November 1, 2007

What's The Opposite Of Irrational Exuberance?

In 1996, Alan Greenspan warned that “irrational exuberance” contributed to an overvaluation of the stock market during the days of the dot-com boom. A few years later, events proved him correct. Now according to a poll taken by USA Today, the majority of the country has descended into pessimism about the nation and its direction on a number of fronts — economic, security, political, and in foreign affairs. Could this be the opposite of irrational exuberance?

At Heading Right, I wonder what could be bumming out America, given the objective measures of success. It certainly appears to be at least a non-rational response, and I ask what common national experiences could have that kind of influence. Anyone? Anyone? Bueller? Bueller?


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Comments (59)

Posted by Immolate | November 1, 2007 11:19 AM

I won't tell you the name, but the initials are "MSM"

Posted by SupplyGuy | November 1, 2007 11:33 AM

I'm not sure how to read the pessimism. Is it real or just a story plot by the drive bys?

Other then the dems scaring the hell out of me w/ their attempts to impose Orwellian mind controll through soft gestappo tactics I feel pretty great about our country and economy.

I'm just finishing a one year tour in Bahrain and all I have to say to anyone who thinks America has social and economic problems they need to get out of the US and see what life is like for the rest of the world. If they're honest w/ themselves they'll come back and thank God for the blessing of being born an American where nothing is out of your reach so long as you're willing to work hard for it. The same can't be said for the people I saw in Djibouti and also here in a modern Gulf state that are born into poverty and a life of servitude.

God has blessed America. It's too bad so many people don't acknowledge it and appreciate it.

Posted by JohnnyNJ | November 1, 2007 12:00 PM

The Media & Academia are the main culprits. These groups are heavily overloaded(85-90%) with extreme left wing people who hate America and sprew thier socialist agenda daily. A generation+ of Americans have been educated by propaganda driven hippie professors many of whom dispise everything about a free capitalist society.

Posted by coldwarrior415 | November 1, 2007 12:00 PM

The fraility of the market, and one of its strengths, depending on which end of theeconomy you are on, is the strength and persistence of rumor. Rumors of an impending attack on Iran sent the oil market in a frenzy. Rumors of hurricanes wiping out the Gulf of Mexico oil rigs drove the market upwards along with the price of oil and gas. Pessimism, likewise, can affect the price of oil, of milk, of bread and corn. The brokers get their commissions. Investors realize their profits. The people are left with a vacant wallet.

It can work both ways. The exhuberance of the incoming Reagan Admninsitration turned the market around swiftly before any legislation was passed or economic changes were made. People who feel good about their position, their lot, their prospects, spend more, buy more, creating new jobs, new investments and all the rest. Likewise, being fed pessimism constantly, despite the economic facts on the ground, is enough for people to tighten their belts, close their wallets and prepare for the oncoming doom...real or imagined.

A word for the opposite of "irrational exuberance?" Being played, comes to mind.

Posted by Mike | November 1, 2007 12:04 PM

I think Immolate & SupplyGuy are right. It has to do with the consistent negative messages put out by the MSM -- despite objective news to the contrary.

I suppose the purpose is to instill in Americans the need for change, and to help their democratic allies regain power in Washington.

Posted by olddeadmeat | November 1, 2007 12:04 PM

It's pretty obvious - the economy is going south for most people not independently wealthy.

Inflation is killing consumers - for extended discussions on this point, why not look at http:\\

Gold and oil pretty close to double in price over the last few years, but CPI is low. OK, just a tiny bit of disconnect there.

How much did gas cost you per gallon in 2005? How much now? Maybe not as much as oil prices have risen proportionally, but now that oil is $90+ a barrel - which way do you think gas is headed?

Add to that universities rising faster than wages, health costs rising faster than wages, and food costs rising faster than wages.

So I am having to pay more to take care of and feed my kids, and to give them a good start in life, I have to save more to pay for college for them.

Are you better off now than you were in 2003? 2004? Pick a year, any year.

Why not take a look at this article?
25 stocks to avoid

Trucking is hurting because of rising costs. People don't feel like big holidays so hotels are hurting. Banks still haven't come clean on their losses, and, by the way, the number of homes in foreclosure has doubled the number by the same time last year.

Wal-Mart is so nervous their black Friday sales are tomorrow.

Great news in Iraq, yes, but do you care when your wallet is empty?

SupplyGuy, yes we are blessed, but it's the relative change in our personal conditions that's the point.

Anybody have good news in the economy to point to?

Posted by davod | November 1, 2007 12:08 PM

According to the MSM, various politicians and pundits, the economy has been going south since Bush took office. Considering they have been wrong for most of this time, why should I believe their prattle now.

Posted by Jazz | November 1, 2007 12:09 PM

You ask questions, I try to answer.

economic, security, political, and in foreign affairs

Economic: I don't know how things are out there in the midwest, but I may have to start suggesting to people they move there. Up in this neck of the woods, our two major employers have laid off more than they have hired every quarter since 2002, while expanding the number of positions that have to be filled on each team by "global resources." (Read India.) Several good friends who used to have very high paying jobs in computer engineering and aviation design are now either unemployed or working at Barnes and Noble. The discusisons I hear about the "great economy" are usually met around here with, "Yeah... if you're heavily invested in Wall Street." It's been trending down for a while, and yes, the outlook in the community is pretty bleak.

Security: What's the good news on that? I thought everyone here was equally concerned about porous borders, illegal immigration, insufficient inspections at our ports and the never ending talk about the next attack by AQ?

Political: Tough call. Depends where you live I suppose. Things are *starting* to look up in the Northeast, but I imagine some in the red states...

Foreign Affairs: That's got to depend on your perspective, I'd say. A very solid majority of the country is still opposed to the Iraq war, no matter how some people try to deny it. I think it probably contributes to their total world view on the foreign front, not to mention other news which always seems to be bad in Darfur, unrest in the rest of the Middle East, etc.

So yeah, I can see how people may have a general downward outlook, though it certainly might be more regional in nature.

Posted by NoDonkey | November 1, 2007 12:10 PM

"Inflation is killing consumers"

It's extremely low and it's not killing me. At all.

"Gold and oil pretty close to double in price over the last few years"

Glad I bought oil stocks. Made a lot more than I've spent on gas the last couple of years.

My financial situation is better off every year and I drive my 2000 Jetta to save money and put money into better places (like oil stocks). By the looks of 2007s and 2008 luxury cars on the road, people are not hurting. Either that or they're wasting a lot of money on cars they can't possibly afford.

I personally have more money than I ever dreamed I'd have at this age. If there are truly people like ODM is describing here, they need to get out of the rut they're in and find a new profession or a new area of the country to live.

Posted by pharniel | November 1, 2007 12:15 PM

The main problem is that most of the 'spending' of the last few years has been fueled by HELoCs and other 'your home is an ATM' based scams.

now that home prices are falling, and you can't just bail on the house for a small profit, the default rate is growing exponentially.

credit card lates are going up.

your average american is not making much more than they were in 2000, yet 'core' consumables have increased.

the canadian doller is now worth more than the american dollar, as is the euro.

basically the ONLY thing that looks good is the stock market, because CEOs and the billion dollar industry that get's paid only when the market remains high are artificially keeping it high.

in short, we should have started to see a wind down of the market a few years ago, instead we're going to see a huge crash all at once.

hell, we've had BANK RUNS. when was the last time you've heard of a run on a bank in the modern age?

that doesn't let the MSM off the hook. in general the financial market reporting is so off and wrong as to make your eyes bleed, so bigpicture, calculated risk, the morgade implode-o-meter, housing doom etc. are much better sources as the people writing it at least have a semi-clue of what's going on.

but don't think that just because ace is rining another cowbell over another record dow number that the economy is not a guilded cage full of rot and filth just waiting to pour out.

it's gonna be a bad christmass.

Posted by MarkW | November 1, 2007 12:16 PM

The price of oil and gold are driven by a lot more than just fear of inflation.

A booming economy is often one of the biggest price drivers for both of them.

Posted by Mike M. | November 1, 2007 12:16 PM

I agree that people's opinions on the state of the economy don't appear to be realistic or rational.

My theory is that we've been dealing with so much in recent years, from Iraq, to the Islamofascists, to corruption in our government, to complete incompetence in our government (Katrina), to the neverending immigration invasion wave swamping our country, to the elite stealth push for a North American Union, that it has left people feeling besieged and overwhelmed, thinking that everything is horrible everywhere.

Posted by pharniel | November 1, 2007 12:18 PM

Posted by NoDonkey | November 1, 2007 12:10 PM

"Inflation is killing consumers"

It's extremely low and it's not killing me. At all.

"Gold and oil pretty close to double in price over the last few years"

Glad I bought oil stocks. Made a lot more than I've spent on gas the last couple of years.

My financial situation is better off every year and I drive my 2000 Jetta to save money and put money into better places (like oil stocks). By the looks of 2007s and 2008 luxury cars on the road, people are not hurting. Either that or they're wasting a lot of money on cars they can't possibly afford.

I personally have more money than I ever dreamed I'd have at this age. If there are truly people like ODM is describing here, they need to get out of the rut they're in and find a new profession or a new area of the country to live.

FYIGM of the day.

Posted by Scott_api | November 1, 2007 12:31 PM

I'm not sure you can make a case to pin this on the MSM.

CNN and FOX both tout the strong stock market every day. CNBC and MSNBC both have their daily cheerleaders direct from the trading floors telling me how great things are. I don't get bloomberg, so I couldn't tell you what they are saying. The MSM seems to be telling an 'up' story, but the masses are still feeling 'down'.

I think Jazz has it about right. People are not paying attention to what the MSM is saying, they are paying attention to what is going on in their back yard, and in many cases, they are not liking what they see.

Posted by always right | November 1, 2007 12:38 PM

The USAToday article had to be read with special filters. Most of it only confirmed the "mood" of the few people they've interviewed. From the people they've picked and the sites they conducted the interviews, how is anybody surprised at the gloomy outcome?

Even those interviewed who did pretty well (i.e. better than the year, two years,...before) with solid financial figures (their own), expressed the "whole US economic going south" view. ==> They listened to the "experts" telling them good time is not to be had in the future.

One year later, right before the election? With companies hiring more to meet the export demands (low dollar exchange rate), remember there is a lag time, people will still be worried about their financial future and their children's future, because the same media will still be telling you what you should hear. It is going to be the longest sustaining lies the msm's been pulling. Only because (so rightly summarized by the USAToday article, also backed up by historical election results) extreme pessimism can only benefit the opposition party. That has been a tried and true formula.

Posted by olddeadmeat | November 1, 2007 12:44 PM


Forgive my ignorance - FYIGM?


Congratulations - you live a lot closer to Wall Street than most of the rest of the country.

Wall Street is feeling fine, but really, Angelo Mozillo announces a billion-dollar loss at CountryWide and the stock went up? Wall Street is about as logical as a teenage girl in love.

Those luxury cars and SUVs are financed. I'd bet you 9 out of 10 the buyers are still upside down on them.

A family of 4 grossing $75,000 a year cannot afford a house in huge parts of the country. Doesn't that suggest there might be some problems?

davod, always right: yep, the MSM has been preaching disaster year after year, but we still felt optimistic enough to re-elect Bush in 2004. Why the change from optimism to pessimism - it's not the MSM - because if they could sway minds, GWB would never have won re-election, and the Dems would have 95% of the public instead of half.

It's what the guy living from paycheck to paycheck is feeling right now, which is someone not like many people who post here.

NoDonkey, you are a smart man - you keep a car after it's paid for instead of trading it in right away like the auto and credit industries want you to.

If you have a mortgage, it's probably fixed rate and pretty low, while your credit rating is pretty high. Not everyone is there.

More than half of all Americans don't even know the type of mortgage they have, and many of those are going to be surprised when the adjustable rate resets. If it already has, then they are losing their home.

You, and most of the people on this board, are smarter than the average American so your experience of the economy is very different from theirs. You didn't buy your house with an option-ARM, where you pay less than the full amount of interest each month, so that the amount owed to the bank increases every year.

Many dumb people took out those loans, and are just now discovering that unscrupulous or uneducated (can you hear the Dems whispering "unregulated"?) lenders took advantage of them just to get a commission.

Unfortunately, dumb people vote, and when they are hurting, they will vote for whoever promises the most.

That's easy for the Dems to do - after the, the gub'mint will pay for it.

Gonna be really bad when Wall Street's bull rolls over and dies.

Posted by SupplyGuy | November 1, 2007 12:47 PM

Olddeatmeat - I'm w/ nodonkey, I'm making more money now then ever before and I'm not even invested in the stock market.

This is America. If you work hard and live w/in your means you're going to be well off.

I think the problem w/ most Americans is that they can only see what they don't have and not what they do have.

Since they can't be rich like Donald Trump or Paris Hilton they think the economy sucks.

Grow up.

Posted by Only One Cannoli | November 1, 2007 12:50 PM

Economically speaking, I don't think the average American is very sophisticated.

Gas prices rising above ~$2.50/gallon = a bad economy.

Posted by Charles V | November 1, 2007 12:56 PM

Americans do not trust the MSM to inform them, do not trust Congress to do their job and do not trust GW to act with the power he has as President.

7 years and not a single successful act that addresses Americans dependance on foreign oil. Its now a $100 a barrel.

That is really going to piss a lot of people off.

Posted by Kurt Brouwer | November 1, 2007 1:00 PM

Most surveys reflect that Americans are generally happy about their personal situations and optimistic about their personal future. For example, see the Pew Research Center survey mentioned in David Brooks NYT column, The Happiness Gap, which showed that 62% of people expect their lives to get better in the next five years, while only 7% expect it to get worse.

However, when surveyed about broad issues such as the direction the country is taking, people have generally been much more negative. The way these questions are worded is such that most of us could say we are not happy with the direction the country is taking.

The good news in my opinion is that Americans are positive about themselves and negative about our institutions, particularly the government. Skepticism about government is generally pretty healthy. Hopefully, this level of dissatisfaction will result in Americans becoming more active citizens and voters.

Posted by NoDonkey | November 1, 2007 1:00 PM


Means "Forget You I've Got Mine" (or something akin to that, I believe).

The luxury car thing always comes to mind, because I heard a colleague once say, "I can't afford $185" (for an exercise machine).

But she can afford a 2007 Mercedes Benz, that she drives and parks in a handicapped space, because of her chronic back problems (caused by obesity). But the exercise machine costs too much for her.

Perfect analogy for so many Americans. I've heard people make excuses for bad finances for years, and it's always like the lady with the Mercedes - they make terrible financial decisions, but it's not their fault, it's the governments/evil corporations, etc.

I know if I screw up and buy stuff I can't afford, it's my fault. Not the guvmint's, not the evil Republicans, my fault. So I don't make dumb decisions like buying expensive cars.

"A family of 4 grossing $75,000 a year cannot afford a house in huge parts of the country. Doesn't that suggest there might be some problems?"

Yes - with boneheaded government strategies that limit development. And also encourage development in areas that can't support it (e.g. New Orleans and the California desert).

Actually, I did buy my condo with a 7 1/2 year ARM, which goes to 2010. I knew I'd sell earlier (this year, probably) and I've been paying $200 in principal every month. I just took the ARM because the rate was so good.

I think our economy is pretty good, although as a hedge I've been saving cash money and buying overseas stock. Never put all of your eggs in one basket.

The poor will always be with us. So will poor people who would have been rich, had they made better decisions as far as their finances.

Posted by olddeadmeat | November 1, 2007 1:03 PM

SupplyGuy said "Grow up"

Just what makes you think the public ever did?

Let me amplify and focus my previous question - just what good economic news is there for the average American?

Food, energy, housing, health care, education, the price of tea in China? Got anything? Anything at all?

Posted by Cycloptichorn | November 1, 2007 1:08 PM

Some of you are doing well personally, and can't understand why everyone is so upset. This is ridiculous.

The underlying numbers for the economy aren't great. We've been in a negative savings rate, nationally, for several years now - so those luxury cars you see in many cases CANNOT be afforded by the people that have them.

Energy price rises aren't counted in the 'official' inflation number but most certainly affect people, especially rural populations who are forced to drive. I'm lucky - I ride my bicycle to work every day. Others aren't so lucky.

The mortgage numbers are bad. For every family who is defaulting, there are ten who are barely scraping their payments together each month. Not much consumer spending going on there.

Scott_api is correct. I don't need the MSM to see food and gasoline prices going up. I don't need the MSM to see that homes aren't selling off of the market. I don't need the MSM to see that the job market isn't what it used to be. All you need are eyes...

Posted by Ray in Mpls | November 1, 2007 1:10 PM

"Are you better off now than you were in 2003? 2004? Pick a year, any year."

Pick a year? Ok, how about 1977 when a gallon of gas was only 50 cents but you had to wait three hours in line just to get the 5 gallons or so that most people were allowed, until the station ran out for the day? It was also a time when the country was suffering a terrible mix of high inflation and high unemployment. Not to mention the fact that "perks" like employer provided health insurance, paid sick days, etc, was almost unheard of. We had wage and price controls which proved to be a disastrous combination, the threat of a complete disruption in our foreign oil supply (research the OPEC oil embargo for a perfect example), the loss of manufacturing jobs at an alarming rate, and a huge increase in both income and corporate taxes which cost the country much more than it gained in increased federal, state, and local spending. The interest rates for personal loans went from single digits to double digits within a year, forcing people to forgo investments in homes, equipment, and other loan related spending which caused a further devaluation of the dollar and raised retail costs across the board.

Compare all that to today's low employment, low interest rates, and low rates of inflation combined with the increase in productivity, the abundance of employer provided heath insurance, paid maternity leave, paid sick days, etc, etc, etc, and I would have to say that I'm a hell of a lot better off then in 1977, or 1987, or even 1997 for that matter as I have much more disposable income to spend on products that cost less per manhour than I paid before. (The costs have increased but so has my wages, I can buy a lot more with the money I earn in one day's wages than I could just 10 years ago.)

Gloom and Doom? Don't believe it!

Posted by gregdn | November 1, 2007 1:11 PM

What if the volatile political situation in the ME is worrying people and showing up as pessimism about the direction of the economy?

Posted by Burford Holly | November 1, 2007 1:16 PM

If you are a regular guy, not taking stupid risks and not cashing in on stock options:

Home value - declining
Value of cash savings (the dollar) - declining
Chances of getting a pension - declining
Chance of getting social security - declining
Health insurance benefits - declining
Income, education, public health compared to other countries -declining
Belief that government can respond to disasters like ME war or bird flu - gone
Health insurance premiums - rising
Cost of food and fuel - rising fast

From where a lot of people sit, it's close to where they'll feel the need to stockpile and hoard food.

Posted by Mike M. | November 1, 2007 1:23 PM

so those luxury cars you see in many cases CANNOT be afforded by the people that have them.

The fact that some people out there are buying cars that they can't afford means that the economy is bad?

Rubbish, it means no such thing. It just means that those people are greedy, stupid, shortsided, vain, and have their priorities in the wrong place.

Posted by NoDonkey | November 1, 2007 1:29 PM

"We've been in a negative savings rate, nationally, for several years now"

Whose fault is that? I work two jobs (one in the military reserves) so I can save money.

"so those luxury cars you see in many cases CANNOT be afforded by the people that have them."

Agree there. But again, whose fault is that? When my 2000 VW wears out, I'm off to the lot to buy a pre-owned, leased, modestly priced car that will probably cost 50% of what some schmuck paid for it two years ago. And I'll pay cash for it.

Face it, people who make bad financial decisions and who live beyond their means, are screwed in good times and in bad.

Now, are people who have worked hard, have saved and who haven't made stupid financial decisions going down in droves?

I don't see any evidence of it, really.

"especially rural populations who are forced to drive."

Who's "forced" to drive? I bought a place near to where I work (3 miles). You ride your bike. Good strategy. Saves money.

"Not much consumer spending going on there."

The economy grew by almost 4% last quarter and much of that was fueled by consumer spending brought about by low unemployment.

Not saying that everything is rosy, especially the irrational pessimism that people have about what is generally a good economy.

Posted by olddeadmeat | November 1, 2007 1:30 PM


You are proving my point - you did a long term ARM and you are paying principal as well as interest. Smarter than most.

That said, selling this year is probably contraindicated.

Cash money? in dollars, pounds or euros? :) I didn't realize until today but it's 2 dollars to the pound just now.

You are smarter than most people. However, democracy is still one vote per person.

Smart and dumb alike - no one wants to hear it's their own fault they are miserable.

If the Dems can blame misery on the evil (fill-in-the-blank) group, and this can be fixed with more regulation, then they have a great chance at sweeping 2008.

Consider one of their solutions: the Dems are seriously proposing fixing the foreclosure problem by turning ARMS into fixed rate mortgages at the low teaser rate. Lunacy, but mobs are pretty stupid, and it will feed the mob while destroying more than they dare guess.

Mike M. - it's not that some people are buying what they can't afford. It's that most people have been living beyond their means and it's time to pay the piper.

Unfortunately, the siren song the Dems will sing will tickle the ears of voters a lot more than the crash of harsh reality.

And the GOP candidates ignoring this only helps the Dems. Remember how George Bush 1 lost the election?

Posted by Cycloptichorn | November 1, 2007 1:33 PM


You will end up paying the price for their foolishness whether you like it or not.

When a significant portion of the country is in over their heads in debt, and has a negative savings rate, consumer spending slows - and that slows the economy.

Posted by NoDonkey | November 1, 2007 1:40 PM

"selling this year is probably contraindicated"

Similar places are still selling at twice what I paid for this place 7 years ago. And what I'm going to buy just fell by a ton. Although I might wait longer for further foreclosures.

"Cash money? in dollars, pounds or euros? :) I didn't realize until today but it's 2 dollars to the pound just now."

Unfortunately, dollars. Although when I visited Belgium in June, I didn't really feel like I was paying any more for hotel rooms, food, drink, etc., than I pay in DC. I'll let you know how Angers and Bayeaux are in France when I go there next month.

But doesn't the weaker dollar, provide more incentive for the Euros, etc. to buy our products? I remember last Christmas, Euros were flocking to DC, NY and LA to go Christmas shopping. A cheaper dollar does have some upside.

"the Dems are seriously proposing fixing the foreclosure problem by turning ARMS into fixed rate mortgages at the low teaser rate."

Always good to let people escape the consequence of their own bad financial decisions. It ensures they will make plenty more in the future.

Posted by viking01 | November 1, 2007 1:45 PM

To be blunt I've always considered Greenpan a bit of a narcissist willing to say whatever best promotes Greenspan. A perfect match for vain Andrea Mitchell. Keep hawking those books and face time, Alan.

If there's a common drag on economic outlook for the average guy on the street it is probably the huge number of people whom have maxed out their credit card debts, at loan shark interest rates, to purchase lots of luxuries they could never rationally afford. They're now faced with the cold facts that the price of necessities continues (as always) to increase along with their pile of recklessly accumulated debt. The same with giving mortgages to unqualified purchasers. There are some who will spend every available scrap of cash the instant they can get their hands on it. Then the bills come due and reality sets in.

What also concerns me about the economy is that for those of us who save and invest the dollar loses considerable value because the incessant growth of entitlement and pork / earmark spending by Congress followed by increased taxation. I'm glad to see the Dow Jones reaching higher and higher levels though part of me realizes that it incrementally takes more dollars to purchase the same value of stock or real estate because the dollar's value continues to lessen. Factor in the cost of doing business on the small business level, the courts having gone berserk on money grab lawsuits, and the costs of health insurance for employees (see previous phrase), the difficulty of honest businesses to compete with those hiring illegals, security costs to protect against theft and it becomes exceedingly difficult not merely to keep people employed and compensate them equitably but to simply keep legitimate businesses in business.

Two other factors unsettling to investors are energy dependence upon oil prices largely controlled by foreign markets / multinationals and the Kelo decision by the Supreme Court. Environuts preventing development of domestic petroleum supply hinder our nation's ability to counter foreign crises or nut case leaders like Chavez or Ahamanutjob screwing the market. The Kelo decision, of course, revealed that several lazy socialists on the Supreme Court such as Souter, Kennedy and Ginsburg are willing to permit confiscation by eminent domain of private property at the whim and fancy of local governments wishing to enrich political contributors. Central to our freedoms is the right to own and retain private property. Wherever that private property right is imperiled the cornerstone of our basic freedoms is at risk.

Posted by Scrapiron | November 1, 2007 1:49 PM

If you look around at the poor status (murder capital) states ran by democrats for years and see the possibility of a democrat in the white house and a democrat congress it's time to get out of the market. Maybe investment in North Korea would be a better option. Military recruiting is starting to tank. Who would want to be caught in the military with the above options as leaders? Not me and as a military retiree I no longer recommend (as a fact I tell them to stay the he** away) the military as a career choice. Getting killed because the people behind you are 'inept, traitors, and hate you' and fighting an enemy in front of you that hates you is not a good position to put yourself in. The liberals running the education system from K thru college are so inept/hate filled against the country that they are unable to produce a student with a third grade education in 16 years of school should prove the democrats are more dangerous than all the other terrorists/enemies in the world.

Posted by PD Quig | November 1, 2007 2:25 PM

This is hilarious that we're arguing about whether things are good or bad with the economy:

1. Record stock market in which well over half of America participates
2. Record net worth
3. Record levels home ownership even amidst the 'housing crash'
4. Record government tax revenues (I throw that one in for you lefties)
5. Record low 'poverty' rates even though as defined 40% of the poor own their own homes, 60% of which have air conditioning, 70% own their own car or truck and 100% have at least one color TV and satellite dish or cable
6. The average poor American has more living space than the average middle class European
7. Declining--yes lefties--declining income inequality when transfer payments and in kind programs are properly considered.
8. I could go on and on

Instead, why don't you every-silver-cloud-has-a-dark-lining malcontents take a different tack and tell us what policy changes you would suggest to improve things?

Let me get you started:

1. Tax the rich: Unfortunately, this always ends up taxing the middle class as 20 million AMT victims are learning. What? at $90K/year in California you didn't realize that you were "rich"?

2. Tax corporations: Unfortunately, many of you have so little basic understanding of business that you don't realize that businesses don't pay taxes. YOU pay them for the business in the form of higher prices, lower wages and lower benefits.

3. Expand free government health care: What part of free do you not understand? The more the government regulates an industry the worse the health of that industy (airlines, health care, education, etc). This is causation, not correlation.

4. Penalize corporations that outsource: See #3 above. Get rid of the idiocy like Sarbanes-Oxley and usurious taxes and watch corporations stay home.

5. Rein in free trade: Buy American if you want, but don't force it on me if I can't get as good a product here.

So, what will improve upon this awful mess we're in, my lefty friends? What will sustain or stimulate anew this terrible economy? What would you do differently? With Iraq going so well, these questions will come to the fore as the main topics in the next election. We want the whole country to know just exactly what plans the libs have for our hard-earned money.

Posted by Patrick | November 1, 2007 2:28 PM

The opposite of irrational exuberance? Media-Manufactured Malaise. Made-to-Order Media Malaise. Talk down the economy in order to elect Democrats in 2008 and create an inchoate sense that "change" is needed. Nevermind that the last time Democrats were in the White House, and both houses of Congress simultaneously, America had sky-high inflation, interest rates and unemployment. The woes were real back then.

Posted by EHeavenlyGads | November 1, 2007 2:33 PM

This post is appreciated, Ed. I asked myself your same questions when I read the piece this morning. (Avid, long-time reader here, but a very rare commenter...)

I agree with almost all of the commenters in their reasonings, but most especially Supply Guy, pharniel, OldDeadMeat and Always Right.

But consider the source: I am a 46-year-old woman, divorced for more than a decade, made extra monthly payments for years and now own my suburban Dallas home valued at $200K outright, have no credit card debt (or any other debt), drive a 13-year-old Volvo that runs as well today as the day I bought it (paid that 4-year note off in 2), and have two sons in college that I privately and solely funded. Oh, and my income has averaged about $70K over the last decade, but has climbed every year.

The odds have certainly been against me, but thanks to the Depression-Era teachings from my parents and grandparents, I lived within my means and learned quickly how to tell the difference between a want and a need. As a child, I was taught to budget and to pay myself first in personal savings and investments. My two sons, who have enjoyed a comfortable lifestyle with me, have also learned these lessons and are each doing very well across the board, including financially, I am proud to say. They are proud of themselves, too, and should well be.

We've been blessed with a growing economy for many years, and absolutely so under the defamed Bush Administration. But there is no question that times are getting tough for a large number of people in this country. I read that more than 12,000 Chrysler jobs will be axed tomorrow and my prayers go out to those folks who will now suffer.

As personally secure now and pleased with our economic growth as I am, I also see stormy seas ahead for this nation. Fortunately though, I am somewhat rarely positioned to ride it out, while my over-extended neighbors are certainly on the brink of disaster. "Sacrifice now, or sacrifice later" was a frequent quip of my father's.

Unlike past generations that endured and survived the cycles of ups and downs, this apparent majority of Americans today have made themselves much more vulnerable to the slightest hiccup. The end result, IMHO, is that when our economy tumbles, the vulnerable ones will be dramatically aiding in its demise, much like a snowball grows as it rolls downhill.

As in previous down cycles, some will lose everything and some will find outstanding bargains upon which to build. Neither outcome is by accident.

OldDeadMeat, you nailed it in every detail offered and I thank you. I literally cannot conceive of how bad all of our lives will become if the Dems take over completely...but it sure looks like a scary reality in the making. We'll all see who survives then.

Posted by SupplyGuy | November 1, 2007 3:11 PM

ODM - you really need to get out of the US and see what the rest of the world w/ their government protectionism and socialism looks like.

I thought that I had grown up poor and then I went to Djibouti Africa. I will never call an American poor ever again. The only thing Americans are poor in is gratitude and humility.

America has the best economy in the world. And it will stay that way because we're innovators who don't rest on our laurels.

Even during Jimmy's reign of incompetance we still had a roof over our heads and food on our table and clothes on our back.

You want to cry because 4% of Americans don't have jobs? Never in the history of mankind has such a low unemployment rate been achieved and maintained for so long.

Even the dems can't destroy our economy. Once they try the American people will see the results and throw them out.

If Hillary gets elected in 2008 (and I really doubt she will) it will just mean another Republican congressional tidal wave in 2010.

As I said at first, God has blessed America and we will always be well off even if we refuse to see it ourselves.

Posted by olddeadmeat | November 1, 2007 3:31 PM

SupplyGuy - you are exactly right - we are incredibly blessed. Even in the 70s we were better off than the rest of the world.

But I am also right - perceptions matter more than reality.

Talking about the bad old days of the 70s or poor Africans only matters to those that remember them.

20 and 30 year olds barely remember that Ronald Reagan was a president of the United States, if you are lucky.

PD Quig

The trends are what matters - record net worth for many/most Americans is eroding daily because of crashing dollar, rising costs, crashing housing market.

Same with home ownership - the record was built on sand-people talked into loans for homes they can't afford, and the tide is coming in.

Ditto with the stock market - we'll see 12,000 next year, maybe even down to 10,000 - the Dow won't see 15,000 this decade.

Ditto with tax revenues - a lot of which will be going south right along with housing values.

Yes, things are great compared with the 70s or with poor Africans. Doesn't matter. Voters care about themselves, and right now is worst than last year, and next year looks worst still.

The real cure would have been to resurrect Paul Volcker and put him back in charge of the Fed, but banks and consumers alike are going to scream and bleed like gelded pigs no matter what is done now.

Posted by Cycloptichorn | November 1, 2007 4:10 PM

Market sinks heavily today, as investors know better what's coming then many here.

It's pretty obvious that some of you have very little clue as to what fundamentals drive our economic growth; none of those fundamentals are currently looking great.


"So, what will improve upon this awful mess we're in, my lefty friends? What will sustain or stimulate anew this terrible economy? "

Ending the Iraq war is the equivalent of a 170 billion per year tax boon. That would be my first step.

Posted by PD Quig | November 1, 2007 4:13 PM

Don't be a doofus, ODM. What matters is long term trends, not daily, monthly or even year-over-year trends. Get a freakin' grip.

The chart would look the same for home ownership, net worth, employment and every other positive economic indicator. Not only are things better now than the 1970s or than poor Africa, but the average poor American now has a better standard of living than a middle class American in the 1970's.

Still, we're dying to know: what specific policy prescriptions do you have to improve things? I can't wait.

Posted by PD Quig | November 1, 2007 4:25 PM


I love your lefty euphemisms. "End the war," indeed. The United States does not get to "end the war." Either our defeat--or the defeat or our enemies--will end the war. You and I will be long gone.

We can decide to lose in Iraq, which would be the result of your $170B savings. You might even spend your $170B on new government programs for a year or two....until the next terrorist attack-induced recession.

Posted by Cycloptichorn | November 1, 2007 4:31 PM


Save your pronouncements of doom. I'd rather save the money, as there is no correlation or causal effect between the war in Iraq and attacks here in America whatsoever.

If we spent just 1/4 of that money here at home on defenses we could seriously beef up our ability to resist attacks.

To move on to more productive conversation, I would also immediately raise taxes on the upper classes. This would provide a direct stream of revenue which is badly needed considering our deficits and debts.

Yeah, yeah; please. Don't even bother to come back with the 'mwahh, it'll hurt the economy, people won't innovate, et cetera' argument. It's bullcrap. At every part of American history in which taxes were higher on the upper classes then they currently are, we had innovation and the strive to accumulate wealth. There's little evidence that we would not still have these same things with modest raises in taxation.

To balance this some, I'd suggest cutting spending: some from defense, some from Social Security (in the form of planned reduced benefits over time, it's the only way to go) and a moratorium on earmarks, even if they do constitute a small fraction of the overall budget.

Posted by daytrader | November 1, 2007 4:34 PM

Love to listen to the end of day analyst spin on the market.

Yesterday it was up "because of the rate cut"
Today it's down "because it may be the last rate cut"

Never once did they mention that this is the time of the year all those mutual funds which control trillions of market cap rebalance their funds and throw out the dogs and pick up their new toys to play with.

Posted by Cowboy is a compliment | November 1, 2007 5:33 PM

No, I don't entirely believe this, but fun in arguments like this on some blogs:

Anyone notice that the economy started to go to h*ll when the Dems took back both houses of Congress. After all, its the Congress that has the "power of the purse"

Posted by olddeadmeat | November 1, 2007 5:43 PM


I will accept goofy, wacky, eccentric, cranky, irritating, definitely long-winded, maybe even blowhard, but doofus?

PD - from last year to this year, what is improving that will keep improving next year? Just what trend can you extrapolate out to the long term (and how long a term are we talking about) that will keep going up?

Meantime, it's time to get goofy on your buttocks.

Home ownership: Hello, housing crash! - a record number of foreclosures (DOUBLE last year); Goldman Sachs said last week that homes in California are still 30-40% overpriced; and do you know a member of the National Association of Realtors? No wait, even they are conceding that this is the worst crash in 7.....10.....16 years. Never mind... ignore that... I'm sure that number will change again soon.

The stock market/Wall Street is going gang busters, except...manufacturing is flat, the construction industry is nosediving, and consumer confidence and spending are at best flat. Chrysler is cutting 11,000 jobs. Mortgage lending has lost 60,000+ jobs.

On the flip side McDonald's and the car wash down the street are hiring. Every dry cleaner in town is offering at least $8 an hour. Great jobs for teenagers and septuagenarians alike!

And the price of oil is hurting oil companies? What's up with that?

Another oops, Citigroup got downgraded today - that darn O'Neal and his $160 million retirement - oh, never mind that was Bank of America and it's loss and exposure to future losses. bad, it was really a $160 million retirement package from Merrill Lynch for successfully losing $4 billion-no-we-meant-to-say-$8 billion dollars.

And of course, SecTreas Paulson is creating a bailout fund just because Citigroup is so darn successful and has plenty of capital to cover it's losses without cutting its dividend or going bankrupt.

The health sector is going gangbusters, so the economy is bound to pick up. Of course, that's sort of like suggesting the village will be healthy in the future 'cause the vampires are well fed. (I wish I could take credit for that analogy, but I can't).

Hey, employment is good - I will credit that -anybody can get a job right now and businesses are still struggling to find good employees. As for wage growth - well, the best thing you can say about wage growth is that it's rising faster than uh,,,,,,,,,,,postage rates? Maybe not.

What about consumers? Hmmm....what did a trip to the grocery store cost last year? And today? PD, do you shop for groceries for your family? Maybe you missed it but you might have noticed the price of milk, eggs, meat and grains slipped up a penny or too? bad, did I type "penny"? I meant DOLLAR!

Goofy goofy goofy!

Yaaaaaay! Wal-Mart is selling 50 inch plasma TVs for less than $1000. You know I buy those every month. That's a sure sign that Wal-Mart isn't worried about consumers maxing out their credit cards - they're lowering prices so it will be easy to find more things to use credit cards on.

Boy, I am so goofy I am laughing myself silly, let me wipe these tears from my eyes.

You know what, it's going so great I'm going to short gold futures, 'cause you know no one buys gold when the economy is improving, and the price of gold is sure to nosedive.

As for a cure, too late for that. Keeping interest rates too low for too long was a proximate cause, but not the only one.

Now, well, ignoring will be a great solution. That way we get Hillarycare and every other darn thing, and then the GOP can ride in and clean up the wreckage after we throw the Democrats back out, right?

Of course, if Congress had not gone hogwild on porkbarrel projects, we might have extra resources to cope with some of these issues. At the very least, we wouldn't have quite so much national debt to worry about on top of everything else. Both parties to blame, there.

Me, I'm hunkering down and buying a farm. Great investments. They grow on you.

Posted by patrick neid | November 1, 2007 5:54 PM

The chart of the US, dragging the world behind, looks like a sine wave in an up sloping channel. Occasionally, due to short sightedness the US appears to be in a bear market--the down slope of the sine way.

That aside, everyday is better than the day before. Could it all end? Sure. But you will never know the day. Meanwhile enjoy every minute of it. By every measure, every decade is better than the one before. Today's poor live longer, have better health care and conveniences than the super wealthy just 50 years ago. This was not always the case.

Humanity is in a bull market led by the US.

Posted by Mike M. | November 1, 2007 6:28 PM

On the flip side McDonald's and the car wash down the street are hiring. Every dry cleaner in town is offering at least $8 an hour. Great jobs for teenagers and septuagenarians alike!

This is almost verbatim the exact same garbage I heard practically every day back when Reagan was in office. The "burger flipper" economy and all the same tired old nonsense that we always hear when a Republican was in white house. It never changes.

And I'm not sure when the last time was that you went into a McDonald's, but around me they're all staffed almost exclusively by Latino immigrants these days, not by teenagers and septuagenarians.

Posted by Jeremy Abrams | November 1, 2007 7:28 PM

The malaise is not irrational. We are at the start of a ruinous inflation caused by decades of excessive money (and debt) creation by the federal reserve. (I'm not a Ron Paulist, by the way).

With this much bank-created debt, and dependence on foreign capital because our savings rate has dropped so low (which is also rational behavior - why save when inflation is melting the value of your savings?), we can't afford the natural one or two year recession that is part of the business cycle, needed to wash out weak companies and discipline loaning and borrowing activity.

the Federal Reserve has put us between a rock and a hard place, and please note that Germany' stock market also boomed in the years leading up to its 1023 hyperinflation. Moderate inflation lifts nominal (not real) profit margins, making everyone feel great for a time. But our economy is on steroids, and a reckoning is now at hand. Look at the price of oil, gold, wheat, and tell yourself all is well.

Posted by Jeremy Abrams | November 1, 2007 7:30 PM

whoops - Germany's 1923 hyperinflation, Sorry.

Posted by olddeadmeat | November 1, 2007 7:59 PM

Mike M.:

Back to serious.

I'm pretty anti-liberal in the bulk of my positions. If I appear anti-GOP, at least I consider them worth arguing with.

Actually, I'm pretty sure everyone is wrong about most things, except where they agree with me. Of course, I could be wrong. Don't think that makes me different from anyone else on this blog.

My point was that employment is indeed low, and staying low because of all the bottom end service jobs out there. Lots of those mortgage lenders went back to the bar tending and waitressing jobs they had back in 2002 (literally in some cases). Downward migration.

I have seen wage growth locally, but at the bottom of the market, and there are tons of those service jobs out there. Or where there are scarce technical skills, e.g. welding.

And yes, I ate at McDonald's yesterday morning on the way out of town to a client. High school kids (white & Latino), no septuagenarians.

Of course, it used to be septuagenarians didn't work and didn't need to.

Regards, ODM

Posted by Del Dolemonte | November 1, 2007 10:09 PM

Andrew Cuomo (Democrat-Hillaryland) went after the real estate appraisers today in a lawsuit, blaming them for all of the problems in the real estate market.

However, Andy failed to fail a lawsuit against the financial people who pressured those appraisers to nail a pre-determined value to make the loans work.

He also failed to file a lawsuit againt the AVMs (automated valuation models) that many lenders have used in lieu of sending a real person out to eyeball the property being considered for collateral. But fo course, one can't sue a computer. Right, HAL?

Posted by PD Quig | November 1, 2007 11:42 PM


Sure, there was no correlation or causal effect between the war in Iraq and past attacks here in America, but that is a straw man—that was never the issue. The issue was always the risk of future collaboration with state sponsorship and plausible deniability. Were we to bail out and leave Iraq to AQI—as you prescribe—attacks would become much more likely.

We agree! I want to spend more money on homeland defense, too. Our overall defense expenditures are currently at a historically small percentage of GDP, especially given our war footing. How would you seriously beef up our ability to resist attacks? I would build a border fence, upgrade and integrate FBI, ICE/CBP, CIA and other law enforcement computer systems. I’m all over it, Cy.

Of course, this would NOT be paid for by raising taxes on the ‘upper classes.’ This is entirely fair since those making more than $103,912 per year (the top 10%) currently pay 70% of all taxes. Cy, do you actually think that someone living in California or New York making 103,912 is upper class? At what point would the ‘upper class’ be paying enough for you? When the top 10% pay 80% of taxes” 90%? 95%? How do you define a “modest raises in taxation”?

Percentile Ranks AGI % of taxes paid
Top 1% $364,657 39.38
Top 5% $145,283 59.67
Top 10% $103,912 70.30
Top 25% $62,068 85.99
Top 50% $30,881 96.93
Bottom 50% (from the latest 2005 IRS figures)

Cy, in the 103 quarters since Ronald Reagan's tax cuts went into effect more than 25 years ago, there have been 97 quarters of growth. Since the Bush tax cuts and the current expansion began, the economy's growth has averaged 3 percent per quarter and more than 8 million jobs have been created. The deficit as a percentage of GDP is below the post-World War II average. Silly, tax-crazy liberal.


Unfortunately, again, you have not grasped my point. The long term trends I pointed out have survived cataclysms such as WWII and the Cold War and you’re citing Goldman Sachs and Citigroup stock quotes from yesterday? Umm, how can I say this politely? BFD? A statistic you might have missed while tossing out your hackneyed old “burger flipper” job canard, is that recently average service sector job pay passed pay for manufacturing jobs. Yes, while manufacturing output is at all time highs—we don’t need as many workers to achieve that given the incredible productivity gains of the past twenty years. Yes, you heard me right: American manufacturing output is at all time highs.

Those of us in the service sector might wonder why you denigrate us so. I’m a software product manager, and our products save manufacturing companies $100’s millions each year. Accountants, lawyers, doctors…service sector all. How you gonna keep ‘em down on the farm when there’s so much money to be made in the service sector, ODM?

Posted by John Adams | November 1, 2007 11:45 PM

Sorry Cycloptichorn, your idea that ending the War would help the economy is preposterous. Every war that we have had since, and including, the Civil War, has brought economic prosperity. Do you really believe Roosevelt got us out of the Depression? The worst year of the depression was 1939 and things were so bad that Roosevelt was convinced he could not be re-elected. Then, the U.S. started gearing up for war in 1940, and the Depression finally ended. Same with WW I and Korea, etc. It is clear, my friend, that you are educated in neither basic history nor economics. But, of course, these things used to be taught in high school. War, young man, equals prosperity, however regrettable that may be! You have heard of high school, right?

Posted by TyCaptains | November 1, 2007 11:51 PM

The fact that many of you don't understand the pessimism illustrates just how out of touch you are. Oh I'm soooo going to get flamed for that one.

ODM is laser precise with examples of what the average joe is dealing with and why he/she feels pessimistic.

Jeremy Abrams is also spot on as to why we ended up here. Open wallet Greenspan has printed so much money, it fed our greedy consumerism allowing China et al to essentially own our soul.

Now that countries are moving from Petro-dollars to Euros, our bills are coming due; the gravy train is ending as foreigners are less willing to float our debt. Which explains why the dollar is falling faster than Bush's popularity or Obama's chances of taking the White House. And since we now import the vast majority of goods, those prices are going to shoot upwards too.

Sure, as NoDonkey and others point out much of this is due to poor choices made by consumers. Yes, they could have been more frugal, saved for bad times, etc. But the point is, that compared to just a few years ago, it's simply much harder to make ends meet. Sure, compared to 30 years maybe its not nearly that bad, but seriously do you expect the average household to remember what life was like 30 years ago? Think about the average age here, 40 years old? That means they were approximately 10 years old in the 70s - not exactly dealing with day-to-day expenses and thus incapable of making any sort of meaningful comparison.

And don't blindly believe the CPI as it got "adjusted" during Reagan and then Clinton, making it specious. For an example, look at the way the value of electronics are calculated.

Posted by olddeadmeat | November 2, 2007 7:59 AM


I understand your point, but your point is irrelevant, both to the issue and the Captain's question.

Speaking long term:

If you invest $1,000 in U.S. Treasury bills and just keep re-investing it - in 225 years that $1000 will turn into more than $10 million and be worth exactly nothing to you.

Politically, in our country the long term is at the corner of Never-never Land and BFD Avenue.

That's the problem.

The Captain is asking why people are pessimistic now. I'm giving you the answer. I can't help it if such beautiful arguments keep tripping over such little niggling facts.

BFD? You're right. Let them eat cake. Nothing to worry about at all,'s such a BFD that the Fed is cutting rates and spurring inflation and trying to organize a bailout fund for them because if they crater, they'll very possibly take the rest of the economy with them.

Service sector? How goofy! Why, I live to serve. I cut my teeth on punch cards. I learned BASIC on a TRS-80. Then I made a mistake and detoured thru a law degree, but now I run a modest IT business and am doing fine (health insurance aside...).

It's just that my relatives who run farms are doing even better. In the heartland they are seeing record prices and great yields. Farmland is just about the only real estate that's trending up in price just now.

Of course, getting into farming take a little more than a couple of courses at a community college.

PD, this argument you and others have been making reminds me of the old joke about the lost airline pilot flying in a storm at night who asks a man on the roof of an office building: "where am I?"

His answer: "You're in an airplane."

The pilot, of course, immediately navigated safely and landed the plane. His co-pilot asked how he knew where he was.

"Well - his answer was factually correct and totally irrelevant to my problem, so I knew he was at IBM."

Take care, ODM

Posted by MikeDevxPatriot | November 2, 2007 8:04 AM

"The main problem is that most of the 'spending' of the last few years has been fueled by HELoCs and other 'your home is an ATM' based scams.

now that home prices are falling, and you can't just bail on the house for a small profit, the default rate is growing exponentially.

credit card lates are going up."

These quotes do indicate that for certain Americans: those who have been living beyond their means via home equity loans, credit cards, etc, there is genuine pain.

For the larger majority of more prudent Americans, this economic dislocation simply is not the case.

Outsourcing and the falling American dollar are weakening us a well, it is true.

These combinations do indicate that SOME Americans are worse off, and some of them are really struggling.

Our picture is not perfect. But focusing on the negatives, and ignoring the positives, is not exactly realistic. As a reader on another blog recently said, make sure you ask yourself, "What is wrong with this picture?" before you arrive at your conclusions. The picture is biased and skewed. Try to be rational and see the entire situation.

We're doing alright. Still.

Posted by Modcon | November 2, 2007 8:16 AM

We've been writing about this since February of 2006. It's a technique we call the Permatantrum. It's a concept we're still refining and understanding, but there's no doubt that it's something the left has already perfected.

Posted by PD Quig | November 2, 2007 10:21 AM

Okay ODM. Peace.

First a quick recap of forty years:

In the 1960’s and 1970’s we were at the end of our tether. We were disgraced and defeated in Vietnam. We were losing the economic battle to Japan. We were going to run out of oil. Tehran stuck its finger in our eye. Interest rates were at 20%, unemployment was at nearly 10%.

In the 1980’s (that many now remember as the golden years of our inevitable triumph over the USSR), I remember instead the constant griping of the elites that Reagan was going to get us all killed. France shut down for weeks in anti-war protest when Mitterrand agreed to host some Pershing missiles. The world reeled in horror when we walked away from Gorbachev’s deal at Reykjavik. The tax cuts were loopy economic voodoo.

Somehow we survived it all and came out stronger than ever. Inevitable? Not at all. Could it be pissed away? Yes, it could, and the Democrats have precisely the means to do so as their economic and foreign policy. Believe me, I'm no Pollyanna. But my take is that at any point in the past 70 years America has been on the verge of destruction. So now the dirty little secret behind the malaise: Americans have justifiably lost faith and trust in their elected leaders and the MSM to tell them the truth and to deal responsibly with the profound issues that face us. We feel like there are no adults at the steering wheel. On autopilot the economy is doing okay but it will not do so forever.

I have faith in the basic genius of the American people to figure it out and bring about the needed change when the going gets tough.

Posted by olddeadmeat | November 2, 2007 12:37 PM


I will absolutely agree with your last post.


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