The Great Mindgration

Okay, I coined the word "mindgration" and I'll give you that it is not my best stuff, but let's just roll with it for now. The concept is that there are smart people being born, graduating high school and going into college daily. What is their incentive and what will they study? I chose law and, admittedly, it was not a plan for social good. It fit my talents and I perceived that I could make a decent living at it. In the past decade or so many chose careers on Wall Street. Smart minds there could get rich, very rich, and in short order. Now the money is no longer there. Now with hundreds of thousands of people being let go from financial institutions, those in college are forced to find another path. Accordingly, there is a mindgration under way.

Where will the talent flow? Hopefully a fair amount will go into research and development in productive areas, like alternative energy, agriculture, health science and the like. If we can commit the brain waves that went to complicated financial products into brain waves on improving our lives, it may actually make a difference. One can only hope.

Mixed Feelings

Okay, I rant a good bit about money going to bad banks and how it is money down the drain. I know it is easy for me to do this as I am just a spectator. Those making decisions need to consider what happens if they let a bank or other financial institution fail. They saw the consequences of Lehman going under and they are afraid, very afraid. So the answer seems to be to let them all be supported for now and hope things work themselves out in time.

My problem is that we need to thin the ranks. I know this is quite complex due to the links between financial institutions but we need to figure out a way to thin the ranks. They all cannot survive. Some need to be wound down so the stronger can survive. Solutions based on propping up the entire mess are simply not working and will not work.

The government also seems to be focused on mortgage assistance, propping up home prices and getting people spending again. These are all wrong moves in my opinion. We got to where we are because people bought homes they could not afford, home prices got out of any rational relationship to incomes and people spent more than they made or could afford. In short, cheap and easy credit made for poor decisions. To me, the answer is aiding those that lose their homes, supporting just those who can truly afford their mortgage on reasonable terms, letting house prices return to where they should be and insisting people get their debt paid down before they are offered more credit. Very painful indeed, but necessary. We need to take our pain now and get on with it. The moves we are taking are only kicking the can down the road and making it worse.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aEs9iy5D54Rw&refer=home

Disclosures: None.