Tuesday, January 22, 2008

The Sky is (Almost) Falling

U. S. News and World Report has a brief note that Fed Chairman Ben Bernanke (Yes, Alan Greenspan finally retired from that job) is pretty pessimistic about the prospects for the American economy in 2008.

One of the things that bothers me about the American economy is that corporate officers and investors seem to have little toleration for anything but robber baron profits even though relatively few opportunities for really high profits have emerged since the dot-com bust of 2000.

That's one of the reasons why the sub-prime mortage scam looked promising to companies like Merrill-Lynch and Citicorp. It looked like an easy way to make high margins at a time when opportunities for high margins have been scarce.

Bernanke is gloomy about recovery from the forthcoming recession because he believes that the problems of the housing market will keep cutting into overall consumer spending. But I wonder how well investors are going to be able to adjust to a more difficult investment climate with lower returns all around.

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