Monday, September 15, 2008


Or maybe not. Jezuz the MSM is having a hissy fit today on a Palin like scale. Lehman Bros fails and holy shit the end is here. Dow is down 500 run for the hills. OMG, OMG, OMG what will I do?

Come on people, take a deep breath and relax. This is something that is needed. Just like home prices need to fall from the excesses of the past decade, stock values have to fall too. This is a good thing and should be celebrated for finally happening. Your choice is a 500 drop today or a 1500 drop next year had Lehman been bailed out and this ponzi scheme were left to fester for another 6 months. This should have happened 18 months ago and had that happened the DOW would be at 13,000 today. But no, government's dirty hands had to get in the way once again.

A couple of big banks may very well fail too. Wamu, Wachovia come to mind right off the bat. And that's fine as well. Where does it say that every financial institution is supposed to be around forever? Anyone been to a branch of First Republic Bank lately? Probably not since that bank failed in 1988 with abouu $30B worth of deposits. What about the Bank of New England? It failed in 1991 with as much in deposits. Southeast Bank? Failed with $15B in assets too in 1992.

At the time that was big news and people were freaking out. And yet somehow the sun managed to come out the next day and the 90s turned out to be pretty decent on the economy side.

Not that the lazy MSM would ever tell you this, but since 1934 there has been at least one bank failure ever year, with the exception of 2004 and 2006. Banks always fail. Sometimes big banks, sometimes small banks, sometimes regional banks. But fail they do and often. Banks are not all that special in the grand scheme of things. They are companies like any other. Some suceed, some fail. Lehman failed. Bank of America is buying up everything in sight and will most likely succeed for a good long time to come. Winners and losers is what makes capitalism work. If you have no losers you cannot have winners. The alternative is everyone loses. See N. Korea, USSR and Cuba is you don't believe me.

From FDIC, bank failuers by decade:

2000-2007: 32
1990-1999: 925
1980-1989: 2,036
1970-1979: 79
1960-1969: 44
1950-1959: 28
1940-1949: 99
1934-1939: 312

If anything we're just due for some big failures to catch up to the average of previous decades. And adjust this for population growth, the 32 so far this decade is way below average.

So once again, I urge you to - as always - ignore the MSM and just calm down. It's going to be fine.

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