Morning Coffee--Zimbabwe French Roast

Dilbert has been fired. Apparently as his company's work slowed, he created a side business out of his cubicle and got canned.

Stormy Daniels, a porn actress in Louisiana, is mounting a write-in campaign to challenge David Vitters in the primary. Stormy is a libertarian and Vitters is known as a customer of the late DC Madam and is famous around town for his liaisons wearing diapers.

A factual error. Obama is not cutting the Defense Budget by 10%. He is maintaining the budget that Bush had agreed on, while the Joint Chiefs wanted 10% more. Watch this to become a big nothing.

Karl Rove has been spotted, parking his Porsche in a handicapped space. After Eric Holder was confirmed as the new Attorney General, Rove's lawyer immediately said Rove will cooperate with the federal criminal inquiry into the firings of the nine U.S. attorneys. The probe is led by Nora Dannehy, the acting U.S. Attorney for Conneticut, who has empaneled a federal grand jury to hear the evidence. Bets are that Rove throws Gonzalez under the bus and then puts the monkey on Holder whether he wants to prosecute the first Hispanic Attorney General. Run, Fredo, Run.

Today's Wall Street Journal has an op-ed by Carmen Rienhart and Kenneth Rogoff titled, "What Other Financial Crises Tell Us." Rogoff is a professor of economics at Harvard and former chief economist at the IMF. Ms. Reinhart is a professor of economic at the University of Maryland.

What did they find when they studied past financial crises. Financial crises,even very deep ones, typically subside in two years. That would mean the U.S. economy should stop contracting toward the end of 2009. Real prices of housing tend to decline 36.5 with the duration lasting five to six years. That means U.S. housing proces peaked at 2005 and still will fall 8-10% before the end of 2010. Equity markets take 3 and one half years to drop an average of 55% in real terms. Equity markets will take a couple more years for any sustained rebound.

The duration of the period of rising unempployment averaged nearly five years with a mean increase in the unemployment rate of seven points, which would bring the U.S. to double digits.

What is most stunning is staggering rise in government debt. Central government debt tends to rise over 85% in real terms during the first three years after a banking crisis. That would mean another $8 or $9 trillion in the case of the U.S. The near-doubling of national debt will bring much higher interest rates and a collapse in today's bond market bubble. The legacy of this could mean stunted U.S. growth for at least five to seven more years.

What they conclude is now is the time to force the necessary restructuring of the financial system.