Collateral Damage: Credit Cards and Loaded Guns

Finally, Congress has passed a credit card reform bill that has some teeth. Most of the heinous credit card company practices have been curtailed in the bill. Some may argue that some of the reforms do not go far enough but as far as I can tell the overall bill is satisfactory. All of the usual suspects have been addressed, the hiking of fees on existing balances, payment cutoff times that are set at odd hours and don't take into account holidays or weekends, ample notification for interest rate or other fee changes to your card account, and many others that you can think of. Unfortunately, none of these reforms kick in until July 2010. So, those of us who already have been dinged have another year of suffering.

Though the credit card companies have threatened that the most stellar card users will bear the brunt of making up the revenue shortfalls that will be incurred through compliance to the bill, they are already charging these users more to make up for the losses of those who are already defaulting left and right. As a responsible credit card user who always pays on time, my response is to pay off the balances and not use the cards again. If others respond in this way then the credit card companies will have to capitulate if they wish to keep us as customers. They want us to keep using their cards so they can keep making money, don't they?

Anyhow, pardon the wordy way of getting here but, the truly heinous piece of this legislation has nothing to do with the credit card reform portion at all. Egregiously slipped into this bill is a provision allowing registered gun owners to carry loaded guns into national parks and wildlife refuges. What? What the heck is wrong with our Congresspeople? Why is it necessary to slip in this type of lightening rod, not to mention dangerous, provision into this type of reform bill? In this age? In this time? Sadly, the machinations of government hasnot changed and the back-washing continues.

So, some time in the future when you pay off your credit card debt and you decide to celebrate by taking that long delayed car trip to experience our national parks and you get there and you are surveying the natural beauty of the country and as you go to take that perfect picture at sunset you drop the camera and the flash goes off as it falls over the ledge shocking some poor sod who grabs his gun in fright and just then the camera hits his hand causing him to pull the trigger and the bullet ricochets in the canyon and maims you or someone you love and then and only then will the populace realize that the right to bear arms should not blatantly undermine public safety. Collateral damage at its finest. Anyhow, since guns scare the shit out of me, I guess I won't be going to Yellowstone anytime soon.

It is Not in Our Nature

Finally, the data has caught up to reality, Americans woke up to the news today that 8 years of wealth gains have been wiped out. Never mind that the Dow Industrials have been hovering at year 2000 levels for almost a year declining almost 50% in value or that the country has been in a recession for a year.

It takes a while for Americans to come to terms with the facts of economic life; though things are bad, none of us is really willing to clamp down completely. We do want to believe that things will get better; who wants to be the doom and gloom person this year, repeating time after time that things will not be getting better this year, which unfortunately is the truth, or try to remain optimistic, a difficult feat.

Americans seemingly have beleaguered expectations. Everyone needs economic assistance, the Government cannot come up with an effective stimulus plan and the stimulus plan will ultimately help those who were the most egregious. The banks have behaved terribly and have received trillions of dollars so that they can survive, the homeowners who overburdened themselves who now loudly claim that the banks recklessness in approving these unsustainable loans assisted their demise, who will be responsible?

What Americans have to accept is that it took almost a decade for the country to wind up in this position; it cannot be solved in a few months or even one year, no matter how much money the government throws at the problem. America does not have much patience; they want it all fixed now. This will be the first time these generations are subjected to hard times and we don't know what it means to sacrifice or anything remotely similar. It is not in our nature.

Rose-Colored Glasses

Today I did not pay much attention to anything. Somehow, the market went up 200 points on the news that the Federal Reserve would keep pumping money into the financial markets because the several trillion dollars that they have already put in still has not eased the liquidity crisis and the house passed the newly proposed $819,000,000,000 stimulus plan; more money above and beyond the $700,000,000,000 plan passed last September and the additional trillions that have been injected by the Treasury Department under its own programs. So the answer still is to throw even more money at the problem.

Maybe the GOP is right, maybe this is too much debt to take on despite the state of the economy. It is ironic that the GOP presided over the run-up of federal debt during the last 8 years and now they are the ones crying that the debt is too high to spend any more dollars to help boost the economy. I don't know, it is all going in circles and no one is guilty; all the corruption was on the fence but was it all really illegal? Now the enriched have enough money to convince us that they should be allowed to keep the money, no matter how ill-gotten; as long as you have enough of it, money talks.

Speaking of money, I have now spent way too many hours, probably to the detriment of myself, trying to find a good deal on hotels for my trip next week. So far I am fairly satisfied with my flight plans and rental vehicle costs. I have reserved a hotel but I'm not 100% convinced; I am surprised that in this economy hotel rates are still so high and they charge for every additional amenity; in many cases after paying an exorbitant room rate, you still have to pay for internet, breakfast, parking, beach chairs and towels and other resort fees. Excuse me but aren't those fees included in that exorbitant room rate? Then again, the last time I went on vacation was years ago so I must not have kept up with the inflation.

Years ago you would call a travel agent and that would be that. Now, there are so many internet sites to check, it is impossible to feel comfortable with your choices. I checked all the sites, I'm sure I did not miss any: AAA, American Express, Hotels.com, Kayak, Orbitz, Expedia, Travelocity, Priceline (except I did not want to bid and end up with someplace I really didn't want), Trip Advisor for all the reviews, Yahoo Travel, Away.com and numerous others. I am compelled to check daily to see if there is a better deal.

Nevertheless, it does seem that there must be enough people going on vacation to justify these room rates and charges. Some people must still have some cash lying around somewhere. Or maybe we're all doing the same thing, escaping now before the real crash and burn.

Hank Paulson Has Gone "Rogue"

This week, the revelations about Treasury Secretary Hank Paulson changing tax rules and refusing to divulge the recipients of the Congressional bailout funds began to raise eyebrows now that the election is over and we have time to pay attention. Well, today we have our answer.

Secretary Paulson appeared before Congress today stating that he decided not to use the funds for what they were originally intended, to buy up troubled mortgage assets and, in fact, he had decided it was a better idea to inject capital into banks instead in return for preferred stock. Essentially he has spent and will continue to spend the $700,000,000,000 bailout funds in any way that he sees fit. Folks, he has gone "rogue."

Actually, capital investment in banks may be a better investment for us taxpayers in the long run than buying up toxic bank assets but shouldn't he have informed Congress first? He does not have the authority to use Congressional funds for any other purpose than Congress intended or does he?

Originally Paulson appeared before Congress with a 3 page ransom note requesting the money with no strings and even though cooler heads prevailed within the maelstrom and protections were written in on behalf of the taxpayer, the bailout bill was stuffed with so much pork so if Congress got theirs, I guess, Mr. Paulson would get his.

He is only back before Congress because they have to vote on giving him the additional $350,000,000,000 because they only released half of the funds to begin with. He has proposed a new plan for the remaining funds; to buy up other debt securities mainly credit card and auto loan debt that were packaged and sold to investors in the same way as mortgage loans. This also may not be a bad idea but are we sure he will even do what he says since he hasn't so far?

Mr King of the Universe will do whatever he wants with our taxpayer dollars and Congress will allow it. The Congress doesn't know who to give the money to either; everybody wants a bailout. American Express asked for $3,500,000,000 today. AIG already got theirs and then some. GM has been begging for $25,000.000.000 for a week. Personally I don't think AIG should get any more and GM's Union-contracted labor costs are too high and will drain the company regardless. But it is too late, the animals are out of the barn and nobody knows who to save first, the cows, the pigs, the goats or the chickens. So it will wind up as Barney Frank says, that the funds will be given out until they run out.

Frozen Credit Markets: What They Are Not Telling Us…

…And why they are not telling us. Those three toxic words driving the financial crisis and the credit freeze: credit default swaps (CDS). They cannot tell us because it is too big to comprehend and too hard to explain. CDS contracts are essentially bets on the bets on the bets that the underlying financial instruments, mainly mortgages, would continue to be profitable. The bets on the bets on the bets are a whole lot bigger number than the underlying mortgages themselves. MIT caliber mathematicians came up with those statistical models; risk moves towards zero when divided into infinitesimal slices shared by a greater mass of investors. Of course this is only good when underlying values increase; nobody calculated the downside. Whoops! First we have to understand credit default swaps...

From wikipedia:

“In layman’s terms the CDS is essentially an unregulated insurance policy. It guarantees the performance of a security instrument, e.g., a mortgage. The buyer of the CDS pays the maker a fee or “premium” (think insurance) for protection against a loss. Historically the US Treasury has not classified derivatives as “insurance,” and therefore they trade free of any government regulations. Because of that, the firm selling the CDS is not required to set aside any reserves from the premiums received to insure against possible future loss claims. This obviously makes the sale of the Credit Default Swaps extremely profitable and default loss payments very expensive.”

“Credit default swaps are the most widely traded credit derivative product. By the end of 2007 there was an estimated $45 trillion to $62.2 trillion worth of credit default swap contracts outstanding worldwide.

Today, AIG asked for even more money; we the taxpayers have already loaned them $85,000,000,000 then another $38,500.000.000 and now they want another $12,000,000,000. If you insert AIG in where it says "the firm" in the above quote then you will understand AIG’s problem. They sold a lot of CDS and all of those mortgage losses mean potentially trillions in loss claims; that’s a heck of a lot of payouts. Insurance is good when everyone pays premiums but only a few collect; there are simply too many people collecting due to these defaults. All of those failing mortgages mean billions, even trillions, in insured defaults.

Adam Davidson of NPR stated that “The pure size of the CDS business is enough to make a failure of AIG a threat to the entire global economy…The fear is…if AIG collapsed, banks would stop lending money to each other. The Treasury Secretary and the Federal Reserve Chairman, Paulson and Bernanke respectively, know this and that is why they keep pumping the money into the credit markets. Over $2,000,000,000,000 has been committed by the Treasury and the Fed so far but the banks are not budging, they are still not lending money to each other; the credit freeze is not thawing. With trillions of CDS sold, no one knows how deep it goes. All of this money may just be a drop in the bucket.

The next President is going to have to understand this because this economic chasm is like quicksand. It is going to swallow up a whole lot of dough. NPR tried to explain it and 60 Minutes tried to explain it but it is too monumental an amount to comprehend and maybe it is better if we don’t know and just hope that some institutions become greedy enough to start lending again. This is essentially what we are left with to solve this crisis, hope. Huge risks yield huge rewards, the American taxpayer has already taken on that premise. If we can convince more institutions to put equity into this new game then fear diminishes and lending begins. Thus, the big outlay on the part of banks around the world. But then again, maybe we shouldn’t be running on so much debt after all. What point expansion if the debt overcomes the gains in the end?

What Happened to John McCain?

Most Americans had respect for John McCain whether or not they agreed with his politics. That respect has been severely strained for some and completely broken for others. He has allowed Sarah Palin to whip his supporters into such a far right frenzy with all the trappings of ignorance and prejudice that they all have lost sight of reason. This is a shame considering that John McCain was the first to declare earlier this year that he wanted to run a "clean" campaign.

The Dow has nose-dived 2000 points in the last 5 days to less than 8,600 points; my brain still cannot comprehend. The Federal Government through the treasury and the Federal Reserve has committed trillions to rescuing the economy without any negligible effect. This downturn is so serious, even the rich are losing money. Yet, all we hear from McCain-Palin is nasty attacks about Barack Obama's connection with Bill Ayers, the 60's era anti-Vietnam Domestic terrorist turned educator, who Obama worked with on education reform.

Joe Conason of RealClearPolitics.com wrote today:

"Entering the election's final weeks, the rhetoric of the former maverick and his lipstick-toting pit bull, Gov. Sarah Palin, has turned so ugly and inflammatory that their rallies have begun to sound like lynch mobs."

"What these concluding weeks have told us about the Republican candidate, to the shock and surprise of many of his admirers, is that he misunderstands the meaning of honor. Evidently he believes that the credit he accrued for suffering bravely for his country in Vietnam somehow licenses him to campaign as crudely and deceptively as he can, if that will help him to win. He seems not to realize that the respect he earned so many years ago requires him to uphold a higher standard of decency in politics."

Even Cindy McCain has jumped into the fray declaring that Obama, who has lobbed his own attacks on MCain though he has not sunk as low, has run the "dirtiest campaign in American History." What? The heights of denial to which the McCain campaign has sunk will require years of therapy to unwind, for all of us. Obama has kept calm, continues to evoke a Presidential aura and push his economic policy to salvage America; meanwhile McCain's supporters are so rabid, it is clear that they are beyond listening to his economic prescriptions. Ever thought a 1/2 black man with a funny name could be President? McCain really thinks so and he is fighting against it like mad.

What a Difference a Weekend Makes...

Much clarity has been given to certain situations though many more waters have been muddied...

The Bailout Fails: In a vote of 228 Nay vs. 205 Yea, the House of Representatives failed to pass the $700 billion bailout package with a resounding 2 to 1 nay on the part of the Republicans. Thank you Republicans. There, I said it. I am happy this bill did not pass because I did not know all of the details and I think it was too large a sum to make such a hasty decision.

I understand that this is really about Commercial Paper and not bailing out Wall Street but then don't put forth a bill with little explanation granting vast powers to Treasury Secretary Hank Paulson, who is from Wall Street and has private interests (mainly Goldman Sachs) to protect. There are many other methods, all equally valid, that would assist in returning liquidity to the Credit markets. This is about confidence in lending; banks and others are all undermined by their own lapsed judgment in lending. The Federal Reserve is doing all it can by dropping additional hundreds of billions into the global markets but still the Commercial paper market remains frozen. If banks don't lend to each other then small businesses and individual borrowers suffer the most. It is possible that the Fed is overextending itself, more to follow on this I am sure.

The rest of it is that the markets do need to correct; we accept correction in every other market except this one? In any case, a bailout package should, at its core, provide relief to struggling home owners; there has to be a provision to allow borrowers to re-negotiate their loans with a fixed interest rate between 6.5% to 7% and a longer loan term of 40-50 years. The point is the loan amount remains the same but the payments become more affordable and when the markets return to health these borrowers will be able to refinance to a shorter term loan or better interest rate. This way the prudent people who did choose affordable loans do not feel punished for being prudent.

Dow drops 777.68 - A Day That Will Live in Infamy: The Dow suffered one of the worse days in history dropping nearly 500 points the instant the House vote was closed; it was already hovering around $280 points down pre-vote. We watched it in real time; most of my coworkers checked in on the CNN Money site which crashed momentarily; MarketWatch, my preferred choice, stood firm though refreshed at an agonizingly slow pace. All hell instantly broke loose; political spin, partisanship blaming; John McCain claiming credit for bringing together the bailout package then having to sidestep himself when it failed damningly by his own party. Ouch. Also John McCain appeared with Gov. Sarah Palin in a joint interview to save her from remarks she made about Pakistan that he criticized Obama for saying in the debate. Double Ouch.

Saturday Night Live Palin Skit Dead On: Yet another Sarah Palin skit was unveiled on Saturday night this weekend with a send-up of Gov. Palin's interview with Katie Couric. All it required was Tina Fey, who does a very convincing comic caricature of Palin, essentially espousing verbatim Palin's exact phrases from the interview. Hilarious but sad; Palin is living the Peter Principle. Enough said.

Last But Not Least: This is the most engrossing reality show on record as we watch our economy and politics explode, the Republican party implode and the Democratic party standing to bear the brunt of this economic disaster if Obama is elected. He will be blamed if the devastating outcomes of this debacle persist over the next 4 years and of course, it will be doubly damning because he is 1/2 a black man. Sad but true. At the end of the day, politics and fear aside, we all have to give ourselves a financial housekeeping. Plan for the worst and you will survive. The net effect of all of this is that decrease in consumer spending will kill our GDP splintering all industries and the credit card market will be next in line to send up its wave of bad debt. It does not look pretty out there. What were the economic terms that we had before "market correction?" Depression, recession, inflation? Think about McCain & Palin leading us through these times...try not to cringe while doing so.

Bailout or Else: The GOP Politics of Fear in Full Swing Yet Again

Having now presided over the biggest economic collapse in recent history, George W. Bush and friends are out to convince the American people that the best and only solution is to hand over $700,000,000,000 to the Treasury Secretary to bail out Wall Street and that it should be done expeditiously and with as minimal oversight as possible. This Administration has perfected the Karl Rove politics of fear methods so completely and, unfortunately, so successfully that they have no qualms rolling it out whenever they need to force the hand of the American people.

Right now we are witnessing almost to the letter the same playbook used to rush us into war 6 years ago. Tonight the President spoke on television right before Congress is to go on break, like he did 6 years ago, giving us the old “act now or doom will befall you” speech. These same tactics were employed during Bush’s re-election campaign and are now being employed in more extreme fashion in John McCain’s campaign. So far, they have been successful at these methods even though the outcome has always been disastrous for the American people.

Though the Congress is trying more diligently this time around to mitigate the damage of hasty decision-making; this plan seems destined to come to fruition in some form albeit with greater restrictions. Why isn’t anyone else coming up with an alternative solution? Why is this expensive bailout the only way to bring order to the markets? While the GOP continues with their lies, fear and deceit, the American people are once again swept up into a situation where they are taken for a ride and this time around instead of fearing the GOP; they fear the intelligent black man who actually does want to help them.

Bailout Bonanza Continues to Prevent Trickle Down of Bad Debt

The Federal Government reversed itself after 2 days of record declines in the financial markets; it is pretty clear that there is no faith in the financial markets without the government guarantee. The mantra of “too big to fail” has completely taken over though I do not understand the criteria used to choose who wins and who loses. Why let Lehman fail but not AIG? As I write the Fed and the Congress are feverishly meeting to create a new government entity to buy up the rest of the bad debt out there. If this is the case, Lehman got a bum wrap.

However, it was good news for the market and it leaped over 400 points. I am not convinced this is the best solution no matter how much we fear financial failure because I am not convinced that it is a good idea for the government to keep borrowing funds for all of these bailouts. If the government had the money that would be fine but it doesn’t. The taxpayer is on the hook for the largest transfer of debt in American history.

Before George Bush was elected President, the discussion centered on his ability to ruin just about everything he touched. 9-11 saved him from himself for a while and delayed the inevitable. There was a point when he enjoyed incredible popularity much to my dismay, I might add. We were “winning” the war on terror and Americans improved their standard of living; trading up to bigger houses and better things because George Bush was right prosperity did trickle down. Unfortunately, we did not realize the sleight of hand; victory and prosperity were an illusion. And while the war rages on and the rest of us take on 2^nd jobs and plunder our 401k’s to remain afloat, the government has chosen to bail out some of the richest companies in the world supposedly to prevent all of that bad debt from trickling down.

Finally The Financial Truth Flows Through the Markets

The world-wide financial markets are in crisis right now. Wall Street investment banks are failing and/or scrambling to stay afloat either through a merger or cash infusion. The Dow lost 504.48 yesterday and 449.36 today; almost 1000 points in 2 days. Meanwhile markets in Russia, Asia and other parts of the world are hemorrhaging; Russia has had to halt trading over the last 2 days.

As you know, I knew these days were coming and I welcome them. We have to let the financial truth flow through the markets so we can figure out where we are so we can know where we have to go. All of the lies and propping up caused the market to disassociate from reality. The markets have been on a roller coaster ride this whole year because investors had no idea where to plant their feet. I have gone over all of this in previous posts.

I hope all of this fallout means we are getting closer to a financial reality based on the fundamentals. Yes things are terrible right now and I have always said that the market should reflect it. All we did was delay the inevitable; the government invested over $500,000,000,000 into trying to shore up the markets and it didn't help at all. Now investors are worried the government has over-extended itself.

I'd rather know the truth because knowledge is power; with the right information, we can find solutions. We have found them before and we will find them again. In the meantime, it is going to be terrible, I am not looking forward to going through any of it. At least we all know that we are in it together because that's all we have right now. We need to help each other as Americans first and people second.

All I can hope is that Americans do the right thing and elect the President that will bring us together. President Bush and the GOP have done nothing but divide Americans into nasty splinter groups blaming and re-blaming while they capitalize on our prejudicial weaknesses leaving us proving once again that there is truth in those unavoidable cliches:

UNITED WE STAND; DIVIDED WE FALL.

There is no way for McCain to bring us together and you all should know that by now. Do you really think he will inspire us to do anything? Ask yourselves deep down inside if lies, deception and downright nastiness is the way to help America. Obama will make mistakes, all Presidents do, but at least we will be United, something we have not been for a long, long, time.

Taxpayers Bail Out AIG

Like I said yesterday Citizens, prepare yourselves!!! We are in it for good this time. One of America’s largest insurance companies, American International Group (AIG) has failed. Yesterday, NY Governor Paterson relaxed the insurance regulatory rules to allow AIG to borrow $20,000,000,000 from one of its subsidiaries which wasn’t nearly enough because they were looking for an additional $40,000,000,000 to borrow from the Feds. Now it turns out the Feds have loaned them $85,000,000,000 today in exchange for 80% ownership in the company. I just want to know how it is that AIG was looking for $60 billion yesterday but was loaned $85 billion today. I just can’t stand it anymore.

Why are we saving AIG and not Lehman Brothers? Yesterday, the government said it would no longer bail out private companies. Today they say if they don’t continue, our financial system will collapse; the number of companies deemed too big to fail is growing. Has anyone stopped to add up all of the bailouts this year? What is the total? How much debt will it take for the government to realize it too has reached its limit? Do you all still believe in the free market economy? If the market is supposed to find the best price, reward good business practice and regulate itself, then these companies should fail because others will take their place. Isn’t that the theory Republicans?

Wall Street can go ahead and jump for joy every time the government bails them out but they have no idea what misery will trickle down to the rest of America. Trickle down theory works both ways; if wealth trickles down so does debt. This economic policy is clearly not working in the new global economy. There are no financial borders in which to preserve capital and bolster the wealth of a nation.

Debt has fueled growth for all of us. We all borrowed and things were fantastic. The middle class improved its standard of living on debt. Business improved its profits on debt and the Government paid for war, entitlements and subsidies with debt. Everyone was HAPPY HAPPY HAPPY! The debt has come due my friends and while we the middle class are now struggling to repay our debt the government is borrowing to pay for its debt and is called on to help big business pay their debt. The individual is held accountable but not big business?

WE ALL KNOW WHAT HAPPENS WHEN YOU BORROW FROM PETER TO PAY PAUL!!!

We are supposed to be one America. Find me a reason why we should continue the same economic policies that is not racist and partisan and small minded and liberal and elitist and blue and red and conservative and republican and democrat and everything in between? Tell me how we are going to afford all of this war on terrorism that is supposed to keep us safe when at this point we cannot afford our own military.

The greatest country on earth is begging Asia and the Middle East for funds. Work this all out and tell me how you can vote for John McCain? Barack Obama has his problems, believe me, but the time is now to boldly go where no one has gone before. The last time we tried, we were brow beaten and deceived and cheated and frightened into voting for 4 more years of George Bush?

Oh, that worked out real well.

R.I.P: More Wall Street Firms Go Bust

If you read me, you know that I have been screaming about the financial markets and all the debt that is being used to prop them up. Everyone kept telling me that I was being a “negative nelly” because I have been complaining that the unprecedented use of debt instruments was unsustainable. Every day we hear about more financial institutions who have bitten off more debt than they can chew; today we lost two more, Lehman Brothers and Merrill Lynch.

Now I think it is particularly ironic that the Republican’s own economic policies have fed upon themselves. 168 yr old Lehman Brothers, one of the hallmarks of Wall Street has crumbled under the weight of the debt driven economy. Merrill Lynch skirted the same fate by selling itself to Bank of America. The venerable bull got beaten by its own financial bull$#!%.

Citizens and businesses alike have been turning to the government for bailouts. Today, the government drew a line in the sand and refused to bailout Lehman. American International Group (AIG) is begging to borrow $40,000,000,000 and other institutions are quietly shopping themselves to foreign investors. For the umpteenth time this year, the Fed has increased the amount it will lend to financial institutions. I am concerned about how much the government has borrowed this year, at least $1,000,000,000,000, for bailouts, the Iraq War and the 2008 budget shortfall. There is plenty more nasty financial news to come, Citizens. Prepare Yourselves!

Let’s Face Facts: The Republican Economic Policies Have Failed

Now that we have had time to digest both Political Conventions, the gloves are off. In the next 60 days Americans have to decide once and for all the direction of this country. Many people were impressed with both shows and it appears that the polls are neck and neck once again. While we all want what’s best for the country, we all need to do a little math and ask ourselves the age old question; “Are we better off today than we were 4 years ago; in this case 8 years ago?”

We have had a Republican President for 8 years with a Republican Congress for 6 of those years. They lowered taxes for business and the wealthy that along with the billions spent on war and subsidies for large corporations etc. reversed the economic policies that Clinton had in place. The wealth was supposed to trickle down and spur economic growth. Sadly, the growth was not real, it was built on debt and we are now paying dearly for it. Many thought the Democratic Congress could accomplish positive change over the last 2 years but since they did not have enough of a majority to turn the tide, they now look really bad; part of the problem instead of the solution.

Though the following numbers are even worse now, these are documented facts as they are from the 2004 census:

-Median Household Income increased under Clinton from $40,422 in 1993 to $46,129 in 2000 when Bush took over. It has declined under Bush since then. In 2004, it was down to $44,389.

-Employment rate declined under Clinton from 6.9% in 1993 to 4% in 2000 when Bush took over. It has increased under Bush and in 2004; it was up to 5.5%.

-Poverty rate under Clinton declined from 15.1% in 1993 to 11.3% in 2000 when Bush took over. It has increased under Bush to 12.7%.

And don’t forget the most important. When Bush took over from Clinton the national debt was about $5.5 trillion dollars. The debt is now $10.6 trillion dollars. Yes, in 8 short years Bush has added $5 trillion to the debt; as much as the entire debt that we had in the whole history of the United States when he took office. He is also leaving the new incoming President, who ever that is, with a 2009 budget deficit of nearly $500 billion dollars; yes that is $ ½ a trillion dollars deficit for one year of running the government.

The Republicans have run the country into the ground. They were the only ones who got rich here. The middle class is suffering under staggering debt and losing their homes. Meanwhile the government has already lent Wall Street Banks over $500 billion dollars and they still give themselves million dollar bonuses even when they fail.

I am not saying that the Democrats are necessarily going to do much better; Obama has offered some pricey panaceas given the state of the budget and the debt. However, we cannot let John McCain keep the same failing policies while bringing even more right-wing religious conservatives into government with him. We all know that “Hope” is not a strategy but in this case, an uplifted spirit is still better than negative divisive politics. The Democratic Convention made me feel like anything could happen; the Republican Convention made me shake in my shoes. In these tough times, hope may be all we have and I’d rather have a positive spirit over the next 4 years than a negative one.

Federal Debt: How Much is Too Much?

I have been especially worried about this economic downturn because of the amount of debt associated with it. Not just for individuals but on the part of the federal government and its entities. The treasury and the federal reserve are borrowing and spending like wildfire to prop up the economy. The federal government has tacked on more debt in the past 8 years than it had acquired in its entire previous existence. The 2009 budget deficit is already close to $500 billion ($500,000,000,000) and the national debt is over 10 trillion ($10,000,000,000,000).

The government has the highest level of debt it has ever had. The American people have the highest level of debt they have ever had. Yet we don’t seem to be too worried. While we all worry about the state of the economy, many look to the government for help and the government is helping. Maybe we Americans simply do not understand how much the government is borrowing for all of the bailouts. Many Americans are suffering now because they didn't recognize their debt limit until it was too late. New York state is currently trimming its budget in order to combat its rising deficit before it becomes unmanageable. When will the federal government realize that it has borrowed too much? What amount will that be?

Manic Stock Market Does Not Inspire Confidence

Hello Monday! The stock market went down 180 points today but this is no longer unusual; 2008 is the year of break-neck rallies and steep declines and lately we do not even know what each day will bring. First crude prices skyrocketed because of worldwide demand that was apparently out of our control; India and China and the rest of the world were consuming so much more oil that it was out of our hands. Even the President went over to the Saudis begging for more production. Now the price of crude has dropped $35 per barrel since mid-July because inflation, America’s reduced consumption and a stronger dollar are helping to bringing the price down. What suddenly happened to world demand?

The Financials are hemorrhaging billions in cash to the point where we are numb to it. After borrowing countless billions from the Fed, they are still posting massive losses. Financials have tapped the Fed for at least $300B that we know of. Fannie Mae and Freddie Mac are on the brink of insolvency. No one seems to care that the government is borrowing money to finish out 2008, to pay for the war and all of these bailouts and that the 2009 federal deficit is already $1/2 trillion ($500,000,000,000) in the hole not to mention the federal debt of $10.6 trillion ($10,600,000,000,000). When will the taxpayer wake up and say enough is enough?

Consumer spending is 70% of GDP. Unfortunately, the consumer is out of funds right now and in debt up to their eyeballs. The consumer has been spending borrowed money for the last 7 years and now they have run out of sources to borrow since the credit markets have dried up. Real income has not budged this decade. Where will the consumer get the money to keep spending?

Right now, all of the behavior in the market is speculative; none of it makes any sense. Bad news is good news. Good news is bad news. How can the market reflect true economic reality when government bailouts, losses that fall short of wall street expectations and massive layoffs are considered good news these days?

What is the average person who does not understand the nitty gritty of the financial markets but is an investor through a 401k or retirement account supposed to think with the market yo-yoing back and forth, especially over the past 4 months. Regular folk are depending on the market for their retirement and this type of manic market behavior does not inspire confidence. When are we going to get back to the business of investing?

The Government Has Gone Mad: Blames Record Deficit on Own Failed Policies

The 2009 Budget Deficit is $482 billion, that is nearly ½ trillion dollars. The White House blames it on the faltering economy and the stimulus package.

They are blaming the stimulus package? The very package that was enacted to help boost the economy in the first place.

They are blaming the faltering economy? The mechanisms of its demise were accepted and presided over by this administration.

Then they tell us the deficit is not so bad because it is only 3.3% of GDP compared to the 2004 deficit which was 3.6% of GDP.

This is the rationale that we are given when this Administration inherited a $128 billion surplus in 2001. This is unacceptable. How can we sit by and actually accept this rationale. This is another ½ trillion that we have to BORROW!!! This will push the national deficit to over $10 trillion dollars. We have a bankrupt government propping up Wall Street. Congress just passed a bill that puts us on the hook for billions more to help stem the mortgage crisis and rescue Fannie Mae and Freddie Mac. We citizens should be rioting in the streets. I cannot write anymore, I have a headache from the veins popping in my brain as I absorb the unbelievable madness that is now the US government.

Calling All Consumers; Only You Can Save the Economy

Consumer Spending is 70% of GDP. Basically, America has no economy unless the consumer spends. If you read me, you know this irks me to no end as I do not like this house of cards economy based on debt. Nevertheless, this is the economy we have right now and unfortunately spending is slowing as the consumer has run out sources of funds. Technically, the consumer ran out of funds years ago. Real wages have not kept pace with inflation for quite a while now. Discretionary income has been under siege since the turn of the century. For better or for worse, we did not notice too much because 2002 ushered in the era of cheap money.

The fed reduction of the discount rate to a mere 1% and investors looking for a safer bet, after shying away from a deflated stock market due to the technology bust, combined with a whole host of factors to create the perfect storm; the housing boom. Lots of cheap money flooded the market. People afraid of being priced out of the housing market jumped in despite their incomes, speculators helped fuel the flames of demand and the inflation in house prices was a baby boomers dream. We bought, we sold, we invested, we cashed out and we spent and spent and spent. Suddenly we all had a lot to spend and when we spent too much on our credit cards, we rolled it all over into a new mortgage, or tapped more funds through another cash-out refinance, a larger home equity line of credit or a home equity loan. Everyone was on the same page; we all could keep up with the Joneses. And, all of this was a great boost to the economy...until it all crashed, as we all know too well for here we are.

So, where will the debt-laden consumer get the funds to keep spending now that food and energy costs have dramatically increased and many are defaulting on their mortgages and credit cards? Never fear, retailers will always find a way: “No money down, no interest til 2013” and a myriad of other incentives will connive us to keep spending. We have July back to school sales, a full 6 weeks before school starts, enticing us to come in now for school supplies for 5 cents, 25 cents and the like. We have the $2.99 gas for life specials to reel us in to purchase a new car and the free shipping and other perks to keep us buying online. The credit card companies need earnings, American Express’ stock fell today because even the 'premier' credit card borrower is becoming delinquent.

We had one stimulus package, we complied and spent those checks, and now some politicians are calling for another one. After all, the government and its entities have spent billions bailing out the financial institutions when the true economic bailout is aid to the consumer isn’t it. Hmmmmm.

Summertime and the Living...

Today I was thinking about summer and how much I love the summer and how much I love summer on Long Island. So, as the financial markets hit hurricane territory with another round of treasury-funded bailouts and billions more in loans to struggling financials, I was going to focus on enjoying the summer. Yet how can I ignore that since March, with the government bailout of Bear Stearns, the treasury has been putting out financial fires and plugging leaks with ever-increasing loans to the financial markets. And can it stop? No. Consider that Fannie Mae and Freddie Mac guarantee and/or insure up to $5 trillion dollars in domestic mortgages. They cannot fail, not over the Treasury's dead body anyhow.

I started this week talking about one of my favorite events of the summer on Long Island so I was going to push the financial turmoil aside and not dwell on the doom and gloom, as I am wont to do. Alas, I cannot dismiss the nagging question, "Where is the money coming from? The U.S. is nearly $10 trillion in debt and it has been running on deficit spending for years. Do U.S. residents not realize that we make up the shortfall by borrowing, much of the funds coming from foreign governments and institutions? The treasury technically does not have the money to be the puppet master; propping up the economy with rebate checks, propping up the financial markets with loans, propping up the housing market with tax breaks and lest we forget, the ever escalating tab for the Iraq War. In addition, the Treasury has already borrowed the entire trillion dollar Social Security surplus and needs to repay Social Security when its current funds dwindle beyond sustenance amount. Lastly, all of this occurred amidst enormous tax-cuts but I digress…

Today was a simple meander through eastern Suffolk County within reasonable driving distance. We were looking for closer destinations where we could enjoy ourselves since in previous years we had no economic concern for our far flung destinations. To the tip of the North Fork, the South Fork, the North Shore, the South Shore and the in-between, we simply named it and we went. So we have to set our sights within reason not only to economize but also to conserve gasoline. We decided to check out a few bayside villages/hamlets that we had previously skipped over in our quest to visit the even more glorious. We enjoyed the views of the bay and the biggest bonus for the children, plenty of playgrounds on the water. Top that off with some home-made ice-cream and we thoroughly enjoyed our dollar-wise weather-wise perfect day.

Countrywide Cousin IndyMac Bancorp Belly Up

Today, Freddie Mac and Fannie Mae assured the government that they are adequately capitalized and that talks of a bailout are premature. Thank goodness because America had the 2nd largest bank failure in history to deal with today. Federal regulators from the OTC (Office of Thrift Supervision) have shut down IndyMac Bancorp and the FDIC (Federal Deposit Insurance Corp.) will be running it as of Monday.

Of course we know what this means, if you have more than $100,000 deposited with IndyMac, you are in trouble because as we all should know, FDIC only insures a maximum of deposits up to $100,000 per depositor per banking institution. Of course every time a bank fails, experts remind us not to deposit more than $100,000 with any one bank just in case, but we do it anyway. IndyMac customers are in for the shock of their lives on Monday. Of course, we don't have all of the details and certainly have no idea how many people on Long Island will be affected.

IndyMac, based in California, was started in 1985 by no other than Angelo Mozilo and David Loeb, the founders of Countrywide Financial. Go Figure! Their greed has now multiplied into two huge financial bombs. IndyMac suffered nearly $1 billion in losses due to its primary business in sub-prime mortgages, many of which they were unable to sell to the likes of Freddie and Fannie. In addition, our very own Senator, Chuck Schumer helped to fan the flames of IndyMac's demise. In the last few weeks, after he voiced concerns about IndyMac's shaky operations, depositors withdraw over $1 billion leaving IndyMac with a lack of capital to sustain operations.

Once the FDIC depletes much of its cash on hand for the bailout, where will it get more funds from, o' taxpayers? Alas, I shake my head.