What is wrong with the US economy? Part 2

[Jimmy Snyder]

You seem to insinuate that capatalism without honesty, ethical and moral standards would be Communism.

I hate it when I have to explain 'em. Astronuc said "he had nothing against capitalism as long as it is based on ethical and moral standards". What he wrote after that indicated to me that he did not think capitalism was so based. Ergo, he has something against capitalism. If you have something against capitalism, then presumably, there is some thing in the world that is better than capitalism. Communism?

 

[edward]

Which political policies and more importantly HOW did they create the 'spark'? How did the 'repealed of Glass-Steagall' contribute? The loosening of which regulatory reigns, and HOW did this contribute?

Here is a good read on the repeal of Glass-Steagall from PBS:

After 12 attempts in 25 years, Congress finally repeals Glass-Steagall, rewarding financial companies for more than 20 years and $300 million worth of lobbying efforts. Supporters hail the change as the long-overdue demise of a Depression-era relic.

http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html

 

[edward]

I hate it when I have to explain 'em. Astronuc said "he had nothing against capitalism as long as it is based on ethical and moral standards". What he wrote after that indicated to me that he did not think capitalism was so based. Ergo, he has something against capitalism. If you have something against capitalism, then presumably, there is some thing in the world that is better than capitalism. Communism?

OK so now you are calling Astronuc a communist

 

[Jimmy Snyder]

OK so now you are calling Astronuc a communist

Syndicalism?

 

[BobG]

I hate it when I have to explain 'em. Astronuc said "he had nothing against capitalism as long as it is based on ethical and moral standards". What he wrote after that indicated to me that he did not think capitalism was so based. Ergo, he has something against capitalism. If you have something against capitalism, then presumably, there is some thing in the world that is better than capitalism. Communism?

It was an obscure comment. My interpretation was that: if he considered capitalism based on ethical and moral standards the #1 option, what was option #2, option #3, etc.

A slightly more interesting matrix weighing which has a bigger impact - the type of economy or corruption? (you could easily have a communist system based on bribery and corruption)

 

[Jimmy Snyder]

you could easily have a communist system based on bribery and corruption.

If Astronuc had followed up, I would have gotten to that eventually. I doubt he meant to say that there was something wrong with capitalism, just something wrong with corruption. But if I'm wrong, then his post comes close to the fallacy of 'guilt by association'. These guys are corrupt, these guys are capitalists, therefore capitalism is corrupt.

 

[mheslep]

mheslep; banks don't just suddenly start lending recklessly out of the blue. They are constrained by a set of strict regulations. And since the early 90's those regulations have gradually been loosened.

Where have the banking regulations been loosened? GLB allowed banks to acquire investment arms and vice versa. If it any anyway loosened the regulations of an entity acting as a bank (taking in FDIC deposits and loaning them out) I am not aware of it.

The key enactment in law was the repeal of the Glass-Steagall act, which, after some political wrangling, eventually unlocked the way for banking subsidiaries to hold mortgage-related assets. (see here for a treasury white paper http://www.occ.treas.gov/ftp/workpaper/wp2000-5.pdf)

Again my question was: HOW was it key? It was the investment banks: Lehman, Merril Lynch, Goldman that were running 30:1 leverages, not the FDIC banks. The investment banks failed, not the banks.

Other areas of regulation were also simulataneously loosened: risk weighting schemes of capital requirements (the whole of Basel II) and reserve requirements.

All this meant banks were now free to lend more, so they did.

And what was unleashed we all know.

What other areas of regulation? Basel II? What FDIC bank capital requirements were loosened? I'm not aware of any. How did FDIC banks lending more have anything to do with igniting the mortgage based crisis?[/QUOTE]


Edit:
Here's what President Clinton had to say on the GLB:

MARIA BARTIROMO

Mr. President, in 1999 you signed a bill essentially rolling back Glass-Steagall and deregulating banking. In light of what has gone on, do you regret that decision?
FORMER PRESIDENT BILL CLINTON

No, because it wasn't a complete deregulation at all. We still have heavy regulations and insurance on bank deposits, requirements on banks for capital and for disclosure. I thought at the time that it might lead to more stable investments and a reduced pressure on Wall Street to produce quarterly profits that were always bigger than the previous quarter. But I have really thought about this a lot. I don't see that signing that bill had anything to do with the current crisis. Indeed, one of the things that has helped stabilize the current situation as much as it has is the purchase of Merrill Lynch (MER) by Bank of America (BAC), which was much smoother than it would have been if I hadn't signed that bill.

http://www.businessweek.com/magazine/content/08_40/b4102000409948.htm

 

[jal]

There limits on ALL structures, capitalism, banking, etc.
It so happens that there was a flaw in the banking system that was discovered and surpressed by a few people who crossed their fingers and hoped for the best. ( A few market corrections every 5-7 years).
However, a few more experts probably saw the same flaw and saw a way to capitalize and make a fortune. (The hell with the fact that all saving would be wiped out).
Laws were not broken. The writers of the laws who might have spotted the flaw were silenced and overrulled.

I'm tempted to use the expression, "Laughing all the way to the bank", but the banking system has been destroyed and a new one need to be put into place.
jal

 

[edward]

If Astronuc had followed up, I would have gotten to that eventually. I doubt he meant to say that there was something wrong with capitalism, just something wrong with corruption. But if I'm wrong, then his post comes close to the fallacy of 'guilt by association'. These guys are corrupt, these guys are capitalists, therefore capitalism is corrupt.

You didn't wait for him to follow up. He does work for a living you know.

I think you just set some kind of record for twisting a person's words. It is a good example of someone reading something with a preconceived mindset, and then getting from it what they wanted to believe.

Can we get back to Whats wrong with the economy, and not try to second guess someones motivations?

More jobs lost:

Dec. 9 (Bloomberg) -- Sony Corp., the second-biggest consumer-electronics maker, plans to cut 8,000 full-time jobs as consumers curb spending on televisions, game machines and music players amid a global recession.

http://www.bloomberg.com/apps/news?pid=20601101&sid=aOFSQRJoiSs0&refer=japan

The economic downturn has not yet found a bottom, according to New York City Comptroller William C. Thompson Jr., who says huge job losses still lie ahead for the city.

“We’re projecting over the next two years probably about 165,000 jobs may be lost—of that probably about 35,000 on Wall Street,” he said.

http://www.cnbc.com/id/28140388

The following is what local leaders said Monday, when Anheuser-Busch InBev said it would slash 2,065 jobs.

Gov.-elect Jay Nixon:

“Our thoughts and prayers are with the Anheuser-Busch employees in St. Louis who learned they were losing their jobs today.

http://www.bizjournals.com/stlouis/stories/2008/12/08/daily16.html

Twin Cities health groups cut 613 jobs
Slow business and bad debt are taking a toll on an industry once thought to be "recession proof."

http://www.startribune.com/business...qyP4O:DW3ckUiD3aPc:_Yyc:aULPQL7PQLanchO7DiUsA

The snowball has only begun to roll.

 

[Jimmy Snyder]

I think you just set some kind of record for twisting a person's words. It is a good example of someone reading something with a preconceived mindset, and then getting from it what they wanted to believe.

Only to have that record broken in post #1013, but I'm glad to hear that you won't try to second guess my motivations any more.

 

[Astronuc]

And what if it isn't so based?

Then make it [capitalism] so based. I have an expectation of stewardship, which involves fiduciary responsibility, due diligence, and importantly an equitable, just and fair reciprocal relationship between management and labor.

Communism?

No, particularly if one is referring to the various oligopolies/oligarchies we've seen over the past century, e.g. Russia, China, E. Europe, . . . .

 

[fuzzyfelt]

I asked my husband to give his opinion, as he does this for a living, but not on the debt side, on how we got here and what is happening, and he wrote a lot:

I have learned a few things that are kinda fundamental over time - the foremost of which is that with retail products, if you offer the general public one which is really good alongside one which is really bad, then there is some irrisistable force to choose the wrong one (plenty of mkt psychology discussion as to the why's of that exists). well, the last cycle has been no different in this regard, but sadly the asset in question was a crucial one. People hadn’t had access to the equity in their homes until like 10 years ago, there was a problem in that people were asset rich, yet (investible) asset poor. So the IBs provided people access to the equity in their houses, good. But, it went beyond the 10 or 15% that would have been fine, too 100 and 110% which was too much, and worse still, people took this money and (yep) bought more houses, compounding the issue by a factor function or two, and the banks on their side did the same... to the point where one person, one piece of collateral and one bank had like sextuple counted the same asset. So, this is called leverage and we all do it in order to try and get returns in excess of risk free. BUT a crazy and very capitalistic thing kicks in then --- greed. It is as irrefutable as Newtons gravity and other axioms, that risk and reward are tied together completely. Were banks kidding themselves that a AAA rated mortgage security could return 15% (say, 5 times risk free), were the general public kidding themselves that on a 100k annual income they could get 500k investment returns on 5mio worth of investment properties: YES. But it happened. You can’t make excess returns without taking excess risks – it is really, really simple. If you don’t think you are taking excess risk to earn twice the govt bond (risk free rate), then you simply don’t understand yet the risks you are taking. No exceptions.

So, the leverage thing is an issue, since if the 6x geared thing goes down by 1/4 then that is 1.25x the original asset. The thing that has exacerbated everything here is a very incorrect assumption of liquidity that others have touched on here. Most risk analysis suggests that if you have a portfolio of assets then a percentage might go bad. It ignores the systemic issues that can quickly arise, i.e., if one is bad, then aren’t they probably all bad. This happened in 2001 with tech names, and in 1998 with emerging market currencies. Well, the problem is that by and large all quantitative models we use throughout finance are based on variations of normal distributions. There is a bit of stuff that allows you to amend these for kutosis, and be a black swan, Nasim Taleb, kinda guy. But the average of both over a long enough period is basically a normal distribution anyway, so why bother. Most the of the statistical and risk management trades we put on at banks are mean reversion based strategies in one form or another - and so, hey presto, normal returns/normal distribution always wins. What we are bad as a humanity at is acknowledging when we are in a period of excess returns, and this denial of the truth can be supported by that most wonderful human characteristic - optimimism. It is what gives us the courage to say ITS DIFFERENT THIS TIME when clearly and demonstrably over the years - it isn’t.

So, where are we today --- paying the price for the fact that it was a one off event that everyone was allowed to spend their equity in their houses buying plasmas and large SUVs. This is a controversial perhaps, unpalatable certainly, truth --- low income earners are in a really difficult position to achieve above risk free returns for any lengthy period since they are unable to afford the big drawdowns that occur in the generally upward trajectory of asset values. (why upward - simply enough put its population growth).

What do i think is happening --- well, learned people in the business say that the debt super cycle is over. Simply put – it is not going to be acceptable going forward to say that you made your money by gearing up the assets you had, and on selling it. Remember the days when professions, and skills were valued - we are likely going back to that world again (since banks appear unlikely ever to allow us to gear up again, shareholders (incl governments) will dictate that.

So it would appear that a whole generation has gone and lost their collective assets (savings) and we are now in a position where that will have to be built up again. Difficulty is you can’t build savings without curtailing consumption. Now the biggest global consumer has this whole century been the USA, hence things like USD being the currency etc. I don’t subscribe in any way to their being emerging market decoupling, the planet has become economically smaller rather than bigger – the headline things you need to know are that the US consumes, and China constructs (and you can hang all the other theories off these. Hence if the US goes into a period of saving, then China goes into declining production, raw materials lose some value and so on and so forth.

Today – we have the Fed/Treasury tying really hard to offset this move to saving by proactively filling the gap and handing money to all and sundry, taking equity against this. This needs to be done. Couple of problems tho: if I gave you $1000 today, would you spend it, or put it in the bank because either you were scared you would lose your job, or you thought stuff was going to get cheaper and you could buy more with it in January? This is deflation, and it is what is spooking everyone. Or do you spend it? In which case problem solved.

So, S and P index – the global barometer of equity markets: well today it is around 900. Down from a high of 1500. Sounds pretty bad, but if you added up all the macro (economic) and micro (companies) issues then you would think it sounds like it ought to be 600 (no real science on this, but a lot of trough earnings arguments and the like suggest that this would be a cycle low point). I think that is true. What accounts for the 300 extra points right now is the huge and genuine unprecedented moves by Fed/Treasury. Previously, the mistakes they made were to be too laissez faire (eg, 1930s), and not move fast enough or far enough. This time they are desperately trying to get in front of the curve, and do something to fix what they think will happen in the worst case. The market seems to believe they have things on the right track, otherwise we would be at 600. Two paths from here – either they are wrong, and we have a big issue since they have wasted all this money (the deflation, or save at all costs, argument), or very limited upside, because we have a lot of the recovery in economies and assets priced in already – e.g., next year we believe things are on track, yet we have a market only back at 1000 or 1100.

I hope you aren’t offended that in all of this I don’t think I really have resorted to eco jargon often. You can put all these concepts into terms of GDP, GNP, Inflation, Current Accounts, Unemployment, M1/M2/M3, discount and rep rates, NTAs EBITDAs NPLs EPS and Price to Book --- but you end up with these basic concepts falling out. If I can expand on any of these, or actually describe some of them in the correct eco or micro terminology please let me know.

 

[Jimmy Snyder]

Then make it [capitalism] so based.

I'll do my best. What are your plans while I'm at it? Do you agree that capitalism is no more condusive to corruption than any other economic system? If so, why do you mention capitalism in a criticism of corruption? If not, then why do you care whether capitalism is so based or not? What is this other system that is so clearly better than capitalism that no mention of its name need be made? Would you support fascism if it weren't corrupt?

 

[Astronuc]

I'll do my best. What are your plans while I'm at it? Do you agree that capitalism is no more condusive to corruption than any other economic system? If so, why do you mention capitalism in a criticism of corruption? If not, then why do you care whether capitalism is so based or not? What is this other system that is so clearly better than capitalism that no mention of its name need be made? Would you support fascism if it weren't corrupt?

I suppose at this point, we'd have to start defining exactly what is meant by 'capitalism', 'socialism', 'communism', 'anyism'. And I don't mean grab a simple one-line dictionary definition, but I mean paragraphs and pages for each system. The devil is in the details - and this would be a subject of a separate thread in the social sciences forum.

Certainly capitalism is no more conducive to corruption than any other socio-economic system (or socio-politico-religio-economic system, i.e. society/culture).

My comment is a reaction to those who espouse the virtues (and/or successes) of capitalism while ignoring the downside (or corruption, or harm that is done).

I care whether any system is corrupt or not. I care whether people are harmed by the prevailing socio-economic systems in which they live, and even external systems. I care about injustice, inequity and deprivation, not so much for myself, but for others.

I see deficiencies in the US economic system that need fixing. I also see deficiencies in the global systems and each and every national system that need fixing. Given enough time, I might make a small dent in all that.

 

[BobG]

It was an obscure comment. My interpretation was that: if he considered capitalism based on ethical and moral standards the #1 option, what was option #2, option #3, etc.

A slightly more interesting matrix weighing which has a bigger impact - the type of economy or corruption? (you could easily have a communist system based on bribery and corruption)

If Astronuc had followed up, I would have gotten to that eventually. I doubt he meant to say that there was something wrong with capitalism, just something wrong with corruption. But if I'm wrong, then his post comes close to the fallacy of 'guilt by association'. These guys are corrupt, these guys are capitalists, therefore capitalism is corrupt.

Is corruption a bad thing for the economy? As Collis Huntington said:

If you have to pay money [to a politician] to have the right thing done, is is only just and fair to do it... If a [politician] has the power to do great evil and won't do right unless he is bribed to do it, I think... it is a man's duty to go up and bribe

Of course, he also said, "Whatever is not nailed down is mine. What I can pry loose is not nailed down."

Huntington was one of the famous railroad robber barons that built the transcontinental railroad and his Central Pacific gang was far less corrupt than the Union Pacific gang working from the other side.

 

[Astronuc]

If you have to pay money [to a politician] to have the right thing done, is is only just and fair to do it... If a [politician] has the power to do great evil and won't do right unless he is bribed to do it, I think... it is a man's duty to go up and bribe

Reminds me of a comment made by Duane Andreas of ADM. I'd have to dig around for it, but it was cited in a speech by Raj Patel. It was related to the fact that 4 US companies control the grain markets in the US.

 

[mheslep]

... moves by Fed/Treasury. Previously, the mistakes they made were to be too laissez faire (eg, 1930s), and not move fast enough or far enough...

Where'd you get that from? I'd say the last thing the Fed could be called in reaction to the '29 financial panic was, unfortunately, laissez faire. The Fed clamped down hard on the money supply, cut off liquidity.

 

[Jimmy Snyder]

Is corruption a bad thing for the economy?

It's hard to say. Show me an economy without corruption in it and I'll have your answer for you.

I had a friend from Ukraine who moved to the US. He was having trouble with a government agent in getting his father's Social Security payments started. The agent was giving him a hard time even though it was clear that the payments were legitimate. He said that in the Ukraine he would have brought a bottle of Vodka to the meeting and forget to take it with him when leaving. But in the US he had no way of greasing the wheels.

 

[jal]

Hi fuzzyfelt !
I found your expose enlightening.

If the readers are not responding to what you have said ... it's because everyone has neglected to learn about money.

I'm the first to admit it.

I'm sure that you must have made debatable points. (duh not an expert therefore I couldn't find them)
However, there exist a whole spectrum of opinions and fixes. See the following CNN articles.

http://money.cnn.com/galleries/2008/fortune/0812/gallery.market_gurus.fortune/index.html
8 really, really scary predictions
Dow 4,000. Food shortages. A bubble in Treasury notes. Fortune spoke to eight of the market's sharpest thinkers and what they had to say about the future is frightening.
------
jal

 

[mheslep]

Hi fuzzyfelt !
I found your expose enlightening.

If the readers are not responding to what you have said ... it's because everyone has neglected to learn about money.

I'm the first to admit it.

I'm sure that you must have made debatable points. (duh not an expert therefore I couldn't find them)
However, there exist a whole spectrum of opinions and fixes. See the following CNN articles.

http://money.cnn.com/galleries/2008/fortune/0812/gallery.market_gurus.fortune/index.html
8 really, really scary predictions
Dow 4,000. Food shortages. A bubble in Treasury notes. Fortune spoke to eight of the market's sharpest thinkers and what they had to say about the future is frightening.
------
jal

Rodgers wisdom:

The key in times like these is to stay solvent so you can load up when opportunity comes.

 

[Andre]

I asked my husband to give his opinion, as he does this for a living, .

Thank you very much Fuzzyfelt. I'll read it once more. Indeed I should have learned about economics a bit more.

 

[kronon]

Astronuc, nicely said in #1029.

 

[Astronuc]

California running out of money
http://news.yahoo.com/s/csm/20081210/ts_csm/abellyup

Sacramento, Calif. – California lawmakers just got a Henry Paulson-like ultimatum from state officials: If they don't act, the state could be forced to suspend road, bridge, and other public-works projects as early as next week. Come March, California will be out of cash for even day-to-day operations.

A confluence of the national recession and years of legislative budget games is squeezing the Golden State as never before. Although it's not the largest budget gap the state has ever faced, this time it will be harder for California to get help from private lenders. Standard & Poor's now ranks it lower than any other state except Louisiana, which shares the same rating.

The question is: Will lawmakers finally make the tough budget decisions they've put off for so long?

"Because California does have a perennial budget crisis, it's very easy to fall into the 'boy who cried wolf' syndrome," says Dan Schnur, director of the Jesse M. Unruh Institute of Politics at the University of Southern California. "This time the sky is really falling."

The state faces a $28 billion budget shortfall over the next two years. If nothing is done, nearly $5 billion in public-works projects could be halted in little more than a week for lack of bond sales – everything from bridge replacements to a new highway tunnel and billions of dollars' worth of school construction, according to state Treasurer Bill Lockyer.

Already, the state failed to attract enough buyers three weeks ago to sell all of the bonds it had floated, he told state lawmakers Monday. "Expecting investors to purchase our bonds now, when we can't agree on a budget that lenders can rely on, is like expecting someone to buy a stock when they know it's losing value," said Mr. Lockyer.
. . . .

The majority of states are looking at shortfalls in current budgets and reduced revenues for next year.

. . . .
"It's not because of [California's] economy, because it's deep and diverse," says David Hitchcock, primary credit analyst for California with Standard & Poor's. "It's because, financially, they've had budgets that have not proved realistic. They've had large deficits and they've only been able to pay for their budgets through borrowing for the last couple years.". . . .

Bushenomics!

Mr. Chiang said the state may be forced to seek special loans at exorbitant rates or issue IOUs to state workers and vendors, further damaging the California economy.

"Failure is not an option here," said Chiang, referring to the need to align state spending and revenues. "It would take years to recover ... deepening and prolonging the recession."
. . . .

So they could just stop spending money until the revenues catch up.

 

[OmCheeto]

Thank you very much Fuzzyfelt. I'll read it once more. Indeed I should have learned about economics a bit more.

I read it also. It seemed a realistic analysis of the problem. But we science geeks have never been too overly concerned with economics.(see Faraday and Tesla: died paupers) Not to say that one of us should not have been watching the chicken coop. But who's going to decide who that is?(Money is so boring when there is science to be done...)

Astro said something to the effect that he has no problem with something as long as it is practiced ethically. I believe the former chairman(Greenspan) said something to the same effect a few weeks ago.

There have been a few mistakes made in the past couple of decades, by both democrats and republicans. Did Fuzzy's hubby have any suggestions as to how to fix this mess with the least amount of fuss and muss?

I've been feverishly pumping money into the system for the last 4 months, trying to reduce my debt load down to zero, such that when the sun again begins to shine, I'll be poised for the greed stampeed.

Kidding!

I'll die a pauper like all good geeks.

 

[kronon]

"I'll die a pauper"

And you'll probably be better off for it! (the being poor part that is, not the dying)

Is Homo-Economicus happier?
"...it appears that our concern with improving human welfare through greater material
wealth is probably exaggerated, at least in economically developed countries".

I really enjoyed this paper...it also relates back to some of the things Astro was saying.

http://myweb.lmu.edu/jkonow/Hedonistic Paradox.pdf

 

[Astronuc]

Retailer KB Toys files for bankruptcy protection
http://news.yahoo.com/s/ap/20081211/ap_on_bi_ge/kb_toys_bankruptcy

NEW YORK – In another sign of the grim holiday season, KB Toys filed for bankruptcy protection for the second time in four years on Thursday and plans to begin going-out-of business sales at its stores immediately.

The 86-year-old company said in a filing that its debt is "directly attributable to a sudden and sharp decline in consumer sales" because of the poor economy.

That a toy retailer filed for bankruptcy just before Christmas shows how bleak things have become, since such stores make up to half of their sales during the holidays. But analysts expect toy sales this holiday season to be flat or down slightly from last year's total of $10.4 billion, according to market research firm NPD Group, because consumers are cutting back amid the recession.

In response, toy retailers, including KB Toys, amped up their discounts.

KB Toys had aggressively cut prices to entice cash-strapped shoppers, offering hundreds of toys for $10 or less. It also expanded its value program, which offers deals on new items each week, and offered "Buy 2, Get 1 Free" promotions.

. . . .

There will be bargains, but then a lot of people without jobs.

New unemployment claims surge unexpectedly
http://news.yahoo.com/s/ap/20081211/ap_on_bi_ge/financial_meltdown

WASHINGTON – New claims for jobless benefits rose more than expected last week, exceeding even gloomy expectations for an economy stuck in a recession that seems to be deepening.

The Labor Department reported Thursday that initial applications for jobless benefits in the week ending Dec. 6 rose to a seasonally adjusted 573,000 from an upwardly revised figure of 515,000 in the previous week. That was far more than the 525,000 claims Wall Street economists expected.

Elsewhere, the U.S. trade deficit rose unexpectedly in October as a spreading global recession dampened the once-strong sales of American exports and the volume of oil imports surged by a record amount, the Commerce Department said.

More layoffs were announced Thursday. New Britain, Conn.-based tool maker Stanley Works said it plans to cut 2,000 jobs and close three manufacturing facilities, while Sara Lee Corp., known for food brands such as Jimmy Dean and Hillshire Farm, said it will cut 700 jobs as the Downers Grove, Ill.-based company outsources parts of its business.

. . . .

In our region, a Georgia Pacific plant will reduce staff by 25% by mid Jan 09. I have to credit them for attempting to help place workers in other jobs in the area.

Bank of America to cut up to 35,000 jobs over three years!


I heard some expectation that the GDP will shrink 4% (annual basis I expect) in the 4th Q08, and about 3% in the next two quarters, and 1% in the third quarter 09.


China's imports have dropped about 2%.

The Nation's international deficit in goods and services increased to $57.2 billion in October from $56.6 billion (revised) in September, as exports decreased more than imports. The imports are down, but so are exports. The drop in oil price and demand certainly helped.

Exports decreased to $151.7 billion in October from $155.1 billion in September. Goods were $104.8 billion in October, down from $107.8 billion in September, and services were $46.9 billion in October, down from $47.3 billion in September.


Frankly I'd rather we (the US) had the surplus and were looking for ways to invest elsewhere, i.e. they buy we invest, rather than we borrow and buy.

 

[Al68]

I have an expectation of stewardship, which involves fiduciary responsibility, due diligence, and importantly an equitable, just and fair reciprocal relationship between management and labor.

The problem with expectations is that when the expectations are subjective, reality will always fall short of them. No two people will ever agree on what "just and fair" means.

I assume that you wouldn't consider expectations on your part to imply an obligation to servitude on anyone elses part.

Of course things are much simpler if the priorities are liberty, and no involuntary servitude, and the right of every individual to own, buy, sell property, and the right to contract. In a perfectly free economy no exchange of anything of value ever takes place for any reason, unless each party comes out ahead in the deal. Not everyone will agree the exchange was "just and fair", but it was voluntary.

A free person's economic decisions aren't subject to being restricted because they aren't "fair and just" according to someone who isn't a party to the transaction.

 

[jal]

Anybody interested in some gift cards?
jal

 

[Astronuc]

Equities (stock) markets are down as the US government (Senate) fails to pass the 'bailout' package for the US domestic automobile industry.

Stock futures point to sharply lower open
http://biz.yahoo.com/ap/081212/wall_street.html
Friday December 12, 6:57 am ET
By Sara Lepro

Wall Street heads for sharply lower open after Senate rejects bailout bill for automakers

NEW YORK (AP) -- A dejected stock market headed for a plunge at the opening of trading Friday as the Senate's rejection of a $14 billion lifeline for the auto industry intensified investors' concerns about a deepening recession.

The defeat of the bailout bill late Thursday has prompted calls from lawmakers for the Bush administration to use a portion of the $700 billion financial rescue package to prop up the struggling companies. The bill failed after the United Auto Workers refused to meet Republican demands for big wage cuts.

General Motors Corp. and Chrysler LLC have said they could run out of cash within weeks without government help. Ford Motor Co., which would also be eligible for aid under the bill, has said it has enough cash to make it through next year.

The failure of the bill is feeding investors' concerns about job losses. More evidence of the ravaged labor market came late Thursday, as Bank of America Corp. said it expected to cut as many as 35,000 jobs over the next three years, including some from investment bank Merrill Lynch & Co., which it agreed to buy in September.

Dow Jones industrial average futures dropped 310, or 3.61 percent, to 8,287. Standard & Poor's 500 index futures fell 40.40, or 4.62 percent, to 834.10, while Nasdaq 100 index futures fell 45.00, or 3.78 percent, to 1,145.00.

Meanwhile, more glum economic data is expected Friday. The Commerce Department will release its retail sales report for November at 8:30 a.m. EST. The Labor Department is expected to release the producer price index for November at the same time. Later Friday morning, the Commerce Department will issue its report on business inventories for October.
. . . .
Overseas, Japan's Nikkei stock average plunged 5.56 percent. In afternoon trading, Britain's FTSE 100 was down 3.92 percent, Germany's DAX index was down 4.80 percent, and France's CAC-40 was down 5.35 percent.

Meanwhile - I heard an interview with Elizabeth Warren yesterday. She mentioned that a study by Credit Suisse indicates that 1 in 7 (or ~16%) of mortgages are at risk of foreclosure.

What Does $700 Billion Buy Taxpayers?
http://www.npr.org/templates/story/story.php?storyId=98123372

With the reduction of $2 trillion in lines of credit to consumers and the contraction or failure of the US auto industry, that would mean a significant hit on the GDP since about 16% of households represents a significant portion of the consumer market.

I also read an article that Cerebrus Capital, the private equity firm which owns Chrylser and GMAC (or part of it) may go belly up without the aid, and so may some of the co-creditors in their deals.

 

[Art]

Just to further erode confidence ;

$50bn fraud charge at hedge fund

The former chairman of the Nasdaq stock market has been arrested and charged with securities fraud, in what may be one of the biggest fraud cases yet.

Bernard Madoff ran a hedge fund which ran up $50bn (£33.5bn) of fraudulent losses and which he called "one big lie", prosecutors allege.

Mr Madoff is alleged to have used money from new investors to pay off existing investors in the fund.

His lawyer said he would fight to get through these "unfortunate events".

The 70-year-old has been released on a $10m bail.

http://news.bbc.co.uk/2/hi/business/7779442.stm

 

[mheslep]

http://biz.yahoo.com/ap/081212/wall_street.html

...Dow Jones industrial average futures dropped 310, or 3.61 percent, to 8,287. Standard & Poor's 500 index futures fell 40.40, or 4.62 percent, to 834.10, while Nasdaq 100 index futures fell 45.00, or 3.78 percent, to 1,145.00.

Only down 60 points as of Noon EST.

 

[Astronuc]

Jim Rogers calls most big U.S. banks "bankrupt"
http://www.reuters.com/article/newsOne/idUSTRE4BA5CO20081211

NEW YORK (Reuters) - Jim Rogers, one of the world's most prominent international investors, on Thursday called most of the largest U.S. banks "totally bankrupt," and said government efforts to fix the sector are wrongheaded.

Speaking by teleconference at the Reuters Investment Outlook 2009 Summit, the co-founder with George Soros of the Quantum Fund, said the government's $700 billion rescue package for the sector doesn't address how banks manage their balance sheets, and instead rewards weaker lenders with new capital.

Dozens of banks have won infusions from the Troubled Asset Relief Program created in early October, just after the Sept 15 bankruptcy filing by Lehman Brothers Holdings Inc. Some of the funds are being used for acquisitions.

"Without giving specific names, most of the significant American banks, the larger banks, are bankrupt, totally bankrupt," said Rogers, who is now a private investor.

"What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent," he said. "What's happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics."
. . . .

Rogers is a well known contrarian, and be been really wrong sometimes, but then he's probably been more right than wrong as demonstrated by his wealth.

 

[Astronuc]

GM to temporarily close 20 plants to slash output
http://news.yahoo.com/s/ap/20081212/ap_on_bi_ge/gm_cuts

NEW YORK – General Motors Corp. said Friday it will temporarily close 20 factories across North America and make sweeping cuts to its vehicle production as it tries to adjust to dramatically weaker automobile demand.

GM said it will cut 250,000 vehicles from its production schedule for the first quarter of 2009, which includes a cut of 60,000 vehicles announced last week. Normal production would be around 750,000 cars and trucks for the quarter, spokesman Tony Sapienza said.

Many plants will be shut down for the whole month of January, he said, and all told, the factories will be closed for 30 percent of the quarter.
. . . .
The move affects most of GM's plants in the U.S., Canada and Mexico. During the shutdowns, employees will be temporarily laid off and can apply to receive a portion of their normal pay from the company. They can also apply for state unemployment benefits, Lee said.

GM and nearly all automakers who sell in the U.S. are mired in the worst sales slump in 26 years. GM reported its sales in the U.S. plunged 41 percent in November and are down 22 percent for the first 11 months of the year compared with the same period last year.
. . . .

There are a number of suppliers in the NE (and perhaps other parts of the country) that will apparently close if any of the 3 domestic automakers goes into bankruptcy.

 

[Greg Bernhardt]

SEC knew about Madoff and did nothing. wtf!?
http://www.portfolio.com/news-markets/top-5/2008/12/12/SEC-in-Bernard-Madoff-Fraud

 

[jal]

How long is a life sentence in the USA? Does it end when the convict reaches 70 yrs old?
He is 70 now. By the time he gets convicted he could be dead of old age.
jal