Empires have come and gone. Some lasted a blink of an eye and some millennia.
The question is, after 9/11, the rise of China and a great financial crisis, where does the U.S. empire stack up to its predecessors?
Well, it seems the one commonality they all have is the point when their might was undermined by sloth and greed. And entitlements: free bread and circuses. For some it took years, others centuries.
Here, in a compelling and unique address, is what Romulus Augustus, the last emperor of the Roman Empire, might say to President Obama now about how to keep America great.
Read on and share with family and friends...
- DON’T BE SO ARROGANT, MR. PRESIDENT
- How to Fix the U.S. Housing Market
- Author Chat: Money Morning's Martin Hutchinson Talks About "Alchemists of Loss"
- Money Morning Mailbag: Tobin Tax the Only Solution to Problems Posed by High Frequency Trading
- The Defeat of the "Shadow Shogun" Means it's Time to Buy Japanese Stocks
- Investing in Canada: The World's Safest Economy
- Money Morning Mailbag: There's No Way Around the Dangers of Municipal Bonds
- The Tobin Tax: The Deficit-Busting Levy Wall Street Hates
- How Washington Should Handle the Bush Tax Cuts
- The Headline You Never Expected: Foreign Growth Could Bail Out the U.S. Economy
- The Global Double-Dip Recession: Which Markets to Hold... And Which Ones May Fold
- How to Profit From Europe's Stealthy Resurgence
- China's Inflation Higher Than Target Rate, Could Be a Sign It's Time to Tame Rapid Growth
- How to Cure Western Bankers of "Bad-Banker" Behavior
- Money Morning Mid-Year Forecast: Oil Prices Down but Not Out
- The Case for $5,000 Gold: And How to Profit
Empires have come and gone. Some lasted a blink of an eye and some millennia.
But here's what those reports didn't tell you: If the housing market isn't fixed soon, it's going to drag the rest of the economy down into a hellish bottom that will take years, if not decades, to crawl out of.
The housing market is our single-most important generator of gross domestic product (GDP) and, ultimately, national wealth.
It's time we fixed what's broken and implemented new financing and tax strategies to stabilize prices.
Contrary to the naysayers - and in spite of political pandering and procrastination - we can almost immediately execute a simple two-pronged plan to fix mortgage financing and stabilize U.S. housing prices.
I call it a not-so-modest proposal.
The Worst Since the Great DepressionThe facts are frightening: We are in a bad place. The plunge in housing prices we've seen during the current downturn is on par with the horrific freefall the U.S. housing market experienced during the Great Depression.
And without an effective plan to arrest the double-dip in housing, there's no bottom in sight.
Hope Now, an alliance of lenders, investors and non-profits formed at the behest of the U.S. Department of the Treasury and the U.S. Department of Housing and Urban Development, counts 3.45 million homes being foreclosed from 2007 through 2010. Current estimates of pending and potential foreclosures range from another 4 million to as many as 14 million.
According to RealtyTrac, a real-estate data provider, the country's biggest banks and mortgage lenders are sitting on 872,000 repossessed homes. If you add in the rest of the nation's banks, lenders and mortgage-servicers, the true number of these REO (real-estate owned) homes is closer to 1.9 million.
These shocking statistics illustrate just how large the current overhang of bank-owned properties actually is (at current sales levels, REO properties would take three years to unload). And they help us to understand how the staggering number of yet to-be-foreclosed, repossessed, and sold homes will depress U.S. housing market prices for years to come.
This story - as well as some of the other top financial fiascos through the ages - is detailed in the new book, "Alchemists of Loss: How Modern Finance and Government Intervention Crashed the Financial System," which was written by Martin Hutchinson, a former merchant banker and Money Morning columnist, and Kevin Dowd, an economist and respected academic.
Money Morning Executive Editor William Patalon III recently sat down with Hutchinson, to talk about the book. Here are some excerpts from that discussion.
The "60 Minutes" piece prompted this letter from a reader wondering if the technological shift means it's time to readjust investment strategy.
Sunday night on "60 Minutes" they had a story about high-speed computers that are out-trading humans. Is it time to refocus on the world stage and find tangible rather than paper investments to put your money in? A partnership in a retail or manufacturing venue surely is more transparent than the stock market.
--RomanMoney Morning has been examining the effects of high frequency trading for years. In August 2009 Contributing Editor Martin Hutchinson said high frequency trading systems were front-running the market.
However, the Bank of Japan's heavy intervention in the currency markets this week confirmed my view that this political twitch was really very different.
The upshot: As investors, we should pay attention ... and should look to increase our allocation to Japanese stocks.
That's the argument I make when I urge Americans to search for investments outside U.S. borders. Ironically, your money doesn't have to travel all that far: What's arguably the world's "safest economy" is actually located just north of the border.
I'm talking, of course, about investing in Canada.
"Brokers will tell you that particular state and municipal bond issues are 'safe,' meaning that they are rated highly by the rating agencies," said Hutchinson. "However, the rating agencies got it wrong on subprime mortgage instruments, and it seems pretty clear that they are getting it wrong on states and municipalities."
On the municipal level, local property taxes are the primary revenue source. Declining home prices and increased mortgage delinquencies are creating a housing market that offers little local revenue. Municipalities are then left struggling to make ends meet.
Hutchinson said the vicious cycle could send municipal-bond defaults soaring past 2009's $6.4 billion.
A tax increase won't be good news for an already wheezing economic recovery that seems to get weaker with each new report or indicator that's issued. But the type of tax that's chosen will go a long way in determining just how much damage the U.S. economy will have to endure.
With a deficit in excess of $1 trillion, there aren't a lot of options. One possibility would be to allow the 2001 and 2003 Bush tax cuts to expire, which would have a depressing effect on the economy and most people's pocketbooks.
But a better option would be to devise some new taxes that may prove less damaging. Indeed, there's even one possibility that might even do some economic good if it's implemented correctly.
It's called a "Tobin tax."
To see how a reasonably set "Tobin tax" could help U.S. leaders to fix the nation's finances, please read on...
Those tax cuts are scheduled to expire on Dec. 31, with taxes reverting to their 2001 levels.
It's not at all clear which of the cuts will be extended and which will be repealed.
But one thing is clear: The outcome of the Bush-tax-cut debate will have major implications for the U.S. economy.
The rest of the world appears to be doing much better than we are.
In the long run, that's good news for the United States. Rapid world growth will eventually rekindle the economic fires here, producing a growth that is more balanced than the bubbles of 1995-2008.
Still, getting to that point will be a challenge, since - economically speaking - the home fires don't appear to be burning all that brightly.
To see how foreign growth could bail out the U.S. economy, please read on...
However, the truth is that the odds of a recessionary reprise are high in just a few countries - primarily those that have experienced excessive fiscal and monetary "stimulus," or that have real inflation problems.
The rest of the world is recovering just fine.
Greece, Portugal and Spain - three of the so-called "PIGS" - have to do so, of course. But Germany - generally reckoned to be in excellent shape - is also cutting its deficit, as is France, which hasn't run a budget surplus in 40 years. Britain, too, with no need to protect the euro (it's not a Eurozone member) just introduced a budget that cut the deficit by $140 billion over four years.
U.S. President Barack Obama and other Keynesians warn that Europe may push its own economy - or even the global economy - back into recession.
But here's the surprising reality: Europe may gain from its fiscal pain - and its deficit-trimming actions offer the best hope for a lengthy recovery.
The consumer price index climb was the fastest in 19 months and was higher than the 2.8% rate in April. The National Bureau of Statistics also posted increases in industrial production, retail sales, and property prices, which contributed to analysts wondering whether or not China will make moves to tame growth to avoid higher inflation.
"Officials seem confident that price pressures will ease later this year, attributing much of the recent positive trend to base effects, but there are plenty of reasons to think that inflation can keep moving higher," Royal Bank of Canada (NYSE: RY) economist Brian Jackson told The Wall Street Journal.
I think he has a point.
Oku's main purpose in denouncing Western bankers for their lack of self-control was to object to the tougher proposed capital rules from the Basel Committee, the global body that sets banking regulations.
But don't be fooled. The spring retreat simply set the stage for a second-half rally.
After starting the year at about $81 a barrel, prices climbed as high as $86 a barrel before plunging to $64 on May 25.