What is wrong with the US economy? Part 2

[Astronuc]

The 65 mpg Ford the U.S. Can't Have
http://finance.yahoo.com/loans/article/105735/The-65-mpg-Ford-the-U.S.-Can't-Have

It's too expensive to import, and it would cost too much to build in the US.


Huh? What is wrong with this picture?

 

[Andre]

The 65 mpg Ford the U.S. Can't Have..[/url]

Only 65 mpg? Check my car

The Peugeot 308 currently holds the world record of the most fuel efficient mainstream car, averaging 3.13 L/100 km (75 mpg–U.S. / 90 mpg–imp) over a distance of 14,580 kilometres (9,060 mi).[2]

 

[nuby]

Lots of stock buyback announcements today: Microsoft 40B , HP 8B, and Nike 5B.

When it comes to the value of the stock market vs. the value of the dollar, it should be clear our government prefers the stock market over the dollar (for the last 80 years, anyway). And most corporate executives know these government handouts will increase the value of their stock. Maybe now would be a good time to invest?

 

[Jimmy Snyder]

It's too expensive to import, and it would cost too much to build in the US.
Huh? What is wrong with this picture?

Those are two reasons, but the main reason is:

"We know it's an awesome vehicle," says Ford America President Mark Fields. "But there are business reasons why we can't sell it in the U.S." The main one: The Fiesta ECOnetic runs on diesel.

 

[edward]

There are a number of clean burning new generation diesels about to hit the U.S. market. The Volkswagen Jetta TDI even gets the buyer a $1,300 federal tax credit.

http://www.tucsonvw.com/

Edit. I see there isn't a 2009 Jetta TDi yet in stock locally.

 

[Astronuc]

Those are two reasons, but the main reason is:

"We know it's an awesome vehicle," says Ford America President Mark Fields. "But there are business reasons why we can't sell it in the U.S." The main one: The Fiesta ECOnetic runs on diesel.

Yeah - I know about the diesel issue. But they can't just put a gasoline engine in it. OK - so it won't get 65 mpg, but will it get 50-55 mpg? If so, it beats 20-30 mpg.

Apparently the Europeans don't have as strict a NOx/sulfur limit as the US. I don't like being in rush hour traffic or on congested highways/autobahns in Europe since the reek of diesel exhaust.

 

[Astronuc]

Lots of stock buyback announcements today: Microsoft 40B , HP 8B, and Nike 5B.

When it comes to the value of the stock market vs. the value of the dollar, it should be clear our government prefers the stock market over the dollar (for the last 80 years, anyway). And most corporate executives know these government handouts will increase the value of their stock. Maybe now would be a good time to invest?

Looks like MS is going to dump a bunch of cash, and I'd expect some options will be exercised. MS also upped the dividend.

 

[edward]

The administration has added items other than just mortgages to the bail out list.

The three-page rescue plan sent to Congress Sept. 20 empowers Treasury Secretary Henry Paulson to purchase mortgage- related securities from U.S. financial companies. The administration widened the scope of bad loans that may be acquired, potentially including car loans, credit-card debt and other devalued assets held by banks.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a7iCv1F0kuvQ&refer=home


With nearly $800 billion in credit card debt in this country, that could increase the bailout by a very significant figure.

http://www.answerbag.com/q_view/132810

 

[mheslep]

Only 65 mpg? Check my car

Yeah - I know about the diesel issue. But they can't just put a gasoline engine in it. OK - so it won't get 65 mpg, but will it get 50-55 mpg? If so, it beats 20-30 mpg.

Apparently the Europeans don't have as strict a NOx/sulfur limit as the US. I don't like being in rush hour traffic or on congested highways/autobahns in Europe since the reek of diesel exhaust.

Actually with regards to diesel I believe particulate matter is the larger problem. The US standards are extremely high. I doubt the Peugeot 308 would be legal here.

Edit: Euro 4 vs EPA TII B5:
http://www.greencarcongress.com/2007/04/nissan_to_intro.html

...Meeting Tier 2 Bin 5 regulations requires an additional 83% reduction in NOx emissions from Euro 4 levels, and a 75% reduction in PM...

Hard but doable apparently by Nissan.

GM's Lutz addressed the subject too regarding the Volt which will be gas electric here, diesel or gas electric in Europe, in part because of the US emissions standards, in part because he claims gasoline ICE is closing on diesel in efficiency.
http://www.gm-volt.com/2007/07/14/diesel-volt/

 

[Astronuc]

I think anyone could put a gasoline engine in the Pugeot 308 for it to be legal in the US. Let GM/Chrysler/Ford/Honda do their own version.

Clearly it's possible to get a high mileage car in the US. The Big 3 have been fighting CAFE for how long?


Also - another volatile day on the Stock market

Marketwatch (9/22/08) - Dow industrials slide 370 points as Wall Street tries to assess bailout.

Oil's biggest gain ever - Crude makes its biggest one-day price gain since 1984 when futures first began trading. Oil closes up $16 to $120, but blasts as high as $130.

Not a sign of strong fundamentals.

 

[turbo]

Finally, a sane politician, as opposed to the screaming hair-on-fire neocons who insist that Congress must act now to give Paulson free rein to hand out a trillion dollars to his Wall Street cronies.

I have proposed a three part plan to accomplish that goal which includes a five-year, 10% surtax on the income of individuals above $500,000 a year, and $1 million a year for couples; a requirement that the price the government pays for any mortgage assets are discounted appropriately so that government can recover the amount it paid for them; and, finally, the government should receive equity in the companies it bails out so that when the stock of these companies rises after the bailout, taxpayers also have the opportunity to share in the resulting windfall. Taken together, these measures would provide the best guarantee that at the end of five years, the government will have gotten back the money it put out.

Second, in addition to protecting the average American from being saddled with the cost, any serious proposal has to include reforms so that we end the type of behavior that led to this crisis in the first place. Much of this activity can be traced to specific legislation that broke down regulatory safety walls in the financial sector and allowed banks and others to engage in new types of risky transactions that are at the heart of this crisis. That deregulation needs to be repealed. Wall Street has shown it cannot be trusted to police itself. We need to reinstate a strong regulatory system that protects our economy.

Third, we need to address the needs of working families in this country who are today facing very difficult times. If we can bail out Wall Street, we need to respond with equal vigor to their plight. That means, for example, creating millions of jobs through major investments in rebuilding our crumbling infrastructure and creating a new renewable energy system. We must also make certain that the most vulnerable Americans don't freeze in the winter or die because they lack access to primary health care.

Finally, we need to protect ourselves from being at the mercy of giant companies that are "too big to fail," that is, companies who are so large that their failure would cause systemic harm to the economy. We need to assess which companies fall into this category and insist they are broken up. Otherwise, the American taxpayer will continue to be on the financial hook for the risky behavior, the mismanagement, and even the illegal conduct of these companies' executives.

http://news.yahoo.com/s/thenation/20080922/cm_thenation/45362953

 

[CaptainQuasar]

 

[OmCheeto]

I think anyone could put a gasoline engine in the Pugeot 308 for it to be legal in the US. Let GM/Chrysler/Ford/Honda do their own version.

Clearly it's possible to get a high mileage car in the US. The Big 3 have been fighting CAFE for how long?

Step two of my "solve our economic problems" plan.

Fire all detroit execs. No billion dollar severance packages.

Put the 10 greenest(as in new, not worm eaters...) electrical engineers in charge of the corporations.

Tell them to to reorganize their corporations into something that will generate the most efficient vehicles on the planet. Promise them a quadrupling in pay if they succeed.
Tell them to give a $10,000 bonus to each engineer who does not say; "It cannot be done".
Tell them to fire the rest.

A couple of years ago I saw a SmartCar and researched it and found that it got close to 100mpg(euro-diesel).

My brother bought one last month(USA-gas) that gets worse gas mileage than his 1972 Toyota.

2 fewer seats, and no room for improvement. hmm.. 2008-1972= 36 years of nada single improvement. Unless you count of course shiny things.

DIY'ers all around me are getting better than 200mgp(equivalent) from their home-brewed EV's.

can anyone explain a credit derivative to me in 50 sentences or less...?

 

[mheslep]

...DIY'ers all around me are getting better than 200mgp(equivalent) from their home-brewed EV's...

So do golf carts, no DIY required.

 

[OmCheeto]

So do golf carts, no DIY required.

DIY EV-Porsche 914's, to my knowledge, are not allowed on the golf courses.

And they do better than 5 mph.

What is wrong with the US economy, is simply a matter of perception...

A lot of perceptions that is.

 

[mheslep]

DIY EV-Porsche 914's, to my knowledge, are not allowed on the golf courses.

And they do better than 5 mph.

A DIY EV 914 probably has about the same range as a golf cart. And w/o regen braking a converted 914 will not get anywhere near 200 mpg equivalent unless it is downhill all the way.

 

[edward]

Where did that bill to regulate Fannie and Freddie go? $200,000,000 spent by lobbyists may have squelched it.

But the political tentacles of the mortgage giants extend far beyond their checkbooks.

The two government-chartered companies run a highly sophisticated lobbying operation, with deep-pocketed lobbyists in Washington and scores of local Fannie- and Freddie-sponsored homeowner groups ready to pressure lawmakers back home.

They’ve stacked their payrolls with top Washington power brokers of all political stripes, including Republican John McCain’s presidential campaign manager, Rick Davis; Democrat Barack Obama’s original vice presidential vetter, Jim Johnson; and scores of others now working for the two rivals for the White House.

http://news.yahoo.com/s/politico/20080716/pl_politico/11781

As of March 19- 08 Fan and Fred were supposedly looking good.

http://www.ofheo.gov/media/pdf/LockhartStatement31908.pdf

 

[mheslep]

...]

As of March 19- 08 Fan and Fred were supposedly looking good.

http://www.ofheo.gov/media/pdf/LockhartStatement31908.pdf

From Lockhart's statement:

...Effective immediately, OFHEO is reducing the OFHEO-directed capital requirement for Fannie Mae and Freddie Mac from 30 percent to 20 percent above the 2.5 percent minimum statutory capital requirement.

There it is right there, lifeboats being tossed off the Titantic before it sails. Better yet, the statement is so recent that it qualifies as a 'full ahead' with the iceberg in plain view and and ice falling on the deck.

 

[Jimmy Snyder]

There is no earthly need for these bailouts. The idea is to generate fear among the masses who will then call for measures to give money to these institutions. I say let them live or die on their own. Nothing bad will come of it. Bad ones will die off and good ones will take their place. We are fast becoming a socialist state with the socialists crying the loudest "don't throw me in yon briar patch!".

 

[OrbitalPower]

Bailing out corporations doesn't have anything to do with socialism.

 

[Astronuc]

From Lockhart's statement:
There it is right there, lifeboats being tossed off the Titantic before it sails. Better yet, the statement is so recent that it qualifies as a 'full ahead' with the iceberg in plain view and and ice falling on the deck.

That should have been a WT* moment, given that all the warnings over the past 5 years.


CAPITOL REPORT
Echoes of Iraq in Bush handling of mortgage crisis
News analysis: Another 'trust me' remedy is getting rushed before lawmakers

WASHINGTON (MarketWatch) -- Fairly or not, some critics say they can't help but see similarities between the Bush administration's hurried approach to the financial market crisis and its headlong plunge into the Iraq war.

"You can draw some valid parallels between the prosecution of the war under the Bush regime and the way the financial sector has operated in recent years," said Tom Schlesinger, head of the nonprofit research group Financial Markets Center in Howardsville, Va.

"It fails the most basic test of democratic accountability," Schlesinger said.

On Tuesday, Washington kicks off the first hearings in which top officials will defend their prescription before lawmakers, who also are compelled by circumstances to take speedy action.

Some policy observers point to a "trust us" mentality in the administration's call to obtain sweeping powers that are scant on checks and balances on the executive branch. In addition, the White House is faulted with a failure to raise alarm before the situation spiraled out of control, forcing the mobilization of more troops and untold financial resources.

Outlining the administration's remedy, Treasury Secretary Henry Paulson came up with a three-page plan to spend $700 billion on toxic mortgage debt that was very spare on key details.

It boils down to "give me the money and trust me," Schlesinger said.
. . . .

Economists said there was a central problem to the Paulson plan. Most of the toxic waste in question does have some price, but it has been too low for the financial institution holding them to accept. So the government buyout would only work if taxpayers overpay for the assets.

"It is no wonder that the Bush administration is pressing to get the plan passed quickly before any real oversight can be brought to bear, because even the simplest due diligence suggests that it needs some work if the taxpayer's interests are to be even minimally protected and some real oversight brought to bear on the whole process," wrote Josh Shapiro, chief U.S. economist at MFR Inc. in a note to clients.

. . . .

It will be interesting to look back in 20, 30 years to see how this period is judged.

 

[Jimmy Snyder]

Bailing out corporations doesn't have anything to do with socialism.

The Federal gov't bailing out corporations IS socialism.

 

[OrbitalPower]

The Federal gov't bailing out corporations IS socialism.

Socialism is when you have worker run means of production. The workers did not run Fanny Mae and Freedy Mac or Bear Stearns or anybody else, and if they did, this whole thing never would have happened.

Witness public utilities versus privatizes ones.

Capitalism is when the government protects the corporate interests; theoretically, in pure capitalism there is no such thing as even human rights - the government only exists to protect property owners.

So this is a failure of capitalism and the government has stepped into solve it. When the government protects the corporations at the expense of the public, that is called fascism, the successor of capitalism.

 

[Jimmy Snyder]

Socialism is when you have worker run means of production. The workers did not run Fanny Mae and Freedy Mac or Bear Stearns or anybody else, and if they did, this whole thing never would have happened.

They do now.

 

[OrbitalPower]

The government does, and the government is influenced by the corporations - not workers. Corporations have far more influence on the government than workers.

We really have a "free-market" lobbying esystem in addtion to a free-market economy, so it's no surprise that both are in shambles. (Capitalism has collapsed the US economy before.)

 

[mheslep]

There is no earthly need for these bailouts. The idea is to generate fear among the masses who will then call for measures to give money to these institutions. I say let them live or die on their own. Nothing bad will come of it. Bad ones will die off and good ones will take their place. We are fast becoming a socialist state with the socialists crying the loudest "don't throw me in yon briar patch!".

I don't like it either. What do you expect will happen to the availability of credit absent some kind of action? Banks are sitting on bad assets and they're still depreciating. The Treasury proposes to buy up the bad assets. How does a GM, a Caterpillar, Joe's Pizza, what have do if the money dries up?

 

[Jimmy Snyder]

I don't like it either. What do you expect will happen to the availability of credit absent some kind of action? Banks are sitting on bad assets and they're still depreciating. The Treasury proposes to but up the bad assets. How does a GM, a Caterpillar, Joe's Pizza, what have do if the money dries up?

I expect interest rates would climb. Credit would shun risky investments, like subprime loans, gravitate toward solid ones, like 30 year fixed with 20% down for no more than 2 years' salary. All investments would have to prove their worth to creditors. The short term pain would be overcome by the long term gain in the overall improvement of the investment mix. The current round of interventions all have the same purpose: reward risky investment. Median house prices have been falling and they should continue to fall until the median income can buy the median house under the 30 - 20 - 2 rule that I mentioned above.

 

[mheslep]

I expect interest rates would climb. Credit would shun risky investments, like subprime loans, gravitate toward solid ones, like 30 year fixed with 20% down for no more than 2 years' salary. All investments would have to prove their worth to creditors. The short term pain would be overcome by the long term gain in the overall improvement of the investment mix. The current round of interventions all have the same purpose: reward risky investment. Median house prices have been falling and they should continue to fall until the median income can buy the median house under the 30 - 20 - 2 rule that I mentioned above.

A sound description of how things should have been and what they should become. 'Credit' in the 2nd sentence is used as if there is some unaffected credit source waiting to come forward when wiser lending conditions prevail. The question then: is there any unaffected credit that can step forward? I don't think so. Absent any action to buy bad assets I 'd like to see the evidence that it will not just totally stop, versus merely grow tight and cause some term pain.

 

[Astronuc]

Another roller coaster day on the stock markets as the Dow 30 surged about 120 points and then reversed direction drifting down to -150 points during the day.

AIG is almost $5/share, so if one bought at $2/share, one has done quite well.


Last week, the IRS gave Fannie Mae and Freddie Mac a special deal.

IRS break boosts Fannie, Freddie - by Marine Cole, September 14, 2008
http://www.financialweek.com/apps/pbcs.dll/article?AID=/20080914/REG/809129952
Tailor-made ruling helps agencies use tax losses to goose capital.

When Freddie Mac and Fannie Mae inflated their core capital in recent quarters through the questionable use of deferred-tax credits, they didn’t violate any accounting rules. But they certainly received preferential treatment from auditors, regulators and tax authorities even as they were being bailed out by the government.

While Treasury Secretary Henry Paulson placed the two companies in “conservatorship” early last week, the Internal Revenue Service, which Mr. Paulson oversees, rewrote certain tax rules that will allow the mortgage institutions to take advantage of those tax credits. And that will help keep them alive for the time being.

Other companies, especially commercial banks, could also boost their capital with deferred-tax assets and get away with it to a certain extent. But only the banks, or at least big ones, might be able to count on auditors and regulators being as lax on them as they were on Fannie and Freddie, because of the risk to the financial system their failure might pose.

 

[Jimmy Snyder]

'Credit' in the 2nd sentence is used as if there is some unaffected credit source waiting to come forward when wiser lending conditions prevail. The question then: is there any unaffected credit that can step forward? I don't think so. Absent any action to buy bad assets I 'd like to see the evidence that it will not just totally stop, versus merely grow tight and cause some term pain.

Credit is tight now, but it hasn't dried up. Home sales are down, but they are not zero. I don't know who's getting loans now, but I expect that a customer who meets the 30 - 20 - 2 rule can still get one. I think another 25% drop in home prices would go a long way to getting us out of this.

 

[mheslep]

Credit is tight now, but it hasn't dried up. Home sales are down, but they are not zero. I don't know who's getting loans now, but I expect that a customer who meets the 30 - 20 - 2 rule can still get one. I think another 25% drop in home prices would go a long way to getting us out of this.

No dried up yet. The prediction from Paulson in the recent 15 lawmakers meeting, according to B. Frank today, was that nobody would get a car loan. Banks have to maintain a minimum capital reserve in assets, below which they can not loan regardless of the risk.

 

[edward]

Credit is tight now, but it hasn't dried up. Home sales are down, but they are not zero. I don't know who's getting loans now, but I expect that a customer who meets the 30 - 20 - 2 rule can still get one. I think another 25% drop in home prices would go a long way to getting us out of this.

It's a mixed bag. If home values drop another 25% anyone who bought a home in the past 3 years will be upside down on their loan. That includes those with prime loans who paid the 20% down. That is really devastating for people who get job transfers.

On the other hand housing would once again become more affordable. Some people would still be out of luck because they would have to use an FHA loan and pay the MIP.

All in all we appear to be heading back to square one as far as home ownership goes.

 

[Jimmy Snyder]

All in all we appear to be heading back to square one as far as home ownership goes.

Square one was when there weren't any houses. We are not headed there.

 

[edward]

Dynamic Map Of Non Prime Mortgage Conditions In the United States.

http://www.newyorkfed.org/mortgagemaps/

We are in deep do do.

 

[Jimmy Snyder]

Banks have to maintain a minimum capital reserve in assets, below which they can not loan regardless of the risk.

The Fed routinely adjusts the percentage minimum in order to add or subtract liquidity. And Paulson is a snake-oil salesman.