For my first write-up for the new year, I chose this "column" I did for Outsider Views....
Source: http://www.outsiderviews.com, retrieved Feburary 5, 2009
In my almost daily columns/comments on the Economy, I had thought about the calamity as a Tsunami. With a Tsunami, there is at least a chance to see Sunshine. However, I think the better term for it is a Winter Storm. I continue to wonder when we will see sunshine.
On Wednesday, the bleeding continued. Cisco Systems, the leading network gear maker, missed the numbers. Alcatel-Lucent continued its' downward slide which has been on-going for a number of years. Disney missed then it came out with its numbers and annouced jobs cuts totaling some 400 workers at the ABC unit. Earlier in the week, Electronic Arts annouced a job cut and delay in new games. Anne Sweeney of Disney talked about the bleeding and the suffering in this rather telling memo:
Source: http://defamer.com/5142251/today-in-were-screwed-disney retrieved Feburary 5, 2009
[I]Sent: Thursday, January 29, 2009 10:21 AM
Subject: Business Update
Team:
After months of making hard decisions across our businesses to help us adjust to a weakening economy, we’re now faced with the harsh reality of having to eliminate jobs in some areas. This was not an easy decision, nor one made lightly. The people affected today are our friends and colleagues, and we are doing all we can for them and their families during what we know will be a difficult transition. Change is never easy, and becomes even harder to embrace during times of turbulence and uncertainty. With that in mind, I’ve asked each business leader to reach out to their group with more information on this announcement as soon as possible. I realize this is an extremely difficult day for everyone in our group. But despite the challenges before us, I remain confident and optimistic about our future, because you really are the best team in the business. Anne[/I]
I agree with Anne Sweeney in that change is truly never easy. What continues to concern me is the obstructionist strategy of the Republicans. What was particuarly laughable was Jon Kyl's comments that the Republicans knew how to formulate policies that would result in creating jobs. He wants the country and the world to forget about the past 8 years. I Senator McCain announced an alternative stimulus plan that again relied on Tax Cuts. Mike Pence was on Hannity pushing the fiction of bringing "tax relief". The Republicans keep talking about the fact that this will not work. But, old solutions have not worked either--and that's the biggest problem.
There are some sensible views that are out there speaking up for insuring that the right steps are indeed taken. One of those sensible men is Jeffrey Sachs. In a recent column in the Financial Times of London, he wrote, ".....In rough numbers, the US Federal Tax System collects about 18 percent of gross national product, while the total of just five categories of public spending- Social Security (retirement and disability), health (medicare, medicaid), veterans benefits, defense and homeland security and interest payments-eat up about 18 percent of GNP. yet, government has more to do:...transport and other infrastructure; diplomacy and international aid; natural hazards mitigation; energy systems & help for the poor...". He went on to note that, "...let us add in the fact that state and local governments are broke...". Furthermore, he went to note in a Time Magazine article that, "....The time has arrived to restore national prosperity and security with a smartly rebalanced partnership between the public and private sector...". This means that tax cuts will alone not do the job. We have to make sure that we have reasonable a reasonable revenue mix with some targeted tax relief. But, total reliance on tax relief is not going to do it. This Winter Season of discontent should also force us all to look at other more sensible ways to manage risk and insurance. Lasse Pedersen and Nouriel Roubini have proposed an interesting system to manage capital requirements and to provide for an insurance program. I think that it something that ought to be looked at and looked at closely. This is quite important in light of the fact that Roubini was one of the few lonely voices who actually warned of this day. No one wanted to listen. I knew this could not be sustained. I bought into Alan Greespan's fiction that somehow we could fool the economic cycle. I am sure I was not alone.
Professor Sachs' admonition to all of us means that the work on the stimulus has to be finished and finished quickly. The country is broke and needs help now. I wrote in an earlier column on California's plight. California, as a standalone entity, would be the 8th economy in the world. But, it is broke. It is the most recent example of the calamity facing the country right now. The State Controller has stopped paying bills. The credit rating has been dropped. 2.7 Million people will not be getting a refund. Such calamity becomes ever more crucial as time goes by. It is crucial to realize that the money is being borrowed, though. I am quite worried about the neutral position of the Chinese about US Debt. I also worry about Gordon Brown's description of our Economic Winter as a "depression". I wonder if he knows something the rest of us don't.
UPDATE: Markets in Europe have been open for a bit. Swiss Re wrote down $ 5.3 Billion and got a cash infusion from Warren Buffet. Deutsche Bank has annouced its' first loss and sees a bleak outlook. Unilever Q4 does rise, but does not provide any guidance for 2009. Washington has to move and move now.
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