Bryan Marsal, CEO of Lehman Brothers Holdings (via Calculated Risk)
One of my partners said yesterday that we are going to call this phase the “extend and pretend” phase in our economy. Which is you extend someone’s maturity – because they are going to default – and you pretend that business will come back or that leverage factor is going to come back.
Then we’ll enter phase two, which he said is the request to extend or “amend”.
Then “send”. In other words send the keys.
That is the phases we are in right now. Everyone is trying to buy time, as opposed to dealing with the leverage, they are trying to buy time. Whether you are a banker or a company, they are all trying to buy time. I don’t see the leverage coming back, and I don’t see the consumption of good and services coming back.
The only way the economy is going to be revived is to put the Engineers that build stuff, back to work, innovating, inventing stuff, and creating jobs.
All the bank bailouts, financial gimmickry, or gamesmanship will not work.
Even one engineer unemployed in an economy ought to be cause for alarm — because that’s millions of dollars of lost output and prosperity. Now, considering that at least half of Canada’s engineering talent is out of work, and a very large portion of the US engineering pool is unemployed, and its not hard to see why these sort of problems exist.
Mark:
I disagree. The fleets of engineers employed by AECL have been a tremendous drag on the economy for about sixty years. same goes for many of the engineers working at the crown “Hydro” power cos – many of them are so much office wallpaper.
Seeing the enginers at Chrysler and gm unemployed for a period whilst their assets are redeployed to another company is a good thing. Keeping them afloat and busy-” pretending”- that anything they do has to be productive is a mugs game as the topic of this post points out.
As I noted in another thread, this is the same Bryan Marsal who (inadvertently?) blurted out on CNBC on Monday morning that the staff at regulatory bodies at the SEC are paid a “pittance” compared to what the math geniuses from MIT, etc., are paid to “circumvent the system”. Someone’s going to have to shut this guy up!
And yesterday, there was this gem from David Rosenberg, formerly Merrill Lynch’s chief economist in NYC, but who has recently returned home to Toronto to fill a similar role at Gluskin Schiff: “Rent the rallies”. He believes we will be in market timer mode for the next 6-8 years at least. The good news is if you have a teen just entering high school, as I do, when she graduates from university, the next big bull market should be starting.
Regarding the contributions of engineers, I sort of agree with Gord Tulk. When I got my degree in electrical engineering 40 years ago, most of my fellow graduates were decidedly mediocre in their analytical skills. I remember an EE professor saying that at most 20% of the graduates would wind up doing real engineering work. The rest would end up in sales and “management”… in other words, paper-pushing. Although the picture might be different in places like MIT, which I certainly didn’t attend, I suspect that the 20% estimate holds for much of the profession. Real engineering talent is relatively rare.
I still don’t see the problem.
The crippling US national debt is only going to be a problem for younger Americans and their families.
Those younger Americans pretty much all voted for President Obama.
So everything is jake because they’re going to get exactly the future they wanted!
Ha ha!
Procrastination!
Get on the bandwagon! Everybody’s doing it.
Ok, not now, but tomorrow we’ll do it, I promise.
A staggering admission from the Lehman cartel. Especially since it was they who flooded the markets with bad debt trading vehicles. They should be in Jail, not pontificating on markets.
Also this admission pretty much obliterates the false hope driving the sucker’s rally right now.
I hope Americans (and Canadians) have learned something here. That being; you cannot sustain an economy on the semi fraudulent trading vehicles offered by elite investment-banking cartels. Yes, that includes over inflated, debt issued fiat currency.
As a previous poster said, it will take the wheels of the industrial engine to make a true economic recovery. Unfortunately, America is being de-industrialized and dependent on off shore investment and trade by a revolving regimes of beltway globalists.
There must be significant civil upheaval to end the gross corruption in Washington and Wall street. Only then can you talk of recovery.
I predict stagflation until these two items are dealt with by the American public.
The only way to fix the problem is to get rid of the leverage in the system. We have all spend too much (and racked up significant debt in doing so). Printing money will not help (because we don’t have the savings to actually buy the stuff firms are being fooled into producing). Stealing from taxpayers for infrastructure projects will not help. If we don’t get rid of the excessive debt, we can expect an ever bigger problem in the coming years.
engineers there Mark?
the ones featured in the ‘Dilbert’ comic strip?
the ones from the local university who arranged for live strippers at their annual graduation bash? who took on the ‘engineering challenge’ to destroy the original concrete railing on the bridge on university property necessitating expenditure of a couple hundred grand replacing it? is THAT the kind of ’employment’ you speak of?
Leverage is absolutely vital for a modern funtioning society. It is the salt of the financial system: too much is toxic, too little and life becomes very bland and struggle for survival.
even if you rent your residence and ride the bus – leverage enabled the providers of both to supply them.
“the ones from the local university who arranged for live strippers at their annual graduation bash?”
You’d prefer dead ones? Like at a Kennedy bash?
Mark,
Are there any real engineers anymore?
I employ them and work with them all the time. Since they are taught to not admit to failure they never learn from their mistakes; they just keep making the same mistakes over and over again.
I quit electrical engineering at Waterloo after 2 years because some of my classmates didn’t even know to go to the washroom when they had to fart.
I simply couldn’t concentrate with the constant smell of shit in the air.
Obama’s approval rate on Rasmussen is plunging: Down to -5 today!
http://www.rasmussenreports.com/public_content/politics/obama_administration/daily_presidential_tracking_poll
Often times, without the salesmen in the lead, nobody works. Got to get the job before one can do the job. It takes more than paper pushing. And much of the adminstration in a company pushs government mandated paper. Required, but not necessary to the actual transactions. The Receiver General is pretty well paid, but nobody expects him to show up with his boots on and a lunch.
Gord and George,
When you select 1% of the population for your sample your likelihood of being right is really low. There are idiot engineers, but without the good ones you wouldn’t have roads, houses, hospitals, cars, airplanes, the Guiness Widget, clean water, electricity etc….
These are things that are necessary for a prosperous future and need to be built despite your prejudices.
Working with engineers most of working life, found them rather well reasoned and down to reality. As with general population there are all kinds. Those that want to get into management, will do less engineeering, that is probably safer, and do more politicking.
As for actual politics, engineers are much more connected to real life then some such low life like lawyers that deal with highminded nothingness to impress uninformed.
Reagan’s admin consisted mostly of engineers.
Lev,
It’s also worthwhile to note that an engineer’s job is essentially to find a cheap, reasonable and functional solution for their clients.
It would be nice if our politicians found cheap, reasonable and functional solutions for problems.
Lev,
The engineers of yesteryear are a different breed all together. The use of slide rules and practical application gave them a much better analytical reasoning and methodology to apply their skills.
Today’s computer and entitlement generation of engineers are severely lacking in necessary skills and methodology. Couple that with the denial of mistakes and you’ve got a serious problem.
I long to have just one of those Reagan engineers in my office; sadly they’re a dying breed.
Have to agree with Jon and Lev. At this outfit we have dozens of engineers. Working with the mechanical engineers, they are well trained, intelligent critical thinkers. I also work with engineers at our suppliers. There are a few in both cases that are the classic pocket protecter type who are actually easier to work with in some cases. In all my years in the industry, only one engineer was a goof, he was a foreign national, a drunkard and cost us hundreds of thousands because of design gaffes for an equipment upgrade.
We couldn’t run this business or the country without these guys.
As for the slap at GM engineers, don’t get me started. I’ve been driving GM products for 30 years. The only failure thus far after 20+ vehicles was the result of a Chevy part being installed on a Cadillac. Don’t defame what you don’t understand.
The greens all have been saying slow down the economy ,too much consumption,decadent west.
When do we start the public floggings.
Mazzuchelli,
What causes a critcal thinking engineer to oversize equipment, design a duct system that doesn’t effectively convert velocity pressure to static pressure then sign off on the commissioning report like everything is fine?
These are things I have to deal with on a daily basis
Sounds like it’s time to replace those incompetent guys in the engineering jobs with sociologists or poli-sci’s. Who needs bridges anyways?
Try to stay on topic, folks.
I miss the “seven year recession watch” posts…
[quote]Couple that with the denial of mistakes and you’ve got a serious problem.[/quote]Not stirred
You sir! are confused… Those that chose the Academic road have that problem & it prevents them from practicing. Ego is only useful in a controlled environment (university)
Practicing Engineers are those that must make shit work…they have the ability to hit a wall and get backup. they challenge their intellectual understanding of science every day and MUST admit mistakes to themselves in order to succeed…
When you want to know how things “should” work… ask a Academic
When you want things to work.. ask a practicing engineer
Extend and pretend – aka wait for currency devaluation/inflation to save your neck.
Has happened many times to many countries. All countries.
The recession arrived the minute the world realized Obama might win.
The Mother Of All ‘I am from the government and I am here to help’ bullsh!!
Phillip G. Shaw,
At the risk of incurring Kate’s wrath for not staying on topic I’ll make one last comment on engineers.
If you want things to work ask a qualified tradesperson. If you want to pay too much money for an over-designed boondoggle then ask a mechanical engineer for their design.
Pursuit of an academic education is no excuse to not put at least a small effort into gaining some practical experience.
Extend and pretend….your denial is a perfect example.
If my recent adventures in contracting are any indicator, the news people are pretending there’s a recession in Ontario.
Can’t tell that by contractors around here. They are all booked solid.
Sorry for unintentionally running this threAd off the rails (I think that’s a mixed metaphor).
But ihave to correct the assumption that I think engineers are bad/inadequate. Some surely are but the thrust of my point is that many thousands of them are uselessly employed by organizations that should terminated. That that would put those engineers out of work for a period of time would a good thing for all concerned including the temporarily unemployed engineers.
There is a Quasi Engineering process to this thread
The top level financial system (Economist POV) may be compared to the engineering task of balancing 3 phase electrical power. The down stream single phase distribution may look balanced to it’s self, but the relationship, to the other phases, will unbalance the whole system…
Its time to send the KEYS
I am not an academic….
The fault lines you see in the financial markets are systemic not symptomatic. All the backing and covering that has led to this ‘crisis’ will do is delay the inevitable. The fact of the matter is that no engineer will heal the economy nor will any salesman heal the economy. The only thing that will heal the economy is if all the young women stay home and make babies. When the national birth rate hits 2.5 – 3 our economy will begin to heal itself. Until then it will just be more plaster in a fatal crack.
There are 600,000 foreclosed homes in the U.S. that have disappeared from the market.
The banks and the U.S. government are hiding them.
The unions have got to go, and that means public sector unions too.
There won’t be any recovery any time soon, probably not in my lifetime.