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2008-10-01 Home Front Economy

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Posted by Fred 2008-10-01 00:00|| E-Mail|| Front Page|| [11130 views ] Top

#1 I don't know about everyone else but I'm really upset that Bush, our representatives and the media seem to be attempting to create a run on the banks and stock market by shouting "fire". They didn't pass that bill and this morning the stocks went back up. Hmmm.

I was driving this morning and some unknown news announcer was telling listeners how to explain the financial crisis to children in an age appropriate way. Something like, "Tell them that when it comes to matters about money and keeping the house that mommy is nervous and concerned but hopefully everything will turn out ok."

I'm not kidding.

Posted by Betty Grating2215 2008-10-01 02:31|| 2008-10-01 02:31|| Front Page Top

#2 The danger is real, Betty, not faked. The international credit and currency exchange system is tottering very very close to the edge of a cliff we really do not want to go over.

Look: I'm as skeptical as anyone about government action in the markets. But there really is a potential here for massive world wide depression. Paulson was trying to STOP a cascading set of failures already under way in the finance system, not trigger one.

Posted by lotp 2008-10-01 07:09|| 2008-10-01 07:09|| Front Page Top

#3 I don't think anyone has a problem with saving the financial system, but they could pick one of the intelligent ideas that have been floated to them.

Posted by bigjim-ky 2008-10-01 07:27|| 2008-10-01 07:27|| Front Page Top

#4 Potential? I'd say certainty. We're only discussing whether or not we can cushion the blow.

And then I awaken this morning to the whiney voice of Robert Reich III complaining on NPR about the effect of this on...early wave boomers...like him. ME, ME, ME, for ever. An assh*le like that ought to be thanking the Lord for all his blessings and worrying about the poor of all ages who won't be able to pay for heat this winter and will resort to open flame heating that will burn their house down while they sleep. But instead, I guess he's worried about not being able to summer on the Riviera. It's exactly that attitude that has made this reckoning inevitable. Let it be swift.

Posted by Nimble Spemble 2008-10-01 07:31|| 2008-10-01 07:31|| Front Page Top

#5 Look. Let's get past the "cliff" metaphor and talk about what's really down there. Not "there be monsters"... what's really the downside of not doing anything? I'd like to know beyond "it's scary, trust me".

Posted by Grenter, Protector of the Geats 2008-10-01 09:34|| 2008-10-01 09:34|| Front Page Top

#6 It's far enough down that there are some clouds obscuring the view, but ....

If credit dries up that has a massive effect on the economy.    Small and mid-sized businesses depend on working capital to operate and expand, so a credit crunch means fewer jobs and more layoffs.    Families that are using credit to skate by a rough spot will spiral down and the rate of home foreclosures will increase exponentially - i.e. slowly at first and then massively over time. We might well be looking at 15-20% unemployment, 25% credit card rates (if you can get them), ARMs adjusting to 15-20% or more annual rates in a year or two ....

Overall the biggest danger is that there is a mid-term and long-term flight from the dollar.   We have been financing our wealthy lifestyles (and yes, I mean YOU are wealthy compared to the middle east, africa and major parts of Europe) through national borrowing and because of the wealth spinoffs of easy consumer and business credit. When Bush was thwarted at every turn by the Left wrt the GWOT, he bought them off with a variety of financial measures that he didn't like. He stopped pushing Social Security reform. He accepted Medicare part D as written. And he let the dollar drop (as it would have anyway) in order to force others to indirectly help fund the war(s).

It was inherently a balancing act.   I'm not going to argue here whether or not he could have done some of it differently. Certainly a huge portion of the mess we're in has its roots in Congress -- and in the divided, spoiled voter population that elects them.

But be that as it may, where we are now is that the whole rickety mess is in danger of crashing down onto the main day to day economy, here and around the world.  Overly leveraged derivatives would have had a market correction anyway. What makes this one so very dangerous is that it is hitting developed economies globally and that it will spread at the speed of 24 hr/day computerized trading.

Posted by lotp 2008-10-01 10:02|| 2008-10-01 10:02|| Front Page Top

#7 Good question Grenter.

lotp your answer helps but only slightly.

Can anyone tell me exactly who will benefit directly from this bailout and why that will help the rest of the economy.

Also, the same people that got us into this mess seem to be the same people that are going to benefit the most. WTF up with that?

What would happen if these banks that are in such trouble were just abandoned and their assets parcelled out to conservative, solid banks; then take some of that bailout money to fund mass infrastructure improvements for power plants, bridges, etc. to help the employment picture and get the money into the system?

Oh, yeah, kill the cap gains tax and cut business taxes.

Posted by AlanC 2008-10-01 10:16|| 2008-10-01 10:16|| Front Page Top

#8 Okay. So there's the hard bottom of it, apparently. What does the recovery from that point look like?

Posted by Grenter, Protector of the Geats 2008-10-01 10:52|| 2008-10-01 10:52|| Front Page Top

#9 Bachmann (R-MN) summarizes the situation this way: "We're told on the one hand that we're facing financial Armageddon, but we weren't given evidence to explain why ... and we weren't given information to show why this bailout was the only solution." Also, evidence showing this bailout would even work was lacking. Also, no alternative measures or points of view were ever considered.

Posted by Anguper Hupomosing9418 2008-10-01 11:08|| 2008-10-01 11:08|| Front Page Top

#10 It's far enough down that there are some clouds obscuring the view, but ....

If credit dries up that has a massive effect on the economy. Small and mid-sized businesses depend on working capital to operate and expand, so a credit crunch means fewer jobs and more layoffs. Families that are using credit to skate by a rough spot will spiral down and the rate of home foreclosures will increase exponentially - i.e. slowly at first and then massively over time. We might well be looking at 15-20% unemployment, 25% credit card rates (if you can get them), ARMs adjusting to 15-20% or more annual rates in a year or two ....

Overall the biggest danger is that there is a mid-term and long-term flight from the dollar. We have been financing our wealthy lifestyles (and yes, I mean YOU are wealthy compared to the middle east, africa and major parts of Europe) through national borrowing and because of the wealth spinoffs of easy consumer and business credit. When Bush was thwarted at every turn by the Left wrt the GWOT, he bought them off with a variety of financial measures that he didn't like. He stopped pushing Social Security reform. He accepted Medicare part D as written. And he let the dollar drop (as it would have anyway) in order to force others to indirectly help fund the war(s).

So he basically let himself be blackmailed into Robbing Peter to Pay Paul.

SO, the inevitable result... another cycle, and we get to be given the choice to Rob Peter to Pay Paul to hold everything together again.

And the end result of this will be another blackmail a couple months down the road... until we're instituting the European managed economy system ourselves, and the blackmailers are pushing something else for the cures of its ills, and blaming 'free market capitalism' for the problems with the previous iteration of the socialist system.

I find it interesting that one of the alleged precipitators of this crisis, "Mark to Market," was part of the Sarbannes-Oxley regulations. I know people whose primary response to S-O was that they wouldn't start a public company in this sort of regulatory environment.

I remember when it was being sold as the answer to all bad asset valuation problems and other assorted skullduggery.

I wonder what the proposed regulations will look like for Febuary's crisis, or the one it causes?

Posted by Tranquil Mechanical Yeti 2008-10-01 11:22|| 2008-10-01 11:22|| Front Page Top

#11 We need a way out that doesn't lead to just a next step in the blackmail/rob peter cycle. Down that road lies Stalin and Hitler, throwing away human lives like dogfood and saying they're the only ones that can stop Hitler and Stalin.

Posted by Tranquil Mechanical Yeti 2008-10-01 11:40|| 2008-10-01 11:40|| Front Page Top

#12 So he basically let himself be blackmailed into Robbing Peter to Pay Paul.

How many Rantburg regulars wanted Bush to pull out of Afghanistan, Iraq, our naval presence in the Gulf, our special ops people in Africa and South America where Hezb'allah and Al-Qaeda have training and recruiting camps ... on the basis of fiscal responsibility???

Can't say as I remember many.

Alternately, how many people here really think Bush had or could have generated sufficient public support for the GWOT to get the public to live frugally and to get financial traders and leaders to curb their greed?

And how many people here think any of us or all of us could have curbed the power and money greed of Pelosi, Reid etc etc and gotten them to act on behalf of the greater good of the country? Or Republicans like Ted Stevens, for that matter?

If you think you could, go run for office or otherwise take a visible leadership role. Because Bush and Rumsfeld etc. couldn't.

Posted by lotp 2008-10-01 11:43|| 2008-10-01 11:43|| Front Page Top

#13 Not me.

Posted by AutoBartender 2008-10-01 11:55|| 2008-10-01 11:55|| Front Page Top

#14 You're going to lose all those things anyway under President Obama. Oh, I'm sure he'll make a token effort, set up to fail, rather like the Bay of Pigs was.

Maybe I should have been against the war from the start, in both Iraq and Afghanistan, until the American Public started putting down the crack pipe that we could shovel money to Saudi Arabia and expect everything to turn out ok?

Posted by Tranquil Mechanical Yeti 2008-10-01 11:59|| 2008-10-01 11:59|| Front Page Top

#15 The modern political scene in the US is starting to feel like living with a relative with dementia.

Posted by Tranquil Mechanical Yeti 2008-10-01 12:00|| 2008-10-01 12:00|| Front Page Top

#16 lotp, what you say only serves to minimize Bush's culpability. That's fine.

But, it has long been said that Bush's biggest failure vis a vis the GWOT was his failure to ask / push on the American people the cost and what they needed to do to help.

Something like War Bonds for instance might have helped to fund this. Now, that would also have cut into consumer spending, etc. etc.

I don't think that there is necessarily a good answer but his approach of sucking up to the Dems certainly didn't help.

Posted by AlanC">AlanC 2008-10-01 12:56|| 2008-10-01 12:56|| Front Page Top

#17 Granted. But I've long said here that Bush couldn't do it alone. He needed a lot of public sentiment pushing Washington and he didn't get it from you and me in any way that counted.

Posted by lotp 2008-10-01 13:08|| 2008-10-01 13:08|| Front Page Top

#18 I think we could stand to have some serious credit tightening in this country. We've got way too many:
* People who buy more house than they should.
* College students taking out loans for dubious majors that would be cheaper at public colleges and in-state colleges anyway.
* People maxing out on multiple credit cards.
* People who are buying groceries on credit and then putting them into their gas-guzzling SUV with satellite radio, DVD player, and navigation system and driving off while chatting on their high-end mobile phones.

I could go on and on. The point is that we've got way too many people in this country who are living beyond their means. There's way too much "buy now, pay later".

The same is true for businesses and working capital. It's ridiculous how many businesses borrow money to cope with even day-to-day operations. Tighten the credit and those of them who deserve to survive will adapt accordingly. I carry some cash for day-to-day expenses and I save in advance for large purchases. They can too.

Screw the bail out. It's way too much, way too fast, way too vague, way too based on numbers pulled out of Paulson's rear end, way too rewarding to risk-takers and idiots, and way too socialistic. No way.

Posted by Darrell 2008-10-01 14:01|| 2008-10-01 14:01|| Front Page Top

#19 Tighten the credit and those of them who deserve to survive will adapt accordingly. I carry some cash for day-to-day expenses and I save in advance for large purchases. They can too

Sounds good in theory. But if your employer goes out of business because a larger firm slowed down payments for goods/services that were honorably delivered, you might find that your cash stash dwindles quickly.

Posted by lotp 2008-10-01 14:34|| 2008-10-01 14:34|| Front Page Top

#20 Then your employer was not very diversified in clients, didn't get a suitable payment plan, and was maybe a bit over-extended. Look, I've been there. I'm a consultant and I've been down to one client and eagerly awaiting the check. People will always take risks and some will fail, but it's high time for a lot of people to be a little more financially conservative.

Posted by Darrell 2008-10-01 14:58|| 2008-10-01 14:58|| Front Page Top

#21 Screw the bail out. It's way too much, way too fast, way too vague...

Is there a way to do it slower or in smaller pieces?

Posted by Grenter, Protector of the Geats 2008-10-01 15:06|| 2008-10-01 15:06|| Front Page Top

#22 Darrell, agreed re: financial conservatism. Mr. Lotp and I have lived beneath our income means for a good while and it has served us well during harder times.

However: the point here is that we are facing a potential correction so hard and so deep that many people may be harshly impacted, including the fiscally responsible.

Posted by lotp 2008-10-01 15:14|| 2008-10-01 15:14|| Front Page Top

#23 may?

Posted by Nimble Spemble 2008-10-01 15:17|| 2008-10-01 15:17|| Front Page Top

#24 The first thing we have to do is stop calling this a bailout. That word serious overstates what this bill actually is.

Posted by Mike N. 2008-10-01 15:32|| 2008-10-01 15:32|| Front Page Top

#25 Could someone please tell me exactly what this "bailout" will do?

Is the gov't going to cut a series of checks (electronicall not on paper) totalling $700b and start passing them out to the big players in the market? If not, what ARE they going to do?

Posted by AlanC">AlanC 2008-10-01 16:01|| 2008-10-01 16:01|| Front Page Top

#26 I feel for President Bush, as he had to fight this WoT and Homeland Security, still deal with the aftermath of 9-11, Katrina, Ike, and he inherited this greedy globalized mess that has been decades in the making. It's tempting to vote Obama just to let it all land in their liberal laps, along with a lot of the blame.
It is already affecting main street, btw. Our wholesale small business, locally supplying mostly new construction, uses credit to buy inventory. Many customers have been squeezed for sometime now, and aren't paying their bills, because the construction companies are filing bankruptcy, with excess homes selling below the cost to build them. The banks don't want to extend the line of credit any more than it is. Home equity loans aren't available, even with good credit ratings, so contractors like roofers are idle. You feel guilty for buying a new gas guzzler even when you can afford it, as others resent it. It wasn't that long ago that many had union jobs with union wages and benefits, but cheap immigrant labor and outsourcing broke the unions. Plumbers have to purchase products at a good price and try to make it up in labor costs. People lost health insurance and began using adjustable ARM's and credit cards to make ends meet. The high cost of transportation made the cost of everything go up so Walmart was welcomed. The trade deficit grew even larger and the small shops closed because you can't compete with those that buy in such unimaginable quantities, often container ship loads full, as these large companies. Add a local disaster like the floods or a personal setback such as cancer, and people just despair. Then they wake up and see their life savings plummet 30% in one day. Retirement becomes out of the question, yet they have elderly parents to care for and children to put through college. Family and friends are asking for personal loans and even hand outs. All of this is no fault of their own and it is human nature to scapegoat and blame. I know many people working multiple jobs and are skimping to get by,and rightfully angry, but maybe it is the area where you live or the circles you keep. Wall Street and the Beltway often seem oblivious to anything west of the Potomac. "Woe to those who make unjust laws" wail the prophets. I certainly wouldn't want to be a Congresscritter or a banker or a stock broker that gambled away someone's pension while paying themselves millions in bonuses. Their yachts can even be renegotiated if filing bankruptcy but a primary mortgage cannot. I'm afraid it will get ugly and violent but I also fear the solution Congress comes up with will be even worse--kinda like having to choose between the cobra and an asp. It just sucks. Worry-wart Mom has been put on fulltime prayer duty--the saint is about to personally strangle Pelosi herself!

Posted by Danielle 2008-10-01 16:08|| 2008-10-01 16:08|| Front Page Top

#27 "Our wholesale small business, locally supplying mostly new construction"
I'm afraid that's a tough row to hoe even with a bailout. You've chosen a business that has always been highly cyclic, and this is a pretty deep cycle.

Posted by Darrell 2008-10-01 16:16|| 2008-10-01 16:16|| Front Page Top

#28 Re #21: "Is there a way to do it slower or in smaller pieces?"
I'd prefer we stuck with the Wachovia model of a few days ago. Wachovia bought a boatload of trouble by acquiring Golden West in 2006. The feds assisted in a Citibank buy of Wachovia. Minimal cost to taxpayers and Wachovia gets what it deserves for making a spectacularly stupid mistake. Let natural selection improve the market.

Posted by Darrell 2008-10-01 16:22|| 2008-10-01 16:22|| Front Page Top

#29 @25 - From what I've been able to gather, Big Poppa Gov is going to come buy ALL the craptastic securities that no one else wants... at least right now.

Their theory is that someday someone will want them again and The Gov't will sell them out. (I'm not holding my breath for that scenario.)

Posted by Grenter, Protector of the Geats 2008-10-01 17:22|| 2008-10-01 17:22|| Front Page Top

#30 LOTP re Bush asking for us to sacrifice...after 9/11 there was the fear that the economy would go into the toilet. Instead of expressing confidence in the core underpinnings of the economy and instead of preparing the country for a prolonged and expensive war, Bush told us to go shopping. It was an opportunity missed.

He should have slammed the brakes on non-defense spending, called for an increase in the size of the military and pushed for the sale of war bonds. He had the American public and the Congress in the palm of his hands and he wasted it. It was, IMO, the greatest failure of his presidency.

Posted by remoteman 2008-10-01 18:57|| 2008-10-01 18:57|| Front Page Top

#31 That said, I am going to batten down the hatches because I think this is going to get really ugly and will last for a while.

The only potential silver lining I can see in this is that hopefully it teaches the general population that you have to be able to pay for what you buy and that we don't get to have everything we want. Not sure that the government types are ever going to get that message though.

Posted by remoteman 2008-10-01 19:00|| 2008-10-01 19:00|| Front Page Top

#32 "A government which robs Peter to pay Paul can always depend on the support of Paul."

George Bernard Shaw

Posted by Besoeker 2008-10-01 19:10|| 2008-10-01 19:10|| Front Page Top

#33 "A government which robs Peter to pay Paul can always depend on the support of Paul."

Yah, but then you have to do business with a sore Peter.

Posted by Tranquil Mechanical Yeti 2008-10-01 19:48|| 2008-10-01 19:48|| Front Page Top

#34 Go to your room, Tranquil.

Posted by Barbara Skolaut">Barbara Skolaut 2008-10-01 19:56|| http://ariellestjohndesigns.com/]">[http://ariellestjohndesigns.com/] 2008-10-01 19:56|| Front Page Top

#35 Yes, wWe don't condome this sort of behavior.

Posted by Darrell 2008-10-01 20:00|| 2008-10-01 20:00|| Front Page Top

#36 Look, lets be honest. We stopped being an economic superpower years ago when we exported most of our manufacturing jobs to less expensive wage sie like China, India and Mexico. We have been living on the colective national credit card for years. Literally, we don't reward saving or prudence in any concrete way, and the sad reality now is that those of us who have behaved responsibily are essentially being forced to subsidize more drunken-sailor behavior or rest losing everything.
There are so many guilty parties I cannot begin to name them all, but the fix is generational and will require national will. Spend less than you take in, encourage businesses through tax breaks and protectionist tariffs (free trade is a myth, we have had our heads handed to us becasue we actually believed the other people would be honest and play fair, time to cut them out and take the pain). A whole generation or two must essentially accept less quality of life and carry the burden of paying down the debt.

Since we have so diluted the American character with unfettered immigration of the least worthy from other nations, dumbed down our education system to the point that it does not produce sufficient qualtity of high quality, industrious workers, and so designed governments intrusion into every aspect of our daily lives that half of us carry the other half through a class-warfare tax system...... we can't do it!

So, and bullshit bandades politician lies will lull the fools back into the cauldron for more cooking, but the Republic is done.

Look for violence within 25 yrs as parts begin to separate (probably the Southwest) and balk at paying the freight.....

Wish this was all wrong...... but the 450 page bailout did it for me..... buying votes while the ship sinks by promising to only take the water out of one side of the bucket....

God, to have had this happen in my lifetime......overwhelming sadness.

Posted by NoMoreBS">NoMoreBS 2008-10-01 21:01|| 2008-10-01 21:01|| Front Page Top

#37 Their overwhelming arrogance and greed, our overwhelming sadness and regret.

The democracy will cease to exist when you take away from those who are willing to work and give to those who would not. -- Thomas Jefferson

Posted by Besoeker 2008-10-01 21:20|| 2008-10-01 21:20|| Front Page Top

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