Oh No! I have to reverse all of my glowing recommendations for Governor Paterson. I really thought that he was going to get things done and he has failed all of us New Yorkers. NY's 2009-2010 budget at $132,000,000,000 is $11,000,000,000 more than the current budget. How could this be possible in the face of the economic calamity that has befallen our state? How could Paterson abandon all of his impassioned pleas for fiscal discipline? What happened to making the hard choices now to ensure the future fiscal viability of the state?
Until last year, I did not know that Wall Street revenues contributed approximately $20,000,000,000 or 1/5th of the state budget. It is definitely certain that this level of contribution will not be attained again for quite some time. The new budget proposal includes approximately $6,000,000,000 in federal aid and another $7,000,000,000 in new fees and taxes. I am simply shocked that no provisions have been made to account for the upcoming shortfalls that are all but certain in the coming years. When our West Coast cousin, California, is on the verge of collapse and the Federal Government borrowing heavily to prop up the entire financial system, any rational human would expect some serious budget cuts. We cannot depend on the Federal Government to continue to provide aid at current levels.
Besides, with an approval rating of 26%, what did Paterson hope to gain by risking the ire of the wealthiest New Yorkers? Now don't get me wrong, those earning over $300,000 probably can afford to pay a few more taxes but when the budget does not contain any real effort to cut expenses, it does not seem fair. Fairness is always key in the tax equation. But then again, the wealthy folk and the rest of us don't count, do we? It seems that public employees and unions are the key to an election in New York State and without those unions, your star is all but faded.
Paterson's star has been faded for so long, how about going down a hero? It does not seem that there can be enough pandering for him to reverse his political fortune and be elected governor for an official term. Now, I don't think like most people but I would wager that a good budget would have been applauded by the rank and file; we would weather the cuts because we have to. Instead we will have to pay more to register our cars, renew our licenses, pay more for health insurance and property taxes, pay more for transportation and everything else.
My goodness, how much do the regular people of New York have to suffer and why do we have to pay so much while doing so? Will New York continue to be worth the hype? I guess it will so long as you have money, work for a union, or are simply flat out poor, you can stay. As long as the budget process remains broken, the legislature remains mired in political shenanigans and the power brokers reek what they sow, the rest of us in the middle class and the young people who don't see a viable economic future may truly have to leave; that does not bode well for the future viability of the state. And Long Island, Fuhgetaboutit!
Tuesday, March 31, 2009
Monday, March 30, 2009
Outrage
Last week I had a medical procedure done that required such detailed preparation and fasting that it drained the very life out of me and I couldn't write on Thursday. I came out of my stupor on Saturday, since I had to be sedated for the tests, to hear on Sunday that President Obama had finally done it; he was sticking it to the auto companies.
In finally taking bold action against the auto companies to come up with a sustainable plan for survival; the new administration has unleashed an avalanche of collateral criticism. This called for the ouster of Rick Wagoner at GM and a 60 day deadline for the company's major overhaul; it is rumored that President Obama prefers a structured bankruptcy for GM. Chrysler was given the directive to make a plan for a joint venture with Fiat in 30 days or else; the White House believes that Chrysler is essentially finished. I am not sure why Fiat is the chosen suitor. Even the market was spooked by this logic and fear in equities ensued again.
Nevertheless, it is finally nice to see the auto companies forced to face facts and deal with their fate. Business-as-Usual is truly over for them. They will not receive any more billions unless they comply. Unfortunately, the fallout from this decision-making process seems to underscore Obama's apparent elitism. Why force the auto companies to the comply with such draconian measures when the same was not required of the financial firms?
The auto companies received a mere fraction of what the financial firms have received to date. $30,000,000,000 for auto companies, nearly $1,000,000,000,000 for the financials. It doesn't even seem fair. It was likened to the President seemingly more "in bed" with "those who shower before they go to work," the white collar folk rather than "those who shower when they come home from work," the blue collar folk. Well, the whole stimulus situation is fraught with outrage. All the money and how it is delegated will continue to lead to outrage and I am sure there is more to come.
In finally taking bold action against the auto companies to come up with a sustainable plan for survival; the new administration has unleashed an avalanche of collateral criticism. This called for the ouster of Rick Wagoner at GM and a 60 day deadline for the company's major overhaul; it is rumored that President Obama prefers a structured bankruptcy for GM. Chrysler was given the directive to make a plan for a joint venture with Fiat in 30 days or else; the White House believes that Chrysler is essentially finished. I am not sure why Fiat is the chosen suitor. Even the market was spooked by this logic and fear in equities ensued again.
Nevertheless, it is finally nice to see the auto companies forced to face facts and deal with their fate. Business-as-Usual is truly over for them. They will not receive any more billions unless they comply. Unfortunately, the fallout from this decision-making process seems to underscore Obama's apparent elitism. Why force the auto companies to the comply with such draconian measures when the same was not required of the financial firms?
The auto companies received a mere fraction of what the financial firms have received to date. $30,000,000,000 for auto companies, nearly $1,000,000,000,000 for the financials. It doesn't even seem fair. It was likened to the President seemingly more "in bed" with "those who shower before they go to work," the white collar folk rather than "those who shower when they come home from work," the blue collar folk. Well, the whole stimulus situation is fraught with outrage. All the money and how it is delegated will continue to lead to outrage and I am sure there is more to come.
Wednesday, March 25, 2009
Local Unions Still Resistant to Concessions Despite Bad Economy
On a local level, Governor Paterson recently proposed the layoffs of nearly 9000 state workers if the union does not make any attempt to help him find $500,000,000 in cost savings; the MTA voted today to raise fares approximately 23%, raise bridge tolls, cut services and layoff workers unless the state votes to help bail them out and Suffolk County Executive Steve Levy has sent out 2,200 notices to some county workers putting them on notice for the potential layoff of 386 persons if the unions do not agree to some concessions.
As the State and local governments struggle to bring their budgets in order and minimize their looming deficits, the biggest area of contention are with the unions. Note here that I am speaking only about unions that represent employees who work in any public service sector supported by taxpayer dollars; the United Auto Workers, the teamsters and the like who work for large private corporations fall into a different category for purposes of this discussion. Anyhow, we must admit that the generous union contracts entered into during the previous boom years are crippling state and locals governments alike in their ability to trim their budgets as they stare down the failing economy.
Now it may not seem from any of my previous posts that I have any support for unions but I do believe that unions have a noble purpose in providing employment security for many citizens. Certainly this purpose was critical during much of the 20th century to balance out huge employee/employer discrepancies and abuses. Yes, we needed unions to reset the playing field and that did take place. Now, unions are reaping generous benefits above and beyond what employees of private enterprise could ever hope to attain. In addition, these private employees most shoulder the higher tax burden required to pay for all of those union perks.
I believe that a shift in the balance between the benefits of public and private employment requires an re-evaluation of union benefits. So, at the very least, unions should be reasonable when it comes to economic crisis. For the majority of New Yorkers who are not in a union, the axe could come at any time. While they work fearful for their livelihood, union members have the advantage of negotiation before the axe falls. Yet, union members are acting like the Wall Street folk, defending their entitlement to their generous contracts.
Recently, union members protested County Executive Levy's proposal to cut some county jobs as they have the right. But, listening to some of their defense made it hard to sympathize. Many lamented with indignation how it was unfair for them to work within an environment where their jobs were threatened. Hello! Times have changed. If we continue to pay you, our whole government welfare is on the line. When the analogy is used by Obama and Bernanke alike that when your neighbors house is burning - in an upside down mortgage or potential foreclosure - we have to save them with a housing bailout to save the neighborhood. How about public service union employees realizing that if they don't sacrifice a little now, the future could be bad for all of us?
The Suffolk County employees are being asked to accept a lag payroll, meaning that they will sacrifice 10 days of pay now to be paid at a higher rate when they retire. They are still going to get the money, just not now. One Suffolk employee even suggested raising taxes as being better than laying of people. Huh! For God's sake, none of the concessions sound so bad if you still get to keep your job. And, what about the ones who do end up being laid off? They will still get their pensions. The rest of us have to rely on our own 401k/IRA savings, which averaged just $15,000 per employee by 2008 estimates though I'm sure they are worth considerably less now with the market so topsy-turvy. This is pitiful compared to the value of a union pension.
While private employees have to save for their own retirements, public employees earn retirement credits for each year that they work. It is hard to feel bad for them right now when a large portion of their health insurance is being paid and they receive generous holiday and vacation days. They had a good run but if we all have to pay the piper, then they should too. How can they still remain reluctant to do so?
As the State and local governments struggle to bring their budgets in order and minimize their looming deficits, the biggest area of contention are with the unions. Note here that I am speaking only about unions that represent employees who work in any public service sector supported by taxpayer dollars; the United Auto Workers, the teamsters and the like who work for large private corporations fall into a different category for purposes of this discussion. Anyhow, we must admit that the generous union contracts entered into during the previous boom years are crippling state and locals governments alike in their ability to trim their budgets as they stare down the failing economy.
Now it may not seem from any of my previous posts that I have any support for unions but I do believe that unions have a noble purpose in providing employment security for many citizens. Certainly this purpose was critical during much of the 20th century to balance out huge employee/employer discrepancies and abuses. Yes, we needed unions to reset the playing field and that did take place. Now, unions are reaping generous benefits above and beyond what employees of private enterprise could ever hope to attain. In addition, these private employees most shoulder the higher tax burden required to pay for all of those union perks.
I believe that a shift in the balance between the benefits of public and private employment requires an re-evaluation of union benefits. So, at the very least, unions should be reasonable when it comes to economic crisis. For the majority of New Yorkers who are not in a union, the axe could come at any time. While they work fearful for their livelihood, union members have the advantage of negotiation before the axe falls. Yet, union members are acting like the Wall Street folk, defending their entitlement to their generous contracts.
Recently, union members protested County Executive Levy's proposal to cut some county jobs as they have the right. But, listening to some of their defense made it hard to sympathize. Many lamented with indignation how it was unfair for them to work within an environment where their jobs were threatened. Hello! Times have changed. If we continue to pay you, our whole government welfare is on the line. When the analogy is used by Obama and Bernanke alike that when your neighbors house is burning - in an upside down mortgage or potential foreclosure - we have to save them with a housing bailout to save the neighborhood. How about public service union employees realizing that if they don't sacrifice a little now, the future could be bad for all of us?
The Suffolk County employees are being asked to accept a lag payroll, meaning that they will sacrifice 10 days of pay now to be paid at a higher rate when they retire. They are still going to get the money, just not now. One Suffolk employee even suggested raising taxes as being better than laying of people. Huh! For God's sake, none of the concessions sound so bad if you still get to keep your job. And, what about the ones who do end up being laid off? They will still get their pensions. The rest of us have to rely on our own 401k/IRA savings, which averaged just $15,000 per employee by 2008 estimates though I'm sure they are worth considerably less now with the market so topsy-turvy. This is pitiful compared to the value of a union pension.
While private employees have to save for their own retirements, public employees earn retirement credits for each year that they work. It is hard to feel bad for them right now when a large portion of their health insurance is being paid and they receive generous holiday and vacation days. They had a good run but if we all have to pay the piper, then they should too. How can they still remain reluctant to do so?
Tuesday, March 24, 2009
De-Pressed Conference
President Obama staged his second prime-time press conference this evening. The purpose of which was to provide insight into the new $3,600,000,000,000 budget and to assure the American people that while the price is high, the intentions are noble. The two-pronged approach is geared to stabilize the economy and plant the foundation for future growth, by investing in renewable energy, infrastructure and education.
With respect to education, the President referred to America's falling behind stating "countries like China and India will be running laps around our young people" which is true as far as my anecdotal evidence points. The fact that Americans do not realize that the playing field is globally level now and that our self-indulged young people will face serious competition in the future job market seems to be lost on them. Emphasis was also made that finding savings in the healthcare and defense sectors and repealing tax cuts back to Reagan-era levels for the top 1% of wage earners will help to offset new spending in other areas.
Most of this we have all heard in the last few weeks but it is always nice to see the President answer questions from the press; this is where his intelligence and thoughtfulness shine. He does know what he is talking about and perhaps this is the only consolation. What he proposes is costly and scary but as he points out and as I pointed out yesterday, there are lots of critics but no alternate solutions.
It was a sobering press conference as usual, times are tough, the solutions are difficult to comprehend and there is still a chance that it all might not work out the way we planned but something has to be done. Perhaps our expectations are too high? At the end of the day, Americans do need to believe that the fundamentals of the American economy are strong and that we will return to economic prominence and world dominance once we lick this crisis. I hope so but we have a long way to go, probably longer than we dare admit.
It is nice to see the President acknowledge that the gains of the last decade were artificially fueled so on the one hand he does get it but on the other hand his belief and optimism in America's future requires an audacity of hope that a culture mired in greed and deceit may not have the patience to muster.
With respect to education, the President referred to America's falling behind stating "countries like China and India will be running laps around our young people" which is true as far as my anecdotal evidence points. The fact that Americans do not realize that the playing field is globally level now and that our self-indulged young people will face serious competition in the future job market seems to be lost on them. Emphasis was also made that finding savings in the healthcare and defense sectors and repealing tax cuts back to Reagan-era levels for the top 1% of wage earners will help to offset new spending in other areas.
Most of this we have all heard in the last few weeks but it is always nice to see the President answer questions from the press; this is where his intelligence and thoughtfulness shine. He does know what he is talking about and perhaps this is the only consolation. What he proposes is costly and scary but as he points out and as I pointed out yesterday, there are lots of critics but no alternate solutions.
It was a sobering press conference as usual, times are tough, the solutions are difficult to comprehend and there is still a chance that it all might not work out the way we planned but something has to be done. Perhaps our expectations are too high? At the end of the day, Americans do need to believe that the fundamentals of the American economy are strong and that we will return to economic prominence and world dominance once we lick this crisis. I hope so but we have a long way to go, probably longer than we dare admit.
It is nice to see the President acknowledge that the gains of the last decade were artificially fueled so on the one hand he does get it but on the other hand his belief and optimism in America's future requires an audacity of hope that a culture mired in greed and deceit may not have the patience to muster.
Monday, March 23, 2009
Irrational Exuberance Again?
Darn It! I missed another rally, again! The Dow went up nearly 500 points today on the hope that Treasury Secretary Geithner's re-hash of ex-Treasury Secretary Hank Paulson's original Toxic Asset Recovery Plan will work. Essentially, private investors will be given financial aid to buy up those toxic assets from the banks. If investors buy in then the market will continue its upward trend, it seems, having gone up 1300+ points in the last 2 weeks. On the other hand, this sudden run-up reeks of irrational exuberance. Joy that the government will take on a seemingly bottomless trove of mind-numbing debt is well, mind-numbing.
Nevertheless, the market's recent performance does give credence to the notion that the market is hovering around bottom. Man, it would be nice to ride its return to glory. Alas, us "poor middle class folk" will largely miss out on this and the next run-up due to shortage of funds. Having the ability to invest now in this down market would definitely help to minimize the losses in our existing retirement accounts. It will take many years for those accounts just to return to their 2007 values, the last time many us felt "rich." So the only way to actually get ahead in the future is to have some "new" money in the market while it returns our existing investments and retirement accounts back to their "old" value. It is really annoying to have the old axiom play out again, "needing money to make money".
Unfortunately, this time around is much more bile-inducing than it was previously since the solution to fix the economic crisis is essentially an elaborate "trickle down" solution. By saving the financial institutions and their stewards, read rich Wall Streeters, the economy will be stabilized and the rest of us should just be thrilled that we get to keep our job or that a new one will be created for us or that we get to keep our homes. Some consolation prize. I'd prefer the Bernie Madoff's family consolation prize; he goes to jail but the rest of them get to live richly for the remainder of their lives off of those ill-gotten gains. It ain't fair, I tell ya. Life is not fair but it would be nice to be in the "protected class."
Today's rally signified another financial bounce of air, but it is the type of air that we still wish will put enough confidence in the markets to change the status quo. We need businesses to have confidence to reduce further layoffs and for investors to put their money back into the markets and for money to start flowing again. I sound like I have drunk the koolaid. Am I not just repeating the party line? It is annoying. I search daily for new ideas but there is only lots of criticism about current plans; there are no different solutions posited, only arguments about the details of what we already have before us. While we all want out of the pain and the doom and gloom and want it to be over ASAP, can the excess of the last few decades really be turned around within such a short time? Are we asking too much? By eschewing the principles of Capitalism by not allowing the system to fix itself, can Capitalism regain its footing after all of this stimulus?
Taking the easy way out may very well be to our detriment. I hate having to think like this but they always say, "no pain, no gain." So, by trying to head off all of that pain caused by greed and excess, are we not really fouling the system some more. It is paradoxical that we have to use the very same financial tactics that got us into this mess to get us out of this mess. I am very sorry about that since more of the same did not work out so well for Iraq, for instance which, incidentally just celebrated 6 years of combat and we didn't even have a moment of silence in remembrance. All we had was just silence. The Iraq war is far from over and a "surge" in troops in Afghanistan is all but certain but now war has become the least of our problems. Go figure.
Nevertheless, the market's recent performance does give credence to the notion that the market is hovering around bottom. Man, it would be nice to ride its return to glory. Alas, us "poor middle class folk" will largely miss out on this and the next run-up due to shortage of funds. Having the ability to invest now in this down market would definitely help to minimize the losses in our existing retirement accounts. It will take many years for those accounts just to return to their 2007 values, the last time many us felt "rich." So the only way to actually get ahead in the future is to have some "new" money in the market while it returns our existing investments and retirement accounts back to their "old" value. It is really annoying to have the old axiom play out again, "needing money to make money".
Unfortunately, this time around is much more bile-inducing than it was previously since the solution to fix the economic crisis is essentially an elaborate "trickle down" solution. By saving the financial institutions and their stewards, read rich Wall Streeters, the economy will be stabilized and the rest of us should just be thrilled that we get to keep our job or that a new one will be created for us or that we get to keep our homes. Some consolation prize. I'd prefer the Bernie Madoff's family consolation prize; he goes to jail but the rest of them get to live richly for the remainder of their lives off of those ill-gotten gains. It ain't fair, I tell ya. Life is not fair but it would be nice to be in the "protected class."
Today's rally signified another financial bounce of air, but it is the type of air that we still wish will put enough confidence in the markets to change the status quo. We need businesses to have confidence to reduce further layoffs and for investors to put their money back into the markets and for money to start flowing again. I sound like I have drunk the koolaid. Am I not just repeating the party line? It is annoying. I search daily for new ideas but there is only lots of criticism about current plans; there are no different solutions posited, only arguments about the details of what we already have before us. While we all want out of the pain and the doom and gloom and want it to be over ASAP, can the excess of the last few decades really be turned around within such a short time? Are we asking too much? By eschewing the principles of Capitalism by not allowing the system to fix itself, can Capitalism regain its footing after all of this stimulus?
Taking the easy way out may very well be to our detriment. I hate having to think like this but they always say, "no pain, no gain." So, by trying to head off all of that pain caused by greed and excess, are we not really fouling the system some more. It is paradoxical that we have to use the very same financial tactics that got us into this mess to get us out of this mess. I am very sorry about that since more of the same did not work out so well for Iraq, for instance which, incidentally just celebrated 6 years of combat and we didn't even have a moment of silence in remembrance. All we had was just silence. The Iraq war is far from over and a "surge" in troops in Afghanistan is all but certain but now war has become the least of our problems. Go figure.
Thursday, March 19, 2009
Can We All Just Get a Tax Break?
I'm getting that middle class angst again and it is creeping up on my husband too. The feeling of never getting a break in this world, especially when it comes to taxation. Our tax returns are due a month from now and I am dreading the process as usual. There, I have admitted that I haven't started. At least I can stop wishing I worked for AIG since the House passed a bill to tax their tainted bonuses at a rate of 90% though 10% of $1,000,000 is still $100,000 which is pretty much all I need to set my world straight. I am at least willing to work for the money if someone would give me a job. It can be part-time, temporary, contract or whatever; I'd be happy for some work.
But, in the meantime, I will stew about the fact that I am not making any money and remain ineligible for unemployment. Alas my tax dollars are going to work to bailout the Wall Street rich and the Main Street poor, anyone who was fiscally irresponsible or simply cannot afford their share. I, on the other hand, am left to do the "right" thing; reduce my expenses. I am thankful that I was lucky enough not to have a privileged life so I can survive no matter how lean the times. Too bad, the state, the municipalities and the school districts have few plans to reduce their expenditures in any significant manner that would reduce my taxes.
The fact that the tax rolls and government spending have grown exponentially over the last decade remains off the table. State and municipal governments are attempting to hold the budget line at the current levels (and for this we are supposed to be grateful.) Long Islanders/New Yorkers have been screaming for years about the high tax rates so holding budgets at current levels is holding them at levels that are already too high.
School budgets are coming up on the block again but districts will make few changes this year because of the stimulus funds that the state received. What about next year? I just feel like they are delaying the inevitable. Before the stimulus funds arrived, the pressure was rising on lawmakers to make some serious cuts and the special interest groups were out in force, placing ads and commercials to gain public sympathy and protect their interests from cuts. Now that stimulus funds are arriving, the urgency has dissipated, unfortunately.
Local Governments and School Districts should start getting real right now before the crisis of next year. There won't be any extra funds next year. I am pretty sure. If the value of our assets and the state of the financial world is re-setting to the beginning of the decade so should all budgets adjust accordingly. It just makes sense.
But, in the meantime, I will stew about the fact that I am not making any money and remain ineligible for unemployment. Alas my tax dollars are going to work to bailout the Wall Street rich and the Main Street poor, anyone who was fiscally irresponsible or simply cannot afford their share. I, on the other hand, am left to do the "right" thing; reduce my expenses. I am thankful that I was lucky enough not to have a privileged life so I can survive no matter how lean the times. Too bad, the state, the municipalities and the school districts have few plans to reduce their expenditures in any significant manner that would reduce my taxes.
The fact that the tax rolls and government spending have grown exponentially over the last decade remains off the table. State and municipal governments are attempting to hold the budget line at the current levels (and for this we are supposed to be grateful.) Long Islanders/New Yorkers have been screaming for years about the high tax rates so holding budgets at current levels is holding them at levels that are already too high.
School budgets are coming up on the block again but districts will make few changes this year because of the stimulus funds that the state received. What about next year? I just feel like they are delaying the inevitable. Before the stimulus funds arrived, the pressure was rising on lawmakers to make some serious cuts and the special interest groups were out in force, placing ads and commercials to gain public sympathy and protect their interests from cuts. Now that stimulus funds are arriving, the urgency has dissipated, unfortunately.
Local Governments and School Districts should start getting real right now before the crisis of next year. There won't be any extra funds next year. I am pretty sure. If the value of our assets and the state of the financial world is re-setting to the beginning of the decade so should all budgets adjust accordingly. It just makes sense.
Wednesday, March 18, 2009
The Bite is Worse than the Bark
I don't follow celebrities much but I was sad to hear that Natasha Richardson had died from what had appeared to be a minor head injury. I am a bit clumsy and I fall or bump into things all the time. If I had fallen as she did, I would have gotten up, dusted myself off and said I was OK too. You do this, especially when you are tough and strong-willed. We praise that. Alas, this is not the right decision all of the time.
Yet this is supposed to be the rallying cry for America 2009, the President said it in his inaugural address, "we must pick ourselves up, dust ourselves off and begin again the work of remaking America." Of course, along with the chorus are the solos and the bridge - threatening to burden the song with too much histrionics, like the AIG outrage, the fear of releasing all those "terrorists" being held at Guantanamo Bay who were truly tortured as was confirmed today though we knew this all along but were afraid to challenge Bush and his deputy, Gonzales, and the Federal Reserve buying Treasury Bonds.
What, say you? How does the Central Bank of the United States purchase bonds issued by the Treasury of the United States? We are cannibalizing our own money supply. Where does the Federal Reserve "get" all of this money? They just decide to print more money? And what is all of this money tied to? Not much, it seems other than the value of the dollar in relation to all the other world currencies. The dollar went down today since we "watered down" our money supply. Isn't that what the Fed has been doing this whole time, when it reaches deep down into the printing press for those bailout funds it has been doling out left, right and center? Now we buy our own bonds with wet, freshly printed, money and this is supposed to help us, right? Where is China when you need them to buy our debt? Oh yeah, they are now big enough to kick our A's.
Today China said no to Coca-Cola in its bid to buy a large Chinese soft beverage maker. Serves us right, what goes around, comes around. Americans would have been screaminng if the Sears Tower was to become Wangchi Tower; Willis Tower? We hardly raised an eyebrow.
Yet this is supposed to be the rallying cry for America 2009, the President said it in his inaugural address, "we must pick ourselves up, dust ourselves off and begin again the work of remaking America." Of course, along with the chorus are the solos and the bridge - threatening to burden the song with too much histrionics, like the AIG outrage, the fear of releasing all those "terrorists" being held at Guantanamo Bay who were truly tortured as was confirmed today though we knew this all along but were afraid to challenge Bush and his deputy, Gonzales, and the Federal Reserve buying Treasury Bonds.
What, say you? How does the Central Bank of the United States purchase bonds issued by the Treasury of the United States? We are cannibalizing our own money supply. Where does the Federal Reserve "get" all of this money? They just decide to print more money? And what is all of this money tied to? Not much, it seems other than the value of the dollar in relation to all the other world currencies. The dollar went down today since we "watered down" our money supply. Isn't that what the Fed has been doing this whole time, when it reaches deep down into the printing press for those bailout funds it has been doling out left, right and center? Now we buy our own bonds with wet, freshly printed, money and this is supposed to help us, right? Where is China when you need them to buy our debt? Oh yeah, they are now big enough to kick our A's.
Today China said no to Coca-Cola in its bid to buy a large Chinese soft beverage maker. Serves us right, what goes around, comes around. Americans would have been screaminng if the Sears Tower was to become Wangchi Tower; Willis Tower? We hardly raised an eyebrow.
Tuesday, March 17, 2009
Greed
Well if you want to see greed in action, it is out on the street for everyone to witness. AIG has come to embody the greed in its most naked form, pure and unadulterated. They symbolize all that is wrong with the bailouts as they continue to lavish bonuses and perks upon themselves after taking taxpayer dollars.
The conspiracy theorists must be having a field day. Hank Paulson effectively took our tax dollars and funneled them to his buddies on Wall Street with little or no oversight. They made us look like fools; we handed them trillions to help them remain solvent but instead they kept their same behavior and rewarded themselves, so locked in their greed, that they have exercised no conscience.
Can we trust anyone to do the right thing with our money? Now What?
The conspiracy theorists must be having a field day. Hank Paulson effectively took our tax dollars and funneled them to his buddies on Wall Street with little or no oversight. They made us look like fools; we handed them trillions to help them remain solvent but instead they kept their same behavior and rewarded themselves, so locked in their greed, that they have exercised no conscience.
Can we trust anyone to do the right thing with our money? Now What?
Monday, March 16, 2009
Bernanke's Rosy Colored Yawn
Fed Chairman, Ben Bernanke, appeared on 60 Minutes yesterday and assured the nation that the Recession should be over at the end of this year. Might his glasses be rose-colored? It appears that his confidence didn't quell the every-man and like Geithner before him, his intelligence and manner, landed like a thud. Of course I wouldn't be myself if I didn't mention the string of spit that stubbornly remained prominent in the closeups. Didn't the CBS cameraman notice this? Bernanke had dry lips and spittle, he needed to lick his lips and then follow-up with some lip balm. I probably should not have watched his mouth so intently but I literally was hanging onto every word he said. I wanted to fully understand the mechanisms of the Fed and its Bailout Programs. Alas, I wound up with more questions than answers.
For instance, the segment stated that the Fed loaned AIG that first $85,000,000,000. I thought that came out of the TARP funds authorized by Congress. So when we say that AIG has already received $160,000,000,000 in bailout funds, does this include the billions that came directly from the Fed? The Federal Reserve is not spending taxpayer $$ so how much is the taxpayer truly on the hook for with respect to AIG? Also, the segment did not make it clear that the Federal Reserve is a semi-private bank, it did not explain how the Federal Reserve raises the capital that it lends, and didn't explain how its authority to print money is regulated and lastly it did not fully eplain whether the Treasury has a say in all of this.
As far as I understood, the Treasury and the Federal Reserve had their own bailout programs separate and distinct from the TARP funds. Why would I expect 60 Minutes to clear that up for me? As it is not common practice for the sitting Fed Chairman to grant interviews, it was a noble act. Unfortunately, we are still going to continue to crash and burn as far as employment, housing unrest and financial stability are concerned. Some time in the next year, the death spiral is supposed to slow and then we will be on to the next task at hand, the hard road of recovery.
For instance, the segment stated that the Fed loaned AIG that first $85,000,000,000. I thought that came out of the TARP funds authorized by Congress. So when we say that AIG has already received $160,000,000,000 in bailout funds, does this include the billions that came directly from the Fed? The Federal Reserve is not spending taxpayer $$ so how much is the taxpayer truly on the hook for with respect to AIG? Also, the segment did not make it clear that the Federal Reserve is a semi-private bank, it did not explain how the Federal Reserve raises the capital that it lends, and didn't explain how its authority to print money is regulated and lastly it did not fully eplain whether the Treasury has a say in all of this.
As far as I understood, the Treasury and the Federal Reserve had their own bailout programs separate and distinct from the TARP funds. Why would I expect 60 Minutes to clear that up for me? As it is not common practice for the sitting Fed Chairman to grant interviews, it was a noble act. Unfortunately, we are still going to continue to crash and burn as far as employment, housing unrest and financial stability are concerned. Some time in the next year, the death spiral is supposed to slow and then we will be on to the next task at hand, the hard road of recovery.
Thursday, March 12, 2009
Perspective
Bernard Madoff, at 70, is off to jail for the rest of his life after pulling off a $65,000,000,000 ponzi scheme within the asset management arm of his private investment firm. Many individuals lost their life savings, thousands of predominantly Jewish charitable organizations and institutions have lost their endowments and investments, many have had to shut down. Bernie made off with their dough and now, shortly after pleading guilty today for 11 counts worth up to 150 years of jail-time, Madoff was sent directly to jail and his wife went home to the family penthouse. Bernie is going to jail on the taxpayers dime and his family gets to continue to live richly on the money that he stole. Yet another free ride for Bernie.
No matter how many civil suits are filed, the family will still get to live the life to which they have become accustomed. And I suppose from his standpoint, this is the best way for it all to go down. He'll take the fall to protect them as if they didn't know. Come on now, when was there ever anything that was a sure thing?
Well it seems Bernie, and the Antigua-based Robert Stanford, recently arrested for his own $8,000,000,000 scheme, have kicked off what will prove to be the ultimate scammer season. Granted their scams were perpetrated over a longer period of time but this spiraling economic ruin is the perfect time for all the scam-meisters to sharpen their tack. There are so many ways to defraud people now, it is ridiculous; every single type of mortgage reduction, debt reduction, risk-free investment, unemployment scam and others are well-ripe for success. With so many of us clamoring for things to get better including the Dow Jones with its latest 3-day increase of 623 points, we are all especially vulnerable. Already in my job search, I have received so many job-fraud solicitations; unfortunately, the collateral damage of being registered on employment websites.
My husband and I are trying to figure out how to stay positive this year because it is going to be a very long year but it shouldn't be all bad. I don't want to bury my head in the sand and hope for the best. Nor do I want to get so obsessed with trying to find positive news in which to celebrate. I am just hoping not to get so bogged down with surviving that I sound too negative or become too cynical. At least we have Spring right down the road and Spring is usually, almost, pretty much, kind of, mostly, good. Isn't it? I'll make no claims before their time. You know what happens when you bet on a sure thing, Madoffians.
I have to say I am loving the earlier start of daylight savings time.
No matter how many civil suits are filed, the family will still get to live the life to which they have become accustomed. And I suppose from his standpoint, this is the best way for it all to go down. He'll take the fall to protect them as if they didn't know. Come on now, when was there ever anything that was a sure thing?
Well it seems Bernie, and the Antigua-based Robert Stanford, recently arrested for his own $8,000,000,000 scheme, have kicked off what will prove to be the ultimate scammer season. Granted their scams were perpetrated over a longer period of time but this spiraling economic ruin is the perfect time for all the scam-meisters to sharpen their tack. There are so many ways to defraud people now, it is ridiculous; every single type of mortgage reduction, debt reduction, risk-free investment, unemployment scam and others are well-ripe for success. With so many of us clamoring for things to get better including the Dow Jones with its latest 3-day increase of 623 points, we are all especially vulnerable. Already in my job search, I have received so many job-fraud solicitations; unfortunately, the collateral damage of being registered on employment websites.
My husband and I are trying to figure out how to stay positive this year because it is going to be a very long year but it shouldn't be all bad. I don't want to bury my head in the sand and hope for the best. Nor do I want to get so obsessed with trying to find positive news in which to celebrate. I am just hoping not to get so bogged down with surviving that I sound too negative or become too cynical. At least we have Spring right down the road and Spring is usually, almost, pretty much, kind of, mostly, good. Isn't it? I'll make no claims before their time. You know what happens when you bet on a sure thing, Madoffians.
I have to say I am loving the earlier start of daylight savings time.
Wednesday, March 11, 2009
Republican Party Blues
Anyone who is a Republican should be very worried about their party. An unruly triumvirate - Rush Limbaugh, Michael Steele and Newt Gingrich - is highlighting a very uncomfortable discord within the Party. While the Republicans fight amongst themselves for direction after finally losing their absolute power with the election of Barack Obama, they have marginalized their core values of fiscal responsibility, moral rectitude and conservative values with complete buffoonery and braggadocio in a manner unbefitting a major political party. They have consigned themselves to attacking the President at every turn and injecting, once again, negative and divisive politics to the point where most Republicans in Congress refuse to cooperate and/or endorse any of the current economic stimulus plans that have been proposed.
Thomas Friedman sums this up well in his article published 3/10/09 in the New York Times,
"...the Republican Party behaves as if it would rather see the country fail than Barack Obama succeed. Rush Limbaugh, the de facto G.O.P. boss, said so explicitly, prompting John McCain to declare about President Obama to Politico: “I don’t want him to fail in his mission of restoring our economy.” The G.O.P. is actually debating whether it wants our president to fail. Rather than help the president make the hard calls, the G.O.P. has opted for cat calls. It would be as if on the morning after 9/11, Democrats said they wanted no part of any war against Al Qaeda — “George Bush, you’re on your own.”"
I just think back to President Bush's terms in office where he took advantage of the generous rule; we all stand together when the country is in crisis or at war. If anyone criticized President Bush or went against the grade, they were deemed unpatriotic and would have been soundly attacked and destroyed by the media. Remember what happened to General Shinseki when he went against the President and tried to say the right thing, that we needed more initial troops for the Iraq War? Anyone remember that the Democratic Party voted lockstep with Bush and the Republicans even after winning the majority in Congress in 2006?
Now, the Republican Party is sitting around complaining, being downright nasty during a period where we need intelligent dialogue and communication. We know things are bad, all you have to do is look around. We shouldn't be watching our Republican Congresspeople acting like idiots - being petty by angrily declining small portions of the stimulus funds for their home states while taking the bulk of the money and/or adding earmarks to the new Omnibus Spending bill signed today yet screaming that there are too many. I know they are richer than most of us so they don't feel the economic hit like us regular folks but is this the best we can do when we get together and vote for these people to represent us? People so seemingly out of touch with reality.
Everyone is scared. I don't see any economists jumping up and saying everything is going to be Okay in the near term. In fact, they are all on the same page concluding that the government and its entities have to put as much money as they can into the economy to save it. The only criticism I'm seeing is that the stimulus packages are too low. Meanwhile, the Republicans are saying we shouldn't spend at all and put the country into more debt. You know, if they had stuck to their tenet of fiscal responsibility during Bush, we might very well have had the money to save ourselves. Instead they followed Bush down the road, spending us into massive deb. Now they have dismissed Bush completely as if he was never a Republican at all. Amazing.
We are not economists, we have no clue how dire the situation is but we have to do something. Maybe the current proscriptions are not right, maybe they won't help, maybe the economy has to correct itself on its own, maybe billions of dollars might be wasted as money is thrown around to save us, maybe all of this stimulus will come to naught but whatever happens, we have to hope for the best. At the very least, in unity there is strength.
During the Depression, the one beacon of hope was the President. We need to be positive because we are facing deep distress; we have to face it together if we have any chance of getting out of it. Deliberately wishing that the President and by extension the Democrats fail so it can be harped on and used as a negative during Obama's reelection bid in 2012 is all that the Republicans are hoping for. And, they don't seem to care how they get there. How sad.
Thomas Friedman sums this up well in his article published 3/10/09 in the New York Times,
"...the Republican Party behaves as if it would rather see the country fail than Barack Obama succeed. Rush Limbaugh, the de facto G.O.P. boss, said so explicitly, prompting John McCain to declare about President Obama to Politico: “I don’t want him to fail in his mission of restoring our economy.” The G.O.P. is actually debating whether it wants our president to fail. Rather than help the president make the hard calls, the G.O.P. has opted for cat calls. It would be as if on the morning after 9/11, Democrats said they wanted no part of any war against Al Qaeda — “George Bush, you’re on your own.”"
I just think back to President Bush's terms in office where he took advantage of the generous rule; we all stand together when the country is in crisis or at war. If anyone criticized President Bush or went against the grade, they were deemed unpatriotic and would have been soundly attacked and destroyed by the media. Remember what happened to General Shinseki when he went against the President and tried to say the right thing, that we needed more initial troops for the Iraq War? Anyone remember that the Democratic Party voted lockstep with Bush and the Republicans even after winning the majority in Congress in 2006?
Now, the Republican Party is sitting around complaining, being downright nasty during a period where we need intelligent dialogue and communication. We know things are bad, all you have to do is look around. We shouldn't be watching our Republican Congresspeople acting like idiots - being petty by angrily declining small portions of the stimulus funds for their home states while taking the bulk of the money and/or adding earmarks to the new Omnibus Spending bill signed today yet screaming that there are too many. I know they are richer than most of us so they don't feel the economic hit like us regular folks but is this the best we can do when we get together and vote for these people to represent us? People so seemingly out of touch with reality.
Everyone is scared. I don't see any economists jumping up and saying everything is going to be Okay in the near term. In fact, they are all on the same page concluding that the government and its entities have to put as much money as they can into the economy to save it. The only criticism I'm seeing is that the stimulus packages are too low. Meanwhile, the Republicans are saying we shouldn't spend at all and put the country into more debt. You know, if they had stuck to their tenet of fiscal responsibility during Bush, we might very well have had the money to save ourselves. Instead they followed Bush down the road, spending us into massive deb. Now they have dismissed Bush completely as if he was never a Republican at all. Amazing.
We are not economists, we have no clue how dire the situation is but we have to do something. Maybe the current proscriptions are not right, maybe they won't help, maybe the economy has to correct itself on its own, maybe billions of dollars might be wasted as money is thrown around to save us, maybe all of this stimulus will come to naught but whatever happens, we have to hope for the best. At the very least, in unity there is strength.
During the Depression, the one beacon of hope was the President. We need to be positive because we are facing deep distress; we have to face it together if we have any chance of getting out of it. Deliberately wishing that the President and by extension the Democrats fail so it can be harped on and used as a negative during Obama's reelection bid in 2012 is all that the Republicans are hoping for. And, they don't seem to care how they get there. How sad.
Tuesday, March 10, 2009
Getting Our "Acts" Together
I see the pundits on television, which I have curtailed sharply since the election cycle and subsequent inauguration, now shifting their attention to the economy. These one-time "political commentators" are now "economic experts" all jawboning about what we should do to weather the storm. I know as much as they do, which is not much. None of us our economists, we really do not know how far the fissure runs or how deep. The facts keep coming out piece-meal, without any company owning up to their true exposure, leaving us all to speculate and argue over the one plan that we have. It would be nice if there was dialogue about the several plans proposed but we only have one plan...for the government to shovel in as much cash as it can to keep us all afloat.
When the TARP plan was introduced, we hurried the process because it was needed ASAP to avert the failure of the US and by extension world financial systems. It passed with flaws. When the American Recovery and Reinvestment Act of 2009 (ARRA?) was similarly rushed and passed just a few weeks ago, it too passed with flaws. It seems that we have no time to get our Acts together, so to speak. Everything is a big rush to save us from pain and the expectations are too high.
Amongst ourselves, we talk of surviving this year and wondering about the next. What are we supposed to believe when the stock market rallies because the street got wind of an internal memo at Citigroup that said all will be well with the bank, it was profitable in January and February. Well if the Government owns 36% of the bank by way of a $30,000,000,000+ capital injection that the bank has received from taxpayers, I'd say things were pretty good too though it baffles the mind that you can call yourself profitable when you've just been bailed out. But would I believe CEO Vikram Pandit? No. This is something every CEO says to boost morale. You have to believe that things will get better even if they don't. And besides, Bernanke said again today that certain banks, like Citigroup, will not be allowed to fail. There is no other plan.
When the TARP plan was introduced, we hurried the process because it was needed ASAP to avert the failure of the US and by extension world financial systems. It passed with flaws. When the American Recovery and Reinvestment Act of 2009 (ARRA?) was similarly rushed and passed just a few weeks ago, it too passed with flaws. It seems that we have no time to get our Acts together, so to speak. Everything is a big rush to save us from pain and the expectations are too high.
Amongst ourselves, we talk of surviving this year and wondering about the next. What are we supposed to believe when the stock market rallies because the street got wind of an internal memo at Citigroup that said all will be well with the bank, it was profitable in January and February. Well if the Government owns 36% of the bank by way of a $30,000,000,000+ capital injection that the bank has received from taxpayers, I'd say things were pretty good too though it baffles the mind that you can call yourself profitable when you've just been bailed out. But would I believe CEO Vikram Pandit? No. This is something every CEO says to boost morale. You have to believe that things will get better even if they don't. And besides, Bernanke said again today that certain banks, like Citigroup, will not be allowed to fail. There is no other plan.
Monday, March 9, 2009
Depression-Era Solutions May Not Save Consumer Economy
There has been a lot of discussion comparing today's economic climate with that of the Depression. The more I listen to the discussion is the more I conclude that other than having similar types of dreadful economic statistics, we are in a completely new economic situation for which history cannot give us any pointers.
During the depression, America was still an industrial society producing goods and services. This helped to position the U.S. for dependable growth through World War II and beyond. American companies created goods and services right here at home and much of the actions taken by FDR and the government to address the economic woes were executed in a protected national economy that was not intertwined completely with the rest of the world as it is now. The last vestiges of American companies and American products are also under siege; there is a lot more competition in the world and right now it appears that American goods and services are not holding up as well.
For most of the 1900s, America was a producer of goods and services exported all over the world. Now, America imports more goods that it exports and has moved away from a producer society to a consumer society; somewhere along the line America stopped producing goods and started producing consumers. Clearly, this has not been a good development. Now, consumer spending is at 70% of GDP; the consumer has to start spending again for the economy to stabilize and in order for the economy to grow, consumers have to spend even more to keep the cogs turning.
Unfortunately, as the downturn continues to go from bad to worse, the consumer is now forced to live within their means and/or saving cash as they vie for survival. Who knew that saving would be referred to as bad for the economy? When I was growing up, saving was an integral part of fiscal responsibility and lauded as a noble goal for all who were serious about moving up in the world. Now, saving is a dirty word. All who are saving are not spending and without spending, we have no economy.
The solutions that are currently being implemented are for this purpose, to get more money into the pocket of the consumer and get more money flowing for the consumer to borrow and spend. In a $14 trillion dollar economy, consumer spending accounts for nearly $10 trillion if the numbers are right. What will replace the decline in consumer spending and lift the economy?
I'm not sure Depression-era solutions will hold up in this new global economy.We need a new set of industries if we are to have firm footing again. Throwing trillions of dollars at the financial institutions and a few select industries may help to get us back to where we were. However, I don't think America should be looking backwards to restore an economy that I believe is breathing its last gasps. Consumer spending should not be the keys to America's future success.
During the depression, America was still an industrial society producing goods and services. This helped to position the U.S. for dependable growth through World War II and beyond. American companies created goods and services right here at home and much of the actions taken by FDR and the government to address the economic woes were executed in a protected national economy that was not intertwined completely with the rest of the world as it is now. The last vestiges of American companies and American products are also under siege; there is a lot more competition in the world and right now it appears that American goods and services are not holding up as well.
For most of the 1900s, America was a producer of goods and services exported all over the world. Now, America imports more goods that it exports and has moved away from a producer society to a consumer society; somewhere along the line America stopped producing goods and started producing consumers. Clearly, this has not been a good development. Now, consumer spending is at 70% of GDP; the consumer has to start spending again for the economy to stabilize and in order for the economy to grow, consumers have to spend even more to keep the cogs turning.
Unfortunately, as the downturn continues to go from bad to worse, the consumer is now forced to live within their means and/or saving cash as they vie for survival. Who knew that saving would be referred to as bad for the economy? When I was growing up, saving was an integral part of fiscal responsibility and lauded as a noble goal for all who were serious about moving up in the world. Now, saving is a dirty word. All who are saving are not spending and without spending, we have no economy.
The solutions that are currently being implemented are for this purpose, to get more money into the pocket of the consumer and get more money flowing for the consumer to borrow and spend. In a $14 trillion dollar economy, consumer spending accounts for nearly $10 trillion if the numbers are right. What will replace the decline in consumer spending and lift the economy?
I'm not sure Depression-era solutions will hold up in this new global economy.We need a new set of industries if we are to have firm footing again. Throwing trillions of dollars at the financial institutions and a few select industries may help to get us back to where we were. However, I don't think America should be looking backwards to restore an economy that I believe is breathing its last gasps. Consumer spending should not be the keys to America's future success.
Thursday, March 5, 2009
Lions and Tigers and Bears, Oh My
Can it be that Citigroup might follow the footsteps of Bear Stearns, Wachovia, Merrill Lynch & Lehman Brothers? Will it be swallowed whole by a rival, like JPMorgan Chase or will it go belly up and disappear. The mightly financials and the mighty companies are falling; GE is begging for mercy and GM finally admitted today that it is not a viable enterprise without bailout funds.
The very lives of these companies that have ruled the world for as long as I've known are collapsing. These mighty companies were the kings of the jungle, conjuring strength, agility and invincibility. Maybe if the Bellwethers like GE are cracking, this is a signal of the passing of an old era. Maybe these companies are not supposed to survive at all. Maybe these are all unsustainable business models.
The government is trying to address the financial meltdown by injecting all of those bailout funds into the system. But maybe the financial system as we know it is no longer viable, maybe we are trying to fix something that is already broken.
The very lives of these companies that have ruled the world for as long as I've known are collapsing. These mighty companies were the kings of the jungle, conjuring strength, agility and invincibility. Maybe if the Bellwethers like GE are cracking, this is a signal of the passing of an old era. Maybe these companies are not supposed to survive at all. Maybe these are all unsustainable business models.
The government is trying to address the financial meltdown by injecting all of those bailout funds into the system. But maybe the financial system as we know it is no longer viable, maybe we are trying to fix something that is already broken.
Wednesday, March 4, 2009
A Populace Needs to be Educated
If I had one wish, it would be to time the bottom of the market. I would find some money and put it in and ride the next wave to financial glory. Of course, it is a wish, for as we have been told through our formative years, there is no way to time the market. Nevertheless, we have pundits, daily, trying to call the bottom. It seems that we are already so sick of the financial pain that we need to wrap it up and get to the next level. Sorry lads and lasses, no generation gets away with everything.
We would not be well-rounded citizens if we did not feel the pain and make no mistake about it, there is plenty more pain to come. Me, I am just calling for a showing of the hands, someone, anyone, brave-up and tell the truth and let us know how much you really need AIG? GMAC? and the rest of you clowns hiding from a real valuation of those so-called toxic assets. AIG, what would it really cost to cover those bets? GE Money/GE Capital, Citigroup, Merrill Lynch/Bank of America, how much of those bets did you make? The best thing that the government can do now is to order all of these financials hiding behind their faux balance sheets to tell us the real deal.
If Obama is to be praised for a "true up" of the 2010 budget as he strives to incorporate all government expenses - all off-the-books expenditures like the costs for war and the deficiencies in the AMT and other budget machinations, i.e. no bid contracts and the like, why are we not demanding this from the companies who we are bailing out? Where are the forensic accountants when you need them? At this point in this dismal economic cycle, we need to know how much of these off-the-books assets are out there. Today, I am hearing that Bernanke wants to inject a trillion dollars into the shadow banking system, the system where all of these off-the-books assets reside like those credit swap derivatives.
We sit around and complain that there is no transparency in the system but we are not demanding answers. We need an independent citizens brigade to track all of these taxpayer dollars that are being injected into the financial system. At the very least, the taxpayer should know how much and to whom all of this money is being given. We should be protesting over this but our own financial woes are crippling us. Who has time to check out who the government is giving money to when our own personal financial lives are in shambles? I have been out of work 3 months; this milestone is now resonating on a daily basis. The reality has set in that the return on resume submission is dismal, there has been only one interview for nearly 50 submitted. These are not the type of odds that step up the employment quotient though I am hearing that I am lucky to have had one callback.
The bigger question is why I have not been able to get to the bottom of this financial crisis in all of its complexity. Previous recessions were explainable but this most recent debacle is rooted in financial instruments that we, the taxpayer, simply do not understand. There needs to be a whole-hearted effort on the part of the media and the government to explain the elements and educate a society on its new role as financial savior. Now we have people taking sides, even myself, trying to simplify the matter, saying bloviated statements like "let them fail," "no more bailouts," and "the democrats are mortgaging the future" and so on. What is the truth? I am being led to believe that while the government is supposedly bailing out AIG, GE, GM, and the rest of those fat-cats under some dubious rubric of "too big to fail," they are not explaining the real reason; the devasting financial shock to the worldwide banking/financial system of valuing all of those derivatives.
If this is true, then it needs to be explained to the American people. We have nothing to lose and everything to gain. We do not want the financial equivalent of the post 9-11 exhortation of "go out and shop, carry on as you normally do" response to crisis, we should be demanding a real appraisal of what we are getting into with these continued bailouts. If the situation is dire, tell us. Last fall, businesses were planning on a turnaround during the second half of this year. We have now reached the reality stage where it is clear that the turnaround may not happen until 2010 or beyond. I might have planned better last Fall if I had known that. Facts need to be faced. A populace needs to be educated.
We would not be well-rounded citizens if we did not feel the pain and make no mistake about it, there is plenty more pain to come. Me, I am just calling for a showing of the hands, someone, anyone, brave-up and tell the truth and let us know how much you really need AIG? GMAC? and the rest of you clowns hiding from a real valuation of those so-called toxic assets. AIG, what would it really cost to cover those bets? GE Money/GE Capital, Citigroup, Merrill Lynch/Bank of America, how much of those bets did you make? The best thing that the government can do now is to order all of these financials hiding behind their faux balance sheets to tell us the real deal.
If Obama is to be praised for a "true up" of the 2010 budget as he strives to incorporate all government expenses - all off-the-books expenditures like the costs for war and the deficiencies in the AMT and other budget machinations, i.e. no bid contracts and the like, why are we not demanding this from the companies who we are bailing out? Where are the forensic accountants when you need them? At this point in this dismal economic cycle, we need to know how much of these off-the-books assets are out there. Today, I am hearing that Bernanke wants to inject a trillion dollars into the shadow banking system, the system where all of these off-the-books assets reside like those credit swap derivatives.
We sit around and complain that there is no transparency in the system but we are not demanding answers. We need an independent citizens brigade to track all of these taxpayer dollars that are being injected into the financial system. At the very least, the taxpayer should know how much and to whom all of this money is being given. We should be protesting over this but our own financial woes are crippling us. Who has time to check out who the government is giving money to when our own personal financial lives are in shambles? I have been out of work 3 months; this milestone is now resonating on a daily basis. The reality has set in that the return on resume submission is dismal, there has been only one interview for nearly 50 submitted. These are not the type of odds that step up the employment quotient though I am hearing that I am lucky to have had one callback.
The bigger question is why I have not been able to get to the bottom of this financial crisis in all of its complexity. Previous recessions were explainable but this most recent debacle is rooted in financial instruments that we, the taxpayer, simply do not understand. There needs to be a whole-hearted effort on the part of the media and the government to explain the elements and educate a society on its new role as financial savior. Now we have people taking sides, even myself, trying to simplify the matter, saying bloviated statements like "let them fail," "no more bailouts," and "the democrats are mortgaging the future" and so on. What is the truth? I am being led to believe that while the government is supposedly bailing out AIG, GE, GM, and the rest of those fat-cats under some dubious rubric of "too big to fail," they are not explaining the real reason; the devasting financial shock to the worldwide banking/financial system of valuing all of those derivatives.
If this is true, then it needs to be explained to the American people. We have nothing to lose and everything to gain. We do not want the financial equivalent of the post 9-11 exhortation of "go out and shop, carry on as you normally do" response to crisis, we should be demanding a real appraisal of what we are getting into with these continued bailouts. If the situation is dire, tell us. Last fall, businesses were planning on a turnaround during the second half of this year. We have now reached the reality stage where it is clear that the turnaround may not happen until 2010 or beyond. I might have planned better last Fall if I had known that. Facts need to be faced. A populace needs to be educated.
Tuesday, March 3, 2009
Obamanomics
Welcome to Obanomics. Will the massive expenditure of Government capital hold back the tides of disaster about to wash up on our shores? What will be the collateral damage because there will be some? How does one come to terms with the impending higher taxes looming in the near distant future that will be required to quell the massive deficit beast that has been unleashed?
The questions keep mounting. The Republicans have some salient points but they sound like the boy crying wolf because they still want to keep blaming instead of recognizing that they contributed greatly to our common woe by not sticking to their core principles of fiscal responsibility: small government and lower taxes. After presiding over the largest government expansion, costly wars and record-breaking deficits that led to an almost tripling of the national debt, they are now screaming and complaining about Obamanomics.
I am not sure how the Republican party, now framed by Michael Steele, Rush Limbaugh, Sarah Palin and Bobby Jindal with their number one hate-mongering cheerleaders Sean Hannity, Michelle Bachmann and Ann Coulter, can expect any rational minded person to take note of their platform. Even CPAC's best polling efforts turned up Mitt Romney with 20% of the vote as most likely to be the best Republican contender in 2012. Ron Paul turned up at 13% tied with Sarah Palin. I think the Republicans should turn to Ron Paul for an alternate plan to Obama and the tired tax-reductions-will-spur-growth economics begun by Reagan and bastardized by Bush then maybe they will have a chance. Even I liked Ron Paul.
I am rooting for Obamanomics. I am legitimately concerned about the expense but I'm hoping that it does work down the road to stem the tide of joblessness and wealth eradication. Tomorrow I have a job interview for a part-time job against a tide of abyssmal data of escalating layoffs, jobless claims and under-employment. The last time I got a job, it was lost to layoff within 3 months. It would be nice to get a job but I am well aware of the future uncertainties that threaten its tenure. Remember those people who showed up for their first day of work at American Home Mortgage just to find out that the company had collapsed that same day?
Thankfully, the Presidential race took up most of 2008 so we shielded from much of the bad news of 2008. Now that the President has been inaugurated, we have nothing to distract us from the near deafening drumroll of bad economic data and a tumbling stock market down 50% from its high in October 2007.
It probably would not have been so bad if we weren't all in so much debt, from the government on down to the little man. It is the debt that is doing us in. All of the financial instruments bought and created by this debt are collapsing. When so many corporations are borrowing from Peter (the Government) to pay Paul (their creditors) and Peter (the Government) is borrowing from foreign governments and institutions to pay Paul (every single penny of every single bailout package so far), we've taken that simple homily up to a whole new level.
It seems there is always this call for more expansion and that expansion cannot happen without leverage yet every time expansion is based on leverage it collapses and we still have to wait a significant number of years to get back to where we were because in reality it was going to take a significant number of years for a certain percentage of growth to materialize. Speeding up that growth to occur in a few odd years or so gives us momentary satisfaction because we still have to spend the remaining years wallowing with no growth and/or fighting for some sense of growth until the normal passage of years is satisfied. How long was it going to take for us to grow from 1997 on? Certainly it was not 10 years. So now we have to wait to find out where we are on the growth curve. Apparently we were way ahead of where we were supposed to be. How long was it supposed to take for that growth to materialize?
Only real dollars can spur growth. A company takes their profits and puts them back into the business until they reach a desirable rate of return. So far, history has shown us that we can't get ahead of ourselves. If we settled for tiny but steady increases then we would probably not have these massive corrections. In the end, it all has to correct. One could argue that the government has bought into this economic logic of borrowing to spur growth when in actuality there should be no growth. We took it all and enjoyed it all already. The faster we use up the spoils that are not of our labors the longer we have to do without. How many years is it going to be this time around?
Maybe we really don't need Obamanomics at all. Maybe we just need to tread water, put the next phase in place, and wait until we land back on the growth curve of where we were supposed to be in the first place. Maybe this is what Obamanomics should be.
The questions keep mounting. The Republicans have some salient points but they sound like the boy crying wolf because they still want to keep blaming instead of recognizing that they contributed greatly to our common woe by not sticking to their core principles of fiscal responsibility: small government and lower taxes. After presiding over the largest government expansion, costly wars and record-breaking deficits that led to an almost tripling of the national debt, they are now screaming and complaining about Obamanomics.
I am not sure how the Republican party, now framed by Michael Steele, Rush Limbaugh, Sarah Palin and Bobby Jindal with their number one hate-mongering cheerleaders Sean Hannity, Michelle Bachmann and Ann Coulter, can expect any rational minded person to take note of their platform. Even CPAC's best polling efforts turned up Mitt Romney with 20% of the vote as most likely to be the best Republican contender in 2012. Ron Paul turned up at 13% tied with Sarah Palin. I think the Republicans should turn to Ron Paul for an alternate plan to Obama and the tired tax-reductions-will-spur-growth economics begun by Reagan and bastardized by Bush then maybe they will have a chance. Even I liked Ron Paul.
I am rooting for Obamanomics. I am legitimately concerned about the expense but I'm hoping that it does work down the road to stem the tide of joblessness and wealth eradication. Tomorrow I have a job interview for a part-time job against a tide of abyssmal data of escalating layoffs, jobless claims and under-employment. The last time I got a job, it was lost to layoff within 3 months. It would be nice to get a job but I am well aware of the future uncertainties that threaten its tenure. Remember those people who showed up for their first day of work at American Home Mortgage just to find out that the company had collapsed that same day?
Thankfully, the Presidential race took up most of 2008 so we shielded from much of the bad news of 2008. Now that the President has been inaugurated, we have nothing to distract us from the near deafening drumroll of bad economic data and a tumbling stock market down 50% from its high in October 2007.
It probably would not have been so bad if we weren't all in so much debt, from the government on down to the little man. It is the debt that is doing us in. All of the financial instruments bought and created by this debt are collapsing. When so many corporations are borrowing from Peter (the Government) to pay Paul (their creditors) and Peter (the Government) is borrowing from foreign governments and institutions to pay Paul (every single penny of every single bailout package so far), we've taken that simple homily up to a whole new level.
It seems there is always this call for more expansion and that expansion cannot happen without leverage yet every time expansion is based on leverage it collapses and we still have to wait a significant number of years to get back to where we were because in reality it was going to take a significant number of years for a certain percentage of growth to materialize. Speeding up that growth to occur in a few odd years or so gives us momentary satisfaction because we still have to spend the remaining years wallowing with no growth and/or fighting for some sense of growth until the normal passage of years is satisfied. How long was it going to take for us to grow from 1997 on? Certainly it was not 10 years. So now we have to wait to find out where we are on the growth curve. Apparently we were way ahead of where we were supposed to be. How long was it supposed to take for that growth to materialize?
Only real dollars can spur growth. A company takes their profits and puts them back into the business until they reach a desirable rate of return. So far, history has shown us that we can't get ahead of ourselves. If we settled for tiny but steady increases then we would probably not have these massive corrections. In the end, it all has to correct. One could argue that the government has bought into this economic logic of borrowing to spur growth when in actuality there should be no growth. We took it all and enjoyed it all already. The faster we use up the spoils that are not of our labors the longer we have to do without. How many years is it going to be this time around?
Maybe we really don't need Obamanomics at all. Maybe we just need to tread water, put the next phase in place, and wait until we land back on the growth curve of where we were supposed to be in the first place. Maybe this is what Obamanomics should be.
Monday, March 2, 2009
Reflections on a Dow: Revisited
The Dow broke the sixes today, down 300 points to close at 6763 points. As I said last week, it was not impossible and here we are already. Now we are back to 1997 levels, we are now past Bush and back in Clinton! Reality Check. I thought I would look into the Dow a little further to try to understand some of the history. I have run some of these numbers in a previous post but I refer to them more in detail today as I again try to understand the specs and put the whole stock market thing into some historical context. What does all of this numbers posturing mean as I watch the Index begin to majorly tank again?
At the beginning of the last century, the Dow was around 50 points. From 1901-1990 it increased 2950 points winding up around 3000 at the beginning of the 1990s. It has spectacularly increased since 1990. From 1990-2007, the Dow increased over 10,000 points even after dropping down to 7600 points in the Fall of 2002 when the Tech Bubble finally burst for good. This is a significant statistic: 90 years to increase 2950 points, 17 years to increase 10,000 points. The last 17 years have been all the more artificial because of all the available cheap capital.
We racked up incredible wealth in a small number of years if we look back at stock market history. Even the WWII boom increased the market from around 140 points in 1944 to the 700s in the early 1960s. For all of the conversation about the Great Depression, the DJIA was at a high of 381 points when the market crashed in 1929 when it slid down to slightly less than 200 points. Despite numerous efforts to power a reversal, the index finally hit a low of 41 points in mid 1932. After that it had its moments regularly peaking and troughing between 1960 and 1980 reaching a low of 535 points and a high of 1051 points during that 20 year period.
The DJIA began in earnest to steadily ratchet up under Reagan and added approximately 2000 points between 1981 and 1991. The major dip during that period was black Mondayin October 1987 when the market plunged nearly 1000 points from a highpoint of 2722 points. It gained over 8000 points between 1991 and 2001 rising from 2500 in 1991 to the 6700s in 1997 - where we are now - and upward to just shy of 11,500 at the end of 1999 gaining 9000 points under Clinton and a pronounced gain between 1997 and 1999 thanks to the tech boom which corrected itself in 2002 landing the market at 7600 points. This was shortlived and the market nearly doubled adding another 6400 points in 5 years to a high of 13930 in Oct 2007.
It has fallen ever since and here we are now.
So the swings that we are becoming "used to" these days of several hundred points up or down and into almost 1000 point peak to trough swings in one day cannot possibly be true commerce and therefore is no longer any indicator of where the market should or should not be. Unless you are one of the lucky to have had enough money to weather the current downturn or you have a good union type job with a pension, all of the wealth created since the turn of this new century has been wiped out completely putting the Dow back to 1990s levels.
By that reckoning, we have much more to bleed to bring business and building back to those levels. The problem is that you cannot do it without leaving too many relics i.e. abandoned big box store shopping centers. Most of us in the middle class just woke to the fact that we never had any real money to spend; we simply did not realize how hard it would be to pay back all of that debt; rolling into the mortgage and feeling no pain was just the luck of the draw and you did it if you could. Besides, wasn't it good for America?
We really didn't earn anything. We simply spent money that we didn't really have - debt - and now we have to pay some of that down before we can go on. I am trying to remember the last time I was better off...ah yes, the 1990s was it for me.
At the beginning of the last century, the Dow was around 50 points. From 1901-1990 it increased 2950 points winding up around 3000 at the beginning of the 1990s. It has spectacularly increased since 1990. From 1990-2007, the Dow increased over 10,000 points even after dropping down to 7600 points in the Fall of 2002 when the Tech Bubble finally burst for good. This is a significant statistic: 90 years to increase 2950 points, 17 years to increase 10,000 points. The last 17 years have been all the more artificial because of all the available cheap capital.
We racked up incredible wealth in a small number of years if we look back at stock market history. Even the WWII boom increased the market from around 140 points in 1944 to the 700s in the early 1960s. For all of the conversation about the Great Depression, the DJIA was at a high of 381 points when the market crashed in 1929 when it slid down to slightly less than 200 points. Despite numerous efforts to power a reversal, the index finally hit a low of 41 points in mid 1932. After that it had its moments regularly peaking and troughing between 1960 and 1980 reaching a low of 535 points and a high of 1051 points during that 20 year period.
The DJIA began in earnest to steadily ratchet up under Reagan and added approximately 2000 points between 1981 and 1991. The major dip during that period was black Mondayin October 1987 when the market plunged nearly 1000 points from a highpoint of 2722 points. It gained over 8000 points between 1991 and 2001 rising from 2500 in 1991 to the 6700s in 1997 - where we are now - and upward to just shy of 11,500 at the end of 1999 gaining 9000 points under Clinton and a pronounced gain between 1997 and 1999 thanks to the tech boom which corrected itself in 2002 landing the market at 7600 points. This was shortlived and the market nearly doubled adding another 6400 points in 5 years to a high of 13930 in Oct 2007.
It has fallen ever since and here we are now.
So the swings that we are becoming "used to" these days of several hundred points up or down and into almost 1000 point peak to trough swings in one day cannot possibly be true commerce and therefore is no longer any indicator of where the market should or should not be. Unless you are one of the lucky to have had enough money to weather the current downturn or you have a good union type job with a pension, all of the wealth created since the turn of this new century has been wiped out completely putting the Dow back to 1990s levels.
By that reckoning, we have much more to bleed to bring business and building back to those levels. The problem is that you cannot do it without leaving too many relics i.e. abandoned big box store shopping centers. Most of us in the middle class just woke to the fact that we never had any real money to spend; we simply did not realize how hard it would be to pay back all of that debt; rolling into the mortgage and feeling no pain was just the luck of the draw and you did it if you could. Besides, wasn't it good for America?
We really didn't earn anything. We simply spent money that we didn't really have - debt - and now we have to pay some of that down before we can go on. I am trying to remember the last time I was better off...ah yes, the 1990s was it for me.
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