What is wrong with the US economy?

[Astronuc]

Interesting story

Derivatives the new 'ticking bomb'
Buffett and Gross warn: $516 trillion bubble is a disaster waiting to happen

ARROYO GRANDE, Calif. (MarketWatch) -- "Charlie and I believe Berkshire should be a fortress of financial strength" wrote Warren Buffett. That was five years before the subprime-credit meltdown.

"We try to be alert to any sort of mega-catastrophe risk, and that posture may make us unduly appreciative about the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized receivables that are growing alongside. In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."

That warning was in Buffett's 2002 letter to Berkshire shareholders. He saw a future that many others chose to ignore. The Iraq war build-up was at a fever-pitch. The imagery of WMDs and a mushroom cloud fresh in his mind.

Derivatives bubble explodes five times bigger in five years

Wall Street didn't listen to Buffett. Derivatives grew into a massive bubble, from about $100 trillion to $516 trillion by 2007. The new derivatives bubble was fueled by five key economic and political trends:

• Sarbanes-Oxley increased corporate disclosures and government oversight
• Federal Reserve's cheap money policies created the subprime-housing boom
• War budgets burdened the U.S. Treasury and future entitlements programs
• Trade deficits with China and others destroyed the value of the U.S. dollar
• Oil and commodity rich nations demanding equity payments rather than debt

To put things into perspective:

• U.S. annual gross domestic product is about $15 trillion
• U.S. money supply is also about $15 trillion
• Current proposed U.S. federal budget is $3 trillion
• U.S. government's maximum legal debt is $9 trillion
• U.S. mutual fund companies manage about $12 trillion
• World's GDPs for all nations is approximately $50 trillion
• Unfunded Social Security and Medicare benefits $50 trillion to $65 trillion
• Total value of the world's real estate is estimated at about $75 trillion
• Total value of world's stock and bond markets is more than $100 trillion
• BIS valuation of world's derivatives back in 2002 was about $100 trillion
• BIS 2007 valuation of the world's derivatives is now a whopping $516 trillion

One of the big questions, how much leverage is uncovered. The subprime mortgage crisis (meltdown) is just the tip of the iceberg.


Meanwhile - another big story - Carlyle Capital on the Verge of Collapse

Carlyle Capital, an affiliate of private equity firm Carlyle Group, said today it was in default on margin calls of over $400 million, and that it was unable to meet its margin calls and was now in default on about $16.6 billion of its debt!

 

[Astronuc]

Paulson admits deregulation has failed us all
Commentary: Mortgage proposals spell end to decades of looking other way

WASHINGTON (MarketWatch) -- You know things are very very bad on Wall Street when a guy like Henry Paulson -- Treasury secretary, solid Republican, and former Goldman Sachs CEO -- joins the crowd calling for more regulation over the financial markets.

Paulson spared no one in his criticism Thursday of the excesses of deregulation that has now created the worst global financial crisis in a generation, threatening the health of the U.S. economy, the savings of millions of Americans, and the survival of some of the biggest financial institutions in the world.

Wall Street and Washington both failed big time, he said. Wall Street invented new ways to make money by selling securities so complicated that no one could really follow which shell the pea was under. Fortunes were made on the paper Wall Street sold.
At the same time, Washington's watchdogs were dozing, tranquilized by the false assurance that Wall Street would police its own.

It's been obvious for years now that Wall Street could not be trusted, and finally official Washington agrees. The markets need a tougher cop to make sure that money-center banks, investment banks, credit-rating agencies, hedge funds, mortgage brokers and the rest don't let their own greed and arrogance ruin it for the rest of us.

"Regulation needs to catch up with innovation," Paulson said, and he was backed up by the rest of President Bush's working group on financial markets, including Federal Reserve Chairman Ben Bernanke and Securities and Exchange Commissioner Chris Cox. Not a commie among them.

The housing bubble wasn't a flaw; it was a predictable outcome of a system that rewarded smart people small fortunes for conjuring up ways to persuade people to borrow more than they could ever hope to pay back. All the profits were taken off the table quickly, but the staggering costs are only now being paid by homeowners, shareholders, builders and the rest of society.
. . . .

A sobering comment by Ted Campbell back in Jan 30, 2008 at the Commonwealth Club - According to a study by the Fed (Boston) approximately 60% of people pushed into subpirme (high interest rate) mortgages were clearly eligible for lower mortgage rates! That implies significant criminal culpability.

 

[russ_watters]

You are mistakenly presuming that these are all young people. How about the thousands of fifty somethings who have worked hard for the last 20 + years? Are they really slackers Russ?

I made no such presumption. Maybe those fiftysomthings also forgot what their parents taught them.

Beating ones head against the wall trying to find jobs that no longer exist isn't a virtue either. There aren't even enough Walmart type jobs for everyone.

Jobs exist, so people who don't have jobs should keep looking. Or not. I don't care: the point is that they don't deserve help if they aren't trying to help themselves.

 

[Poop-Loops]

I made no such presumption. Maybe those fiftysomthings also forgot what their parents taught them.

Go to war and get rich off of the profits of selling to needy countries at a high price? I thought that's what we were doing.

Jobs exist, so people who don't have jobs should keep looking. Or not. I don't care: the point is that they don't deserve help if they aren't trying to help themselves.

Right. Take a $6.50/hr job and call yourself "employed", forgetting that they cut your hours to 30/week and you can't feed your family for that.

Just out of curiosity, have you ever been in these people's shoes? Have you ever been unemployed and had trouble finding a job?

 

[russ_watters]

Go to war and get rich off of the profits of selling to needy countries at a high price? I thought that's what we were doing.

Since that doesn't make any sense, I doubt it.

Right. Take a $6.50/hr job and call yourself "employed", forgetting that they cut your hours to 30/week and you can't feed your family for that.

Right. If you aren't working and you are desperate and you find a job, you should take it. A bad job is better than no job and a little money is better than no money. This isn't rocket science.

Just out of curiosity, have you ever been in these people's shoes? Have you ever been unemployed and had trouble finding a job?

No.

 

[Astronuc]

Optimistic Bush says economy will bounce back

WASHINGTON (MarketWatch) -- The U.S. economy will emerge from its current problems "better and stronger than ever," President Bush said Friday in a major speech on the economy at the Economic Club of New York.

Speaking just hours after the Federal Reserve helped to engineer a rescue loan for investment bank Bear Stearns, Bush said that, although times are tough, the economy is resilient.

Bush says economic foundation is solid

Bush: "Our economy is obviously going through a tough time

Bush: Housing market is in process of correcting itself

Easy for him to say when he will walk away with a huge pension at taxpayers expense. Bush, Cheney, et al will laugh their way to the bank on the backs of US taxpayers while more people will face bunkruptcy and foreclosures, not to mention the nearly 4000 US soldiers killed and another 29300+ wounded. The wounded will receive minimal support from the US government - in order to keep cost down.


Paulson: Bear Stearns is another challenge for regulators

 

[Poop-Loops]

Since that doesn't make any sense, I doubt it.

Doesn't make sense? You think America just spontaneously jumped out of the Great Depression? No, WW2 had a LOT to do with it, and people were afraid that after the war, teh US would be back in the poor house.

The US made HUGE profits from WW2. Just like companies like Haliburton are making HUGE profits off of Gulf War 2. That is, after all, what their daddies taught them, right?

Right. If you aren't working and you are desperate and you find a job, you should take it. A bad job is better than no job and a little money is better than no money. This isn't rocket science.

You don't get hired at McDonalds if you have a degree in engineering or 20 years experience as some sort of technician. It's called being "overqualified" because they know that as soon as you get a better offer you are jumping ship.

Not to mention, your first two weeks at that sort of job are your "trial" weeks where you work part time to make sure you don't screw up.

Basically, what just happened was, the company, unless it went out of business, said "Thanks for all the money you made for us. Now GTFO." Shouldn't there be some sort of protection against that sort of thing?

Moreover, if you take a crappy job, you no longer count as being unemployed, even though it makes little difference since you can't feed your family. Country looks like it's doing fine when it's really going down the crapper.

No.

Why is it people who have had relatively easy lives who keep saying "Hurr hurr, if you don't have a job, it's your fault!"?

 

[turbo]

Why is it people who have had relatively easy lives who keep saying "Hurr hurr, if you don't have a job, it's your fault!"?

Because until they are confronted with some tough realities, they have no idea what suddenly-unemployed people are going through. It's easy to pontificate and say "just get a job" and put down the unemployed, but that glosses over some harsh realities. I have lots of friends in the pulp and paper industry and worked in it for many years. Many of the mills here are in remote locations, and towns grew up around the mills because they offered employment. When the former Great Northern Paper mill in Millinocket closed down, the town lost not only its biggest employer (BY FAR), but the bulk of its tax base. Guys I know with 20-30 years of experience were suddenly out of work, with kids in school, and with houses that were suddenly almost worthless. It's easy to smugly say "go find another job", but at 45-50 years old, it's tough to get a fair shot in the job market, and you somehow have to line up a place to stay near your new employment, pull what equity you can out of your property, and start over. When you have a house that might have been worth $80-100K in a remote mill town and the mill folds, you'll be lucky to get 25% of its previous value and if you're like many people, you may have about zero equity if you have refinanced to put in a new heating system, new roof, remodel, etc.

This same scenario has played out with mill after mill, as subsidized overseas paper (thanks for NAFTA, Bill!) has eaten more and more of the market. Now, with the collapse of the housing market, there is a huge glut of lumber here, and two of the three largest sawmills in the state have shut their doors, and the remaining one is operating at a loss so they can try to keep their skilled work force, and protect their share of the market, should the market improve in a year or two. Those paper mill and saw mill closures of course ripple back through the wood-suppliers, their truckers, the crews that harvest the wood, the landowners and on and on. It's easy to tell all those people "just get a job", but it is over-simplified and smug to do so.

 

[mheslep]

No

Why is it people who have had relatively easy lives who keep saying "Hurr hurr, if you don't have a job, it's your fault!"?

Just because he's never been unemployed, how can you possibly assume he's had it 'relatively easy'? Maybe he has, or maybe he's worked his butt off his entire life in jobs/education/the military and now has a demonstrated body of knowledge and work ethic that is highly desirable to many employers and also provides a good foundation for self employment?

 

[Poop-Loops]

You can work your butt off all you want, if you can't find a job, you won't get any money for it.

That's the whole point. There are times when the hardest working-people get a string of bad luck. To say that its their fault is ludicrous.

 

[russ_watters]

Easy for him to say...

It sure is easy to say, since it is trivially true. There is nothing wrong with reminding people of the obvious when they are feeling pessimistic and stop believing it.

 

[russ_watters]

Doesn't make sense? You think America just spontaneously jumped out of the Great Depression? No, WW2 had a LOT to do with it, and people were afraid that after the war, teh US would be back in the poor house.

That doesn't appear to have anything to do with what you said and its also self-contradictory. Yes, WWII helped a lot. So why do you say that war hurts the economy? And what does that have to do with "the profits of selling to needy countries at a high price"?

You don't get hired at McDonalds if you have a degree in engineering or 20 years experience as some sort of technician. It's called being "overqualified" because they know that as soon as you get a better offer you are jumping ship.

I don't see your point. Why would someone with an engineering degree want a job at McDonalds?

You're really jumping around here: in your previous post, you talked about if you can get a low-pay job. Now you're saying they can't get them. The truth of the matter is, though, that people do it.

Basically, what just happened was, the company, unless it went out of business, said "Thanks for all the money you made for us. Now GTFO." Shouldn't there be some sort of protection against that sort of thing?

Didn't the employee get anything out of the deal? And should there be protection for the company against a person quitting? And there is protection for employees who lose their jobs: unemployment insurance. But it is temporary and requires you to be actively looking for a job to qualify. And rightfully so.

Moreover, if you take a crappy job, you no longer count as being unemployed, even though it makes little difference since you can't feed your family. Country looks like it's doing fine when it's really going down the crapper.

Perhaps people who only look at one statistic might be fooled by that, but not people who look at a lot of different statistics. For example, what you talk about there would show up in household income stats.

Why is it people who have had relatively easy lives who keep saying "Hurr hurr, if you don't have a job, it's your fault!"?

I never said anything of the sort. And how do you know what kind of life I live or how I got where I am?

All I said was that quitting is not a virtue and is not something that should be rewarded.

 

[russ_watters]

Because until they are confronted with some tough realities, they have no idea what suddenly-unemployed people are going through.

Again, I never claimed to know what such people are going through. In fact, I made no general value judegment about such a group of people. I never mentioned them. What I said was very specific. Don't expand it to be something it wasn't. Here it is again:

They are people who have chosen not to look for jobs. You can't get a job if you don't look. So screw them: they are leeches. They don't deserve jobs and they don't deserve government assistance. They deserve to live in the poverty they've resigned themselves to.

Again, it's very specific and simple: if someone chooses not to look for a job they won't find one. And they deserve no help because they aren't trying to help themselves. Someone in a desperate situation who does whatever they can even if it means working at McDonalds is making a legitimate effort and is therefore worthy of assistance.

 

[Astronuc]

It sure is easy to say, since it is trivially true. There is nothing wrong with reminding people of the obvious when they are feeling pessimistic and stop believing it.

Except that Bush is wrong.

 

[turbo]

Again, I never claimed to know what such people are going through. In fact, I made no general value judegment about such a group of people. I never mentioned them. What I said was very specific. Don't expand it to be something it wasn't. Here it is again: Again, it's very specific and simple: if someone chooses not to look for a job they won't find one. And they deserve no help because they aren't trying to help themselves. Someone in a desperate situation who does whatever they can even if it means working at McDonalds is making a legitimate effort and is therefore worthy of assistance.

My comments were not directed at you in particular, Russ. You noticed I used the word "they" to make a general statement about people who over-simplify and say "get a job" without a feeling for the logistics involved. I have been there. A mill that I worked at in 1975 was bought out by a competitor. We processed all remaining inventory, and the new owners stripped the mill of all the best equipment and shut the place down. A mill that had provided the bulk of the employment to people in a 20 mile radius of the place was suddenly gone. The town never recovered. You can buy a 4-bedroom house there for less than $50K easy.

20 years later, a company that I worked for as a technical/sales consultant was bought out by a competitor, and since they had duplicate field services, they let all of us go and retained all their own staff. I went from making over $80K/yr to nothing. Fortunately, my wife and I are not idiots and we had socked away enough money to weather that, plus she was working. It took me about 9 months to find a job that would substantially replace those wages, but I did it.

I hope you never lose your job - at least without a Plan B firmly in place. It's pretty crappy, and you have to be ready to roll with it.

 

[edward]

This doesn't sound good. Are all of the fat cats going to expect a fed bail out now??

March 15 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke is being forced to throw out four decades of monetary history by a financial system choking on miscalculated risks and a deepening recession.

Bernanke and the four Fed governors voted yesterday to become creditors to Bear Stearns Cos., a securities firm that isn't a bank, by invoking a law that hasn't been used since the 1960s. Three days earlier, the Fed said it would swap Treasury notes on its balance sheet for privately issued mortgage-backed securities held by Wall Street firms.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aY2RvFA.yO_Q&refer=home

 

[russ_watters]

Except that Bush is wrong.

If the economy doesn't bounce back "better and stronger than ever", it'd be the first time in US history and if it happens we should just dissolve the country because the experiment has finally failed.

No, what he said is trivially, redundantly true. The US economy will bounce back and when it does -- redundantly -- it will be better than it was before the slowdown. That's why they call it a "recovery". Everything Bush said there is self-evidently true.

Jeez, Astronuc - you really believe the US is in for complete and permanent economic collapse?

 

[Jimmy Snyder]

If the economy doesn't bounce back "better and stronger than ever", it'd be the first time in US history and if it happens we should just dissolve the country because the experiment has finally failed.

The unprecedented prosperity of the US has often been cited as a kind of report card on our system of government of the people, for the people and by the people. None the less, I don't agree that if the economy stagnated, then we should revert to a kingdom as if the experiment were an economic one.

For all the griping you hear about the economy, it is actually doing great. How long do you expect it will be before you hear another one of those "In a country as rich as ours ..." arguments from the very mouths of those who now tell us that the economy is in a shambles and will never recover? It's a downturn people, buck up. Sit down and talk to your parents and/or grandparents that lived through the great depression.

 

[Jimmy Snyder]

As for Bush's speech in which he erroneously implied that it is not the end of the world, he is not so stupid as to repeat the Carter "malaise' speech. Carter was, of course, the smartest President we ever had. Just because Bush is the stupidest President we ever had doesn't mean he isn't more intelligent than Carter. The job of getting us out of the current downturn belongs to anybody who wants it. That means me for one. You too if you are interested in the position. Bush can't do it on his own you know. If you read his job description, it includes 'cheerleader in chief'. Carter should have been fired for misfeasance on the basis of that speech. All you cheerleaders for the opposition, shake your pompoms all you want, you can't discourage me, go discourage someone else.

 

[russ_watters]

As for Bush's speech in which he erroneously implied that it is not the end of the world, he is not so stupid as to repeat the Carter "malaise' speech. Carter was, of course, the smartest President we ever had. Just because Bush is the stupidest President we ever had doesn't mean he isn't more intelligent than Carter. The job of getting us out of the current downturn belongs to anybody who wants it. That means me for one. You too if you are interested in the position. Bush can't do it on his own you know. If you read his job description, it includes 'cheerleader in chief'. Carter should have been fired for misfeasance on the basis of that speech. All you cheerleaders for the opposition, shake your pompoms all you want, you can't discourage me, go discourage someone else.

You got it exactly.

 

[Astronuc]

Jeez, Astronuc - you really believe the US is in for complete and permanent economic collapse?

I don't believe the US is headed for a complete or permanent collapse, but I do see the possibility of something similar to the Great Depression. The economy may recover, but I don't think it will be 'stronger than ever', simply because per capita wealth is decreasing, and demand will begin to greatly exceed supply of goods and services. With the increase in economic disparity - more folks will have to do with less.

Back in the 60's and 70's, the railroads in the NE US deteriorated and they adopted a policy of deferred maintenance. The two biggest railroads, Pennsylvania and New York Central merged into the PennCentral. The result was disastrous and eventually resulted in one of largest bankruptcies in US history at the time, and this precipitated bankruptcies of several other railroads which interchanged with the PennCentral. Investors lost billions, and many RR employes lost their jobs. Ultimately the US government took the pieces and made Conrail, which was ultimately privatized, and since Conrail was broken in two and the pieces sold to CSX and Norfolk-Southern. With the sail of Conrail, the US government recovered less than 10 cents of the dollar compared to what was invested. The taxpayers lost ground, but a few individuals (the deal makers) made out very well.

The transportation infrastructure in the US is suffering from deferred maintenance, and even with the deficit spending, the deterioration of the infrastructure is not being addressed.

Given that demand for goods and raw materials will increase around the world, and that their are finite resources, I believe the US economy will not necessarily be increasingly stronger and better than ever. In the near term, I see the potential for a partial collapse, but I don't know how severe it will be. Certaily, if the current ways are not changed, the inevitable downturn could be significant - and one measure of that would be an increased mortality rate.

 

[turbo]

Per capita wealth is definitely on the decline, even in stable savings accounts. My money market account (have to stay somewhat liquid for some portion of my investments) is gaining slowly on paper, due to the fact that the Fed keeps cutting rates and banks don't pay much interest on these accounts anymore PLUS the value of the dollar is declining.

The combination of deficit spending, tax cuts for the wealthy, tax breaks, bailouts, and incentives for business is weakening our dollar, resulting in a back-door transfer of wealth from citizens to business. The Fed keeps dropping rates to satisfy Wall Street, but they would be far better off to let stocks fall short-term until bargains become evident, at which point an upward correction will occur.

 

[edward]

A lot of people keep saying that this is just a natural market correction. And this may be true, but the need for a market correction was not brought on by normal market activity. The need for a correction was brought on by unprecedented speculation and obscene numbers of sub prime loans that were fired by just plain rampant greed bordering on being illegal. The investigations have only just begun.

As far as a natural market correction goes, this is like saying that a local economy may naturally correct the results of a massive bank robbery.

The federal government is already bailing out companies like bear Stearns, because they know that natural market forces will never succeed at stopping the downhill slide of the economy.

 

[mheslep]

...The federal government is already bailing out companies like bear Stearns, because they know that natural market forces will never succeed at stopping the downhill slide of the economy.

If you mean by that tax payer dollars are going to b. Stearns that's wrong, no such thing is happening.

 

[mheslep]

Paulson admits deregulation has failed us all
Commentary: Mortgage proposals spell end to decades of looking other way

That Market Watch piece has a ridiculously misleading headline, "Paulson admits deregulation has failed us all". The Secretary made no such dramatic statement, never used the word deregulation in his lengthy remarks. If anything sums up what he said its his own words: "...regulation needs to catch up with innovation..." http://online.wsj.com/article/SB120541755150333389.html?mod=googlenews_wsj".

 

[edward]

If you mean by that tax payer dollars are going to b. Stearns that's wrong, no such thing is happening.

The FED guaranteed the bail out loans from JP Morgan, if Morgan fails to repay within 30 days the taxpayers get stuck with it.

It is probably irrelevant now that JP Morgan has just purchased Bear Stearns company for $2 per share.

EDIT:

The Fed has assumed liability for $30 billion of Bear Stearrns' debt anything over that amount will be the liability of JP Morgan.

 

[Jimmy Snyder]

I don't believe the US is headed for a complete or permanent collapse, but I do see the possibility of something similar to the Great Depression.

Yes, well, anything's possible. Do you have anything to say about what's probable?
One statistic often cited from the Great Depression was the 25% unemployment rate. Are you predicting something similar to 25% unemployment? Would you say that 5% was something similar? What real meaning, if any, is in your words, other than agreeing with Russ, that we are not headed for complete or permanent collapse?

 

[Astronuc]

DOW dropped 293.00 pts, or a decline of -2.36%, the day after it rose 420 points.

All is not well!

 

[russ_watters]

The economy may recover, but I don't think it will be 'stronger than ever', simply because per capita wealth is decreasing,

Do you have sources for either of those claims? The fact that household incomes continue to grow faster than inflation would seem to indicate that that is not the case.

and demand will begin to greatly exceed supply of goods and services.

Do you have a source for that? Why would that be true?

With the increase in economic disparity - more folks will have to do with less.

That one's definitely wrong. That's the 'economics is a zero-sum game' fallacy that is pounded into us by liberal politicians and you've apparently fallen for. The fact that the disparity is growing does not imply that those on the bottom are going down. The fact of the matter is that those on the bottom (over the long term) are going up, but those on the top are going up faster. That increases the disparity even as everyone (on average) is improving.

Given that demand for goods and raw materials will increase around the world, and that their are finite resources, I believe the US economy will not necessarily be increasingly stronger and better than ever.

Do you have any kind of timeframe for that prediction? With nuclear power, recycling, and resource management, it does not need to be true. Certainly, certain resources will get more expensive, but that will just motivate proper management. Ie, environmentalists will eventually get over their irrational fear of nuclear power even if it takes $1/kWh electricity to make it happen.

In the near term, I see the potential for a partial collapse, but I don't know how severe it will be. Certaily, if the current ways are not changed, the inevitable downturn could be significant - and one measure of that would be an increased mortality rate.

What a misery!

I'm just not seeing any evidence that what we are in for over the next year has any potential to be anything we haven't seen before. Unless that was a tongue-in-cheek crack about stock brokers jumping out of windows, it would take a meltdown beyond the great depression to have a significant impact on mortality.

This thread is a year and a half old. I've been waiting for the evidence that we've got something horrendus in store for us, and have so far seen nothing that would imply anything beyond what I'd call 'normal problems'.

 

[russ_watters]

Per capita wealth is definitely on the decline, even in stable savings accounts.

Do you have a source for that claim?

 

[russ_watters]

A lot of people keep saying that this is just a natural market correction. And this may be true, but the need for a market correction was not brought on by normal market activity. The need for a correction was brought on by unprecedented speculation and obscene numbers of sub prime loans that were fired by just plain rampant greed bordering on being illegal. The investigations have only just begun.

As far as a natural market correction goes, this is like saying that a local economy may naturally correct the results of a massive bank robbery.

The last recession was prompted by the worst stock meltdown since the great depression.

The one before that was prompted by the S&L scandal.

The one before that was prompted by the fallout from the oil crisis of the 1970s (stagflation).

There are virtually always major triggers for a recession.

http://en.wikipedia.org/wiki/Category:Recessions

 

[russ_watters]

The FED guaranteed the bail out loans from JP Morgan, if Morgan fails to repay within 30 days the taxpayers get stuck with it.

It is probably irrelevant now that JP Morgan has just purchased Bear Stearns company for $2 per share.

EDIT:

The Fed has assumed liability for $30 billion of Bear Stearrns' debt anything over that amount will be the liability of JP Morgan.

Right, so the point is that you are predicting that it will happen. It isn't a foregone conclusion.

 

[Art]

That one's definitely wrong. That's the 'economics is a zero-sum game' fallacy that is pounded into us by liberal politicians and you've apparently fallen for. The fact that the disparity is growing does not imply that those on the bottom are going down. The fact of the matter is that those on the bottom (over the long term) are going up, but those on the top are going up faster. That increases the disparity even as everyone (on average) is improving.

Would you explain the maths to justify how this is possible in a contracting economy i.e. recession as I don't see how a shrinking pie can simultaneously deliver bigger helpings to all the recipients. Don't you agree economic growth is required to fulfil that or perhaps Jesus and the miracle of the Seven Loaves And Fishes.

 

[wildman]

Do you have a source for that claim?

Stable savings accounts are in decline because of an inflation rate that is higher than the interest rate. This often happens.

 

[jaap de vries]

The bottom line is that no, of course the economy isn't perfect (yeah, that was an exaggeration, but hey - this is a politics forum!), but the economic data is pretty overwealmingly positive right now. And intentionally miselading analysis (the SFGate article) doesn't change that. The OP is likely in response to the liberal politicians, pundits, and posters that are trying to pound the idea into the American consciousness that the economy is doing poorly. We have several active threads about it, and SFGate articles have popped up before (there was a recent one about how people can't afford housing because it is too expensive - how do you think it got expensive? ). And it just plain isn't true.

Russ please don't use the term liberal media bla bla bla itis the kind of O'reillynesqe propaganda that makes you look less intelligent than I know you are.

By the way, I was watching FOX (hardly 'liberal media'!) news the other day at they make it seem like we're on the brink of a http://www.foxbusiness.com/article/economic-activity-drops-fifth-consecutive-month_529129_1.html".
"A gauge of future economic activity dropped for the fifth consecutive month in February, suggesting that the weakening U.S economy could, indeed, be slipping into recession."

The national economy is not linearly related to the stock exchange. that being said, there are some real problems real people are having

http://www.washingtonpost.com/wp-dyn/content/article/2007/06/14/AR2007061400513.html"

These are problems that hit real people on the ground and to say nothing is wrong is simply not true. The interest rate at this level only inflates the dollar more which was a an http://www.iht.com/articles/2008/03/07/business/7dollarFW.php" against the Euro.

In my opinion, the financial markets is based on trust. People simply don't have any trust in the government at this moment nationally and certainly internationally and what we see is simply a reflection of that in the financial mirror.

I agree that a lot of media sensationalize everything including the economic trouble but that does not mean there is no ground for concern what so ever.