Vic sent me this Wall Street Journal Story today.
I think it can be tied into the Red Plan much more directly than might seem apparent at first reading.
Its about our current economic state and it follows the reasoning of, a Mr. Forstman, who predicted disaster when the takeover mania exploded in the 1980’s. He says the current credit crisis is far worse. It began, he says, when banks panicked after 9/11 and lent money at far below its market price to keep the economy going. That led to the lending of more money than anyone needed essentially giving it away. Soon there was so much easy money that no one really valued the intrinsic worth of money and that this caused them to become reckless.
How can I relate this to the Red Plan? Well, individuals and companies that over extended themselves on credit can declare bankruptcy. Banks and other lenders don’t want to be left holding the bag. But government is stuck with its debt. Government borrowing is backed up by the power of government to tax people and pay off those bonds no matter how foolishly entered into. That is exactly what our School Board can do. Investors can buy our bonds knowing that our taxpayers will left holding the bag.
Forstmann qotes Warren Buffet describing the three types of people who enter into these boom/bust business cycles:
“Buffett once told me there are three ‘I’s in every cycle. The ‘innovator,’ that’s the first ‘I.’ After the innovator comes the ‘imitator.’ And after the imitator in the cycle comes the idiot. Which makes way for an innovator again.” So when Mr. Forstmann says we’re at the end of an era, it’s another way of saying that he’s afraid that the idiots have made their entrance.
“We’re in the third ‘I’ for sure,” he interjects an hour after first introducing the “rule.” “And that always leads to something. Innovators don’t just show up. Some disaster takes place because of the idiots, and then an innovator says, oh, look at this, I can do this, that or the other thing.” That disaster is now.”
And the disaster for the City of Duluth is not far away. I’ll give you one guess which of the i’s brought it about.
