recession.

So, here is the problem, the medicin the Fed is giving us now is just going to prolong our suffering. (We will suffer no matter what).

To answer my original question, are we at the bottom of the current recession? Well, again, I don't know, but I am quite sure we are going to enter a period of macroeconomic instability which will last for quite some time (maybe 10 years). The instability will bring us periods of great prosparity and great pain: great swings, and that isn't good.

Enjoy the ride.

Monday, December 22, 2008

Post scripts

A few quick notes:
1) We are driving in tomorrow afternoon because New York State is supposed to get freezing rain on Wednesday.

2) The car wasn't even transported to the body shop until Thursday night, and then Friday was a no-work day because of the storm. Suffice it to say that they haven't even started the body work on the car and it won't be ready in time. So we're renting a car. We ended up with a Civic.

3) I'm glad I was able to get that photo of the rug because this morning, Zeus puked on it. :) The joys of pets. I guess she just wanted to make it hers.

4) I need a vacation. I'm glad it's starting tomorrow. I hope it really will be a vacation.

Sunday, December 21, 2008

Nutcracker, Christmas, etc.

This evening we braved the snow and ice and drove into Boston to see the Nutcracker. It was at the Opera House, a renovated theater that was built in 1928 (? maybe?). (For those of you from Buffalo, think Shea's Buffalo). Going to see the Nutcracker is our Christmas tradition - one of the few we have here in Boston. We enjoyed it. Afterward, we got some dinner at Pho Pasteur and then headed home.

The baby really liked the Nutcracker. :) During Act 2, which is when they have the dances to represent the different types of sweets, she was kicking up a storm. :) I think she was dancing in there.

Jim got me this rug for Christmas:

Isn't it beautiful? This will be the baby's room, so it's nice to have a cozy rug. I love it with the yellow walls. It looks great. Zeus has been enjoying it too. Just now, I was sitting on it, talking on the phone, and she batted at me as if I was in her exclusive territory! Ha.

Outside, the snow has stopped but it was raining for a while. Now that the temperature is back under freezing, all the snow is icy. I am terrified of falling because of the baby so I've been moving around outside like an old person with a hip replacement.

All in all, it's been a very seasonal weekend. We're finally looking forward to Christmas.


Boston has gotten its first real snow of the season. In fact, with one small exception, we had not gotten any snow up until Friday. It has not stopped snowing since.

When the city was canceling school and closing offices and things on Thursday night, I was certain that we weren't going to get any snow. That's usually what happens. Everyone stays home from work and school, and then we just get rain. I just remember growing up, we NEVER had a snow day unless there was at least 2 feet of snow on the ground and it was still coming down at 6am when the principal had to decide whether to call a snow day. We prayed for snow days. I think in my whole school career in Buffalo, we had just a handful of days off because of snow. So it just strikes me as sort of wimpy (if not prudent, given the traffic nightmares of Boston) to cancel everything before the snow even shows up.

But the snow did show up this time. JK^2 and I went to work (the roads were empty), and around 2pm, it started snowing pretty hard. I was in the middle of my office's holiday party. Usually, they close the office after the holiday party anyway, so people went home after that. I stayed for a little while and then went home around 4pm. JK^2 did too. I took the T home and it was a pretty uneventful commute.

So it snowed, and snowed. Friday night we sat in and put together Christmas cards for all my clients. Saturday morning, we were awoken at 6:50 by the neighbor turning on his snowblower under our window. JK^2 snowblowed our driveway (and most of the neighbors' driveways too), then we sat in most of the day. We drove into the city in the evening for Christmas parties. Cambridge and Somerville had gotten a lot of snow too, but it wasn't still snowing. We had to dig out a parking spot next to Jen's house.

This morning, it is much warmer (32 degrees) but it is still snowing. JK^2 is snowblowing again. Here is the scene outside:

From our front door, looking across the street:

From the backdoor:

There is some talk that it might turn to rain, so JK^2 is trying to clear the driveway before that happens, so it doesn't all turn to ice.

The big question for us is how we're going to get to Buffalo on Wednesday. There is supposed to be another storm then, and it is questionable whether we will have our car in time. We'll know more about the car tomorrow. As discussed in my prior post, the car has been in the shop for a week and we haven't heard from the glass shop in a few days. We're starting to think of other options, but there aren't many. We might have to drive in on Tuesday instead, but we may not have the car. The train to Buffalo on Tuesday is sold out, and air fare is unaffordable. The rental car that we currently have is a crappy Hyundai with a broken radio that is about the size of a clown car, and about as reliable. So I guess the worst case scenario is we rent a more reliable car and use it for our trip to Buffalo.

So I guess you'll all have to stay tuned on that front.

Our plans for today involve going to see the Nutcracker in Boston at 5:30, with dinner beforehand. But we'll take the T for that. All the towns are having snow emergencies, which means that parking is not allowed on a lot of streets. The T will be OK though.

I guess we're having a white Christmas after all.

Tuesday, December 16, 2008


It didn't really feel like the Christmas season til Sunday. That's when we actually got our tree, finished our Christmas shopping (for the most part) and wrote out the Christmas cards. Life suddenly feels in control again, now that we accomplished those things. Isn't our culture odd? That we need to cut down a tree and display it in our living room in order to feel normal? And then some people go one step further and don't cut down the tree, but rather buy something that looks like a real tree but really is made out of plastic? I wonder who thought up all these traditions.

It seems like we still have some miles to go before Christmas is actually here. For one, we have to get our car back from the repair shop. Our windshield was leaking. Turns out that it wasn't sealed properly and the metal holding up the windshield was all rusted out. So now the glass place has to tow the car (sans windshield) to a body shop for repair. The good news is that it's all covered by warranty. Yippy. But we need the car to get to Buffalo. So I hope they can get to it soon.

On Friday evening, I'm going to a baby shower. I believe that everyone else invited already has babies. So I'm not sure what I'll say to them. But it'll be fun.

Saturday evening, we are getting together with a friend for dinner, followed by a drop-in at her brother's Christmas party.

In the way of Christmas preparations, the house is basically not decorated, save for the tree. But I think it'll probably stay that way this year. As I say, it hasn't even felt like Christmas up to this point. We have to wrap the gifts. And of course, we still need to decide when we're coming back to Boston after Christmas. It's all up in the air.

But I trust that things will be resolved, if not consciously, then by default. The funny thing is you make all these preparations, and then Christmas is gone in about the blink of an eye.