The Unsinkable brian cork™

Brian Patrick Cork is living the Authentic Life

what next America?

January27

As I have already stated on this Blog, 2008 was a financial crisis, affecting mostly “Wall Street.” 

Looking ahead, what can we expect for America?

2009 will be the year “Main Street” gets hit. 

Mind you, 2009 will be awful for A LOT of people.  But, I believe it can be pretty good for some people focused on Best Business Practices, clear thinking, opportunities and having a plan.

But, generally speaking, the damage to the real economy so far is trivial to what will happen over the next two years.  There will be two big stories.

Business bankruptcies

Going into 2007 we knew that our financial sector was unusually strong, well-managed with strong balance sheets.  False!  Going into 2009 we know that our non-financial business sector is well-managed (outside of some weak sectors, like autos), with strong balance sheets.  Expect to be disappointed and astonished yet again.

Triage

That is a VERY scary word.

Everybody wants bailouts.  Worse, the expectation of bailouts means that few preventive measures will be taken.  This referred to as “moral hazard”.  We see this, for example, at work in California – which is already de facto bankrupt.  But, nobody gives an inch.  No lower government spending; no lower government wages; no reduced government employment; and, no higher taxes (there is more; but, you get my drift). 

Why compromise? 

Well… The Federal Government will not let California go broke.  Or the auto companies.  Or the universities.  Or the banks and insurance companies.  Or millions of households (not actually sure about that one yet).

There is not enough money to bailout everybody.  Triage will be necessary.

I have seen this under the worst possible scenarios.  But, you can probably relate to it in terms of what Kate Beckinsale does with lipstick on the foreheads of the wounded at Pearl Harbor (but, it is one of the most gripping scenes in the 2001 movie). 

To wit:

  • Those who will die anyway:  no treatment. 
  • Those who will recover anyway:  no treatment. 
  • Those will will recover only with treatment.

Making these harsh decisions might be President Obama’s greatest challenge. He may have one of the toughest jobs ahead of him since Truman.

Looking beyond the downturn, what can we expect?

The consensus confidently – almost to a man – anticipates inflation, against which the Federal government will fight either successfully (optimists) or unsuccessfully (doomsters). 

This is, however, absurd. 

People are already preparing for this “inevitable” outcome by owning mostly short-term debt.  As the end of the downturn approaches — inflation can only manifest itself in times or full employment or via a currency crisis — everyone will (should) take strong measures.  Even elderly ladies in Peoria will own inflation-protected bonds, short-maturity bonds, and hoard gold bars in their basement.

These measures will foreclose inflation as a workable option.  As the government is forced to either issue vast amounts of short-term debt or monetize the debt, inflation becomes useless as a tool.  Short-term debt becomes an albatross during inflation:  interest expense skyrockets as interest rates soar.

Seriously.

Hyperinflation always remains an option – as does atomic war and mass suicide. 

However, none of these are “solutions” in any meaningful sense.  

Seriously.

With a history of vast deficits behind us, and larger deficits ahead (from baby boomer’s retiring), the government will choose Door #2:  default.  We will just not pay all our obligations.  This is historically the most common solution.

How we decide who to pay — and how much to pay — will test America as it has seldom been tested.

  • Do we pay our foreign debts?
  • To what extent do we renege on promised social security and medicare benefits?
  • To what extent do we raise taxes vs. defaulting?  

The big unknown

The recession of the late 1920’s became a Great Depression due to a series of public policy errors. 

Most seriously:

  1. Many nations abandoned the gold standard too slowly, and
  2. The nation with the largest trade surplus wrecked the world trade system.

America was the culprit (for #2),  enacting the Smoot-Hawley Tariff Act in 1930.  We can only guess at the equivalent of mistake #1, but the prime candidate for #2 is China devaluing the RMB to boost its exports. 

More later.

Remember what Hemingway thought of Spain.  Go read those books.  Spain can be defended.

“Sons Gonna Rise” by Citizen Cope.

Peace to my Brothers and Sisters.

Brian Patrick Cork

Porsche 964

December9

The Porsche 964 is the company’s internal name for the version of the Porsche 911 model manufactured and sold between 1989 and 1993. It featured significant styling revisions over previous versions of the 911, most prominently the more integrated bumpers (fenders), although it was still obviously a 911. It was the first generation of 911 to be offered with Porsche’s optional Tiptronic automatic transmission as well as the first generation to be offered with all wheel drive.

“Type” 964 (nine-sixty-four) or simply 964 (nine-six-four) is in fact the internal code name for the car; the vehicle was badged simply as Carrera 2 or Carrera 4. The official name for the model, as printed on the front of the Owner’s Manual, is “Porsche 911 Carrera 2” or “Porsche 911 Carrera 4”. The 964 name is now often used to distinguish this car from other generations of the Carrera, especially among Porsche enthusiasts (like me).

Mine is the 1991 Targa.287520

I can offer many a story why I believe this may well be the perfect Porsche – and, thus a dream come true (for me any way) in it’s own right.

In any event, and, perhaps more importantly, I am listening to:  “Sex on Fire” by Kings of Leon, “Snow (Hey Oh)” by Red Hot Chili Peppers, and She’s Gonna Rise” by Citizen Cope.

Peace be to my Brothers and Sisters.

Brian Patrick Cork

NOTE: I also have a business Blog that apparently fascinates world leaders and decision-makers alike (but, few others). It can be viewed and relished at: The Human Capital Blog.

What’s All This About?

"What am I looking at?", you might wonder.

Lots of stuff.

Meanwhile, here, I discuss events, people and things in our world - and, my (hardly simplistic, albeit inarticulate) views around them.

You'll also learn things about, well, things, like people you need to know about, and information about companies you can't find anywhere else.

So, while I harangue the public in my not so gentle way, you will discover that I am fascinated by all things arcane, curious about those whom appear religious, love music, dabble in politics, loathe the media, value education, still think I am an athlete, and might offer a recipe.

All the while, striving mightily, and daily, to remain a prudent and optimistic gentleman - and, authentic.

brian cork by John Campbell





photos by John Campbell

 

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