Once upon a time some thousand years back a country X faced serious economic crisis resulting financial and banking institution failures, massive unemployment, trade crisis that slashed kingdom revenue. King and his chief minister were worried about moving economy. All solutions they brought were failed rather deepened further. Entire kingdom was sleepless. Worried King ordered the ministries “Perceiving economic down turn I decide to invite all the economists and ministers for their suggestions to overcome the deepening crisis and find solutions. Suitable idea will be rewarded”.
There is no constitutional right to homeownership! If you borrowed above your means, you've got no right to stability of ownership! The fact that the value of a house dropped below your purchase price is not relevant unless you want to sell - and if you can't afford to sell, then stay put - that is stability!
If you want rules for dealing with this mess, and keep 4 million families from being thrown out on the street (who, by the way, are not all hopelessly helpless to start with), here is a suggestion to Mr. Geithner:
Make the banks take their houses back (let them foreclose) and make them rent to the occupants (for minimum of 1 year, or pick your time frame)!
Then the dumb bankers will have their "fair market equity" and the dumb buyers will have a roof over their heads at "fair market rates"
I do not want my children to pay for all these gifts!
Financial advice - Steve McDonald of Investors Daily Edge says, “A simple corporate bond strategy can make you a ton of money in the next few years, with almost no risk to your principal. And it’s so simple it’s almost unbelievable."
I had worked for nearly 50 years, starting with pumping gas when I was 14. I paid my way through engineering school. Worked my way up to what you'd call middle management, before I semi-retired this year. My wife and I raised our children, put them through college, and they are productive, good citizens now. While we scrimped early on, going pay check to paycheck, other than a mortgage, we never carried debt. Paying off the mortgage was one of my pre-retirement goals, and we managed to do so. Mind you, we've lived in our house since 1980, the only thing flipping since then were hamburgers on the backyard barbeque. My pension is reasonable, we have no debts, we've done all the right and responsible things, and now I am starting to feel like a sucker! You might ask why?
Because I will be paying off the debts of irresponsible consumers and the salaries of high paid financiers. I will be getting no tax breaks, while Washington is creating them for those who want to borrow, and live beyond their means once again. My biggest uncertainty is not about the Dow Jones, not about housing prices. It is about taxes and inflation.
What is currently going on is eventually going to have to be paid for, either by more taxes or by inflation. Maybe it will be creatively deferred until past my time. But we have also gifted our children with the "responsible gene". If Washington doesn't get me, then it will make suckers of our children. Social conscience is OK by me. Helping those in need is also. But throwing my tax dollars at greedy crooks, greedy idiots (lenders and borrowers) and adding more pork to wasteful programs and pet rocks is not.
President Obama, perhaps this is not the story you wanted to hear, but it is a real, true, and American story. Thank you for your time.
Credit In The Simplest Terms Possible. I Think
Let me ask a few questions. You can think to yourself or shout the answers out loud. Do you have a credit card debt? Do you know anybody who doesn’t have a credit card debt? You know, you are out at the bar or to eat with them do they always pay in cash? Do you know anybody over 20 that has none of the following. Home loan, car loan, school loan, or credit debt? Do you know people who work hard, make a decent wage, do the right things financially, but are still struggling? Do you have a years worth of savings accumulated in case joblessness or illness occurs? So how can it be that so many of us are working our butts off, making an alright living, not living lavish lives, and still could not make it a year with out income. Now, under that guise let us talk about the affect of credit on the US economy.
At least in Erie County NY, the powers that be put together a list of 100 proposed projects, that are far in excess of what is needed in dollar amount, projects promote very few jobs in the short term, and almost none for the long term. With very few proposed road and bridge work. Promoting more urban sprawl with little regard for existing buildings or domiciles.
One proposal I know is way over bloated even though I know it well and believe work is required but not to the amount Erie County has proposed to its constituants. For example: http://www.erie.gov/exec/pdfs/stimulus_project.pdf
1)--$3.75 Million-- for "Chestnut Ridge Park- Heritage Area Restoration: 100 Stone Steps, Bridges(1), Stone Picnic Structures (75), Stone Restroom Facilities (16), Stone and Wood Pump Houses (6); Gateway Improvements: Main Entrance, NewtonRd. Entrance; Maintenance/Storage Yard Reconfiguration: Design, Initial buffer/landscaping; Casino Reuse Feasibility Study; Casino Restoration; Playground Facility Upgrade"
2)--$750,000-- for"Chestnut Ridge Park Casino: The historic Chestnut Ridge Casino roofstucture is severely leaking, causing damage to the building interior, the windows are in poor repair, and the heating system is old and can no longer be repaired"3)--$250,000-- for"Chestnut Ridge Park Toboggan Towers: Repairs to remediate structural damage and lead paint hazzards, and re-open both towers."
Plus a share of another $25.4 million for amenity upgrades and roads for all parks.
In addition to Double dipping for the Casino proposals which is actualy a park setting main event type building made of stone which is pretty cool but not thats its not worth it, its the fact that someone will pocket probably more than 50% of the sum proposed for these projects to this one park I know so well.
I am sure I can refine the stats better, I am sure I can find more inconsistancies in thier ways or proposals.
ButI warned before on 9/11,I warned again in before the economic crisis hitand I have warned on events on varying subjects
Still nobody listens and I don't get paid.
So listen if you care, don't if you won't; but someone has to keep the local politicians in check.
Morality may have one the White House, but it has not beaten back greed and corruption elsewhere.
Thank You for allowing me to at least vent my frustrations with an outlet to someone in power that seems to give a f*&@.
Andre Chernogorec Jr., Tomahs Frejnofes
and PS Under the 2006 Presidential Budget proposal, you have a lot more autority than you may even know. ;)
Continuing with the ideas form the Economic Recovery Meeting...
Well I have to say a few words on the fiasco we call our economy. Sorry Mr. President, I don't fully agree with the assessment that poor lending is what put us into the current predicament. I think it was a final straw, but it was a thin straw at best.
So, what did get us where we are now? Out of control, unregulated oil prices. That is what the majority of the heap is upon this pile. As gas prices escalated at an astonishing rate, and oil companies reaped record profits, the economy began a spiral that has left the entire country reeling. With the higher prices came higher expenses in the transportation of goods. This leads to higher costs, and in effect higher prices. The higher costs a business has to incur, the more they need to charge for their product or service to stay in the black. If goods are higher and one needs to cut back, where do these cut backs come from? Jobs, either the hours, or the position.
The second layer of this is the drop in spendable income when fuel costs more than triple. The less spendable income a family has plays a direct role in the amount of sales a small business makes. Less sales, equals less profits, equals layoffs. With the family's budget stretched by exorbitant fuel costs it may lead to the inability to make mortgage payments, especially when the mortgage payments increase in time because of the assumption of higher income is expected. THIS is where the lending practices start to contribute to the fiscal downfall.
I am not an economist, nor a banker, but I am a big picture kind of person and can see all these pieces falling into their prospective slots. Anyway, adjusted mortgages are not a product of the past 8 years. They started in the 1980's (note, this also was when many regulations dissolved either by law, or by inaction) For many, this banking practice allowed them to afford a home they may not have otherwise afforded, but with this also came extreme home ownership inflation.
The home I grew up in cost my family 35K in 1966. In 1989 it sold for 316K. And after doing a websearch I find a house across the street that is currently listed for 777K. WOW. Now that is some serious inflation. Is this the banker's fault? I don't think so. They merely facilitated the transaction. However, where the banking industry is culpable, in my opinion, is that as home sales began to struggle (became quite noticeable to this layperson several years ago), they did not modify their practices, and with the increase in fuel costs being a major red flag they needed to make immediate modifications, and they didn't. Now they want to be bailed out.
I have a few ideas how bail outs could happen. Reinstate or create regulations that ensure ethical business conduct. For the more urgent bailing out of banks and homeowners I had this idea. Both parties need to be accountable for their personal roles in the current state of things. What can the government do to assist? I would offer this solution, that would be completely voluntary from the banks and/or homeowners. The federal government would put the funding in HUD. HUD would offer to buy the paper on homes that have occupants that are in the foreclosure process (homes valued at 700K or lower). The purchase amount would be 80% of the current market value of that home. The homeowner, would then have 2 choices. They could either repay the loan (recalculated for the amount the government paid with a 4-5% interest rate) or, they could become rent to own tenants if they can't afford the mortgage payment recreated by the new loan. The rent to own tenancy would be rent in the amount of 35% of their income with 25% of the amount they actually pay, going towards the loan amount should they decide to repurchase their home at a later date. This will assist banks from having to sell properties that they most likely won't recoup their losses on anyway. They should accept the profit losses as a price for making bad business decisions.
This kind of bailout will not burden the economy in the long run, because the money will either be paid back as the loan is paid (with interest), or there would be rental income until the house could be sold in the future and the loan would be repaid at that time.
I haven't yet figured out a means that would make the profiteers of the oil industry accountable, just yet, but I'm working on it...my little brain is a ticking. Tic Toc.
Dear Mr. President:
I admire your tenacity and the tenacity of your financial management team in their efforts to rescue our financial system from a systemic collapse.
I’m sure the financial rescue plans, as engineered by your financial rescue team, are well thought out and have considered a wide range of possible scenarios and outcomes, including the possibilities of inflation [caused by trillions of bailout dollars pumped into the system] or deflation [from huge permanent demand destruction in products, services and credit].
Deflation caused by permanent demand destruction for products, services and credit is a reality [and not just a possibility] and could impact the outcome of your teams rescue plans. Here’s why some degree of deflation [caused by permanent demand destruction] can be a good thing in your efforts to re-ignite moderate inflation into the financial system. Your financial rescue plans might just work [because of some degree of permanent demand destruction] in solving the current financial crises…
In summary, what your financial rescue team is doing: “Injecting trillions of dollars in the US economy, the Fed is luring the consumers [and speculators with leverage] back to the same old habit [that got us into the current financial mess in the first place] of living beyond our means to borrow and spend.” After spending trillions of dollars, the Fed will eventually succeed and cause inflation and that in turn will force Fed to raise the interest rates at a later date causing another asset class─ the Treasury-Bond─ bubble burst. And the “boom-bust” cycle will repeat itself, perhaps of a much smaller magnitude given the possibility of tighter banking rules, regulations, regulatory oversight, tempered leverage, global risk aversion, and of course the permanent demand destruction.
For this scenario─ preventing deflation in exchange for future boom-bust cycle of much smaller magnitude─ to play-out, permanent demand destruction will play a major role. Without the existence of permanent demand destruction, the trade-off between “preventing deflation” vs. “accepting the boom-bust cycle of much smaller magnitude” will not work. Some degree of Permanent Demand Destruction for products, services and credit, in the near future, is desirable and hopefully will materialize as a reality. Here’s why…
Most economic models and analysis approach the inflationary issues as a two dimensional model like… action and reaction… supply and demand… price and quantity… money supply and interest rates… interest rates and Bond bubble.
Unfortunately it is not that simple and most everyone approaches the “supply and demand” as a two dimensional economic model. The two dimensional approach to economic analysis seemed to have worked fine in the past because, even though the third dimension [permanent demand destruction] existed in the past, its impact was not huge [because of population growth, immigration and rise in living standards from much lower levels] and it was not realized for a long period of time due to slow consumer reaction to changes. And when the impact of this third dimension [demand destruction] was realized, it had arrived slowly and since its impact was not felt immediately… it was, therefore, considered as the result rather than the cause in the economic models. In summary let me explain…
There is a third dimension [demand destruction] that needs to be considered in any economic model in this day and age… the age of instant communications and the Internet. This third dimension is the “permanent demand destruction” from today’s informed consumer… the buyer of products and services who is also motivated [now] with the desire to store money, in one form or the other, for the future. When you enter the permanent demand destruction in to the equation, your argument of money supply… inflation… higher interest rates… Bond bubble burst scenario will not hold in the near future. In my humble opinion, this time it will play-out differently from the conventional wisdom…
When you permanently destroy huge demand [by the consumer], the supply side [businesses] make adjustment to their business model by cutting production, cutting CAPX, cutting operating cost and letting employees go. In this scenario when there is less demand from consumers [and businesses] for both cash and credit… the risk of Bond bubble bust is delayed if not mitigated altogether. The argument in favor of consumer driven demand destruction is as follows…
The consumer of today recognizes that the trillions of dollars poured into the US [from all over the world] and that is what supported their credit binge to spend and spend. The [almost] free money pushed the consumers to rush into buying products and services they did not really need, rush into tech stocks, then the rush into real estate, then the rush into commodities, and then rush into U.S. government bonds. Over the years all of these asset classes [except the U.S. Government Bonds for now] have blown-up in the consumers face. Not only that, the financial machinery that funneled trillions of dollars of the free worlds savings [from across the globe] into the US financial system has now blown-up as well and the money velocity has come to a screeching halt. Banks are over leveraged, they don’t trust each others financial health and they are not lending.
Consumers are not borrowing either; they are downsizing and cutting cost…
· Banks are not lending to qualified consumers… but that could change;
· Consumers has little or no equity to borrow against… not going to change anytime soon;
· Days of free money are gone forever… because the savers from all over the world are now wise to the financial shenanigans of American financial wizards and are not looking to send their life savings to America any time soon;
· Consumers are now motivated, by the blow-up of almost all asset classes in their faces, to start saving money for their future commitments and retirement… going from negative savings to almost over 6% now;
· Consumers finally realize that they don’t really need three of everything [homes, cars, jewelry, minks/furs, TVs, cell phones, computers, and electronic gadgets].
· Consumers finally realize that they don’t need to buy a Hummer or new model car every other year;
· Consumer finally realizes the rising cost of energy for driving, heating and cooling… the present drop in cost is temporary we all know;
· Consumer finally realizes that the increasing cost of real estate taxes even though their homes are 40% less in value to-day… taxes always go up and not down;
· Consumers finally realize that they don’t need to re-model every five years and buy new appliances every three years;
· Consumers finally realize eating home can save them thousands of dollars over the course of the year;
· Consumers are loosing jobs left and right in all sectors of our economy… there are no safe heaven… not even in the health and consumer goods;
· Consumers are de-leveraging en-masse and there are no asset classes worth investing [speculating] at this time… and perhaps for a long time.
The studies indicate that by the end of year 2008, there will be over 1 billion Internet users. That means, most all of the educated population of the world, will be globally connected by the Internet. And the boundaries of time and space will disappear. People will gather in public forums of their common interests to network and share information. These people will be the consumers, investors, vendors, partners, friends, enemies, management, or employees of the public companies. In a public forum like this, that allows us to maintain our anonymity, there will be no place to hide for the incompetent or the unscrupulous.
Add to this Internet phenomenon the instant communications afforded by the TV, and its producer’s desire to provoke debates on issues, that in the end, when all is said and done, informs and educates the public at large. What you have is a well informed, wiser and more responsible consumer that is all set to “destroy demand” for the un-necessary, unscrupulous and the irrelevant.
Businesses now see this consumer demand destruction as a clear reality and are adjusting their business models accordingly by cutting production, cutting CAPX, cutting operating costs, de-leveraging finances and letting employees go. And as such, eventually, after the initial denial period to accept demand destruction, there will be less demand for cash and credit from these businesses.
On surface it seems that if these businesses could borrow money earlier, like in the August/September time frame, they might have postponed downsizing and waited a little longer before letting employees go. However, that window of opportunity is gone and the reality of wide spread “demand destruction’ has become a reality. The reality of demand destruction is apparent in thousands of employees being laid-off by bellwether companies like Microsoft, Google, JP Morgan and the like.
Granted, that in due time the wealthy consumers and businesses will come back into the credit markets to borrow so they can speculate in products, plants, production, stocks, commodities and real estate. But that time is years away, when there are clear signs of stability and growth in any of the known asset classes for investment.
To this witches brew, let’s add the cause of our current credit crises and see what it means for the free supply of money in our financial system. I’m sure you and I both have our own set of facts, analysis and opinions. But the core fact that no one denies is: “the leverage used at financial institutions world-wide and lack of regulatory oversight was the main cause for this global credit crises.”
The regulatory oversight, or lack of it, will be debated and some day there will be rules and regulations in-place to prevent future systemic melt-down and risks. In the meantime, however, either because of banking laws or because of banks own desire to mitigate risks in this financial environment, the banks and financial institutions out there are busy trying desperately to de-leverage. This means banks [and financial institutions] will first try to shore-up their equity/debt ratios before lending out the money received from TARP and other Fed bailouts. There is, by the latest estimates, over $3 trillion dollar in systemic losses in the US alone. The money losses did not change hands… it just vanished in thin air. What are left behind, however, is the un-acceptable levels of leverage, collateral risk and vastly impaired equity/debt ratios at US financial institutions.
In summary, before we see inflation we will first see some degree of deflation due to permanent demand destruction for products, services, and credit. If we are lucky and the trillions of dollars in Fed money do work, in the best case scenario, we may see Stagflation and not reach full-fledged deflation. That is our hope!
Please plan for [and accept] some degree of deflation from permanent demand destruction in your agenda─ to introduce inflation in our financial system─ to fight the specter of full-fledged deflation. Hyper inflation [as the result of trillions of bailout dollars injected by the Fed] in the short term does not seem possible in view of deflationary pressures of permanent demand destruction for products, services and credit. However, any effort to flood the economy with freshly printed money, or borrowed money, will not bring the demand levels to “the way we were” before this financial crises. A flat or moderate growth in GDP, for the next few years, seems to be the most plausible scenario and that’s what your administration should plan for!
Limited amount of bailout funds for our financial institutions is, perhaps, the right thing to do. However, excessive amount of bailout funds will only attract the unscrupulous and not bring the consumer demand [and the GDP] to the levels of recent past. In all probability, these bailout funds will not reach to those intended and only line the pockets of the same greedy, unscrupulous, and self-centered tarts that got us in this financial mess in the first place.
Please, for God sake, don’t entice the consumers and businesses to go back to the old ways of borrow and spend… and live beyond their means. No society or civilization that lives beyond its means has ever survived. History is our witness!
God bless America.
Vintage Keynesian Propaganda from nibelungensohn: Inflation (MGM, 1933); http://www.youtube.com/watch?v=99Dzdc1H0wM. (Found @ Campaign for Liberty).
Just found it interesting to watch.
Enjoy!
EMK
In case you have some questions about how the Treasury Department is spending the $700 billion of taxpayer dollars that Congress authorized, you're not alone.
The Congressional Oversight Panel (COP) is tasked with answering just that question.
Established by the same law that made the $700 billion fund available, COP is chaired by Harvard Law School Professor Elizabeth Warren - a bankruptcy expert who has written extensively about the credit crisis for the blog Credit Slips.
Over at COP's homepage, COP.Senate.gov, she recorded a short video to tell you a little bit about the panel and the work they'll be doing.
In their first monthly report, the panel lays out 10 questions about the use of the economic stabilization funds, including "Is the strategy working?" and "Is the public receiving a fair deal?"
To answer those questions, COP is going to be holding hearings with officials from the Treasury Department, the Federal Reserve, and elsewhere to make sure that your money is being put to good use. But they're asking for your help and your involvement.
Watch the video, read the first monthly COP report, and share your story of how the economic crisis has affected you at COP.Senate.gov.
What exactly does the Federal Reserve do? (if possible Iwould like the answer from a political official)
Who controls it? (We know that it is not government run nor overheaded by its rulings)
Why has it been that no other canidate other than Ron Paul said anything about the fact that the government does not control the Federal Reserve or its ability to control the economy?
I don't agree with everything Ron Paul says and I'm an Obama voter 100% but just some things I have noticed.
t is the conventional wisdom of the Red Meat crowd that Republicans are better stewards of the economy. This assumption is apparently based on their near religious conviction in trickle down economics and the view that Republican administrations are reliably more sympathetic to big business and the rich. In this article I show that at least as a matter of economic performance that the Republicans are no better stewards of the economy. On the contrary, the evidence indicates slightly higher economic returns under Democratic administrations. What wealthy Republicans voters are doing of course is trying to balance their personal desire for tax cuts with the fictitious economic stewardship argument so that they can feel less guilty about their own greed.
Over the years, stock analysts have suggested that the stock market prefers Republicans in the White House. The following table shows stock market returns under Republican and Democratic Administrations 1901 to 2004 according the Stock Trader's Almanac.
In short, a $10,000 investment compounded during Democratic presidencies since 1901 would be worth $279,705 after 48 years. The same $10,000 investment during the 56 Republican years would have been worth just $78,699. Adjusted for inflation the difference is less significant but still favors the Dems. [1]
Well you might say maybe the Democrats spend more money in the public sector, improving economic performance in the private sector by bloating the Federal Budget Deficit. Previously I blogged on this exact issue. [2]
(Click on the chart above to enlarge.)
What this chart clearly shows is that whereas National Debt has continuously risen, without exception, every Republican administration since 1977 has increased the national debt as a percentage of GDP while every Democratic administration has reduced it. For me this is a moral issue. Borrowing from future generations to pay for the greed of the top 10% of Americans is both economically senseless and immoral.
What about overall federal spending? Growth in federal spending has averaged 6.96% under Democratic Administrations compared to 7.57% under Republicans. [3]
What about unemployment? On the day that US unemployment hit 6.1% it is worth noting that from 1962 to 2001, unemployment averaged 5.1% under Democratic Administrations and 6.75% under Republicans. [4]
GDP Growth? GDP growth from 1962 to 2001 has averaged 3.9% under Democratic Administrations and 2.9% under Republicans. [5]
Inflation? You guessed it. Inflation under Democratic Administrations at 4.26% between 1962 to 2001 trailed average inflation rates under the Republicans at 4.96% [6]
Even though it may not look like it or feel like it, you are making progress.
Continue working towards progress instead of perfection.
Nothing or no no one is perfect.
Just keep taking steps.
Keep making those phone calls.
Continue following your plan.
Remain focused on your goal.
Do what you have to do right now to get to the next level.
Complete every task.
Keep every promise and commitment.
Don't look back.
Let no one weaken your walk of faith and determination.
Remain teachable.
Place yourself in a blessing position by associating with people on-the-grow.
Talk with teachers.
Walk with winners.
Climb with champions.
Study successful people.
Something great is about to happen for you!
Start giving thanks right now before you can even see the outward manisfestation of your prayers and desires.
Everything you do from this day forward will take you further away or closer to your potential for successful living.
-by Dr. Jewel Diamond Taylor, Motivational Speaker & Author
Each month, each resident of your state who has a state Driver's License for at least one year and has had no tickets or accidents in the past year shall receive coupons worth 50 gallons of gasoline. Each gallon shall be discounted at $1.69 per gallon from the pump price. Coupons shall be in $10, $20 and $50 denominations. You may pick up to four different coupon combinations: One $50, One $40 and one $10, two $20's and one $10, or one $20 and three $10's.
Each coupon is bar coded. The gas station scans each coupon at the time of purchase. The codes are cached. At close or shift change the cache is sent electronically to a central bank. Within 24 hours the same amount of US Dollars or Euros will be deposited in your account of choice. In my next blog I discuss ways to fund the 1.69 GAS COUPON. This can be done in about 2 weeks, in time for labor day.
All the Best,
Wain Phillips
The Republican party certainly doesn't have much to talk about these days. I have felt for quite some time that focusing on business growth doesn't readily translate into worker gains. This article brings the point home.
From the Economist...
"With the economy beginning to slow, the current expansion has a chance to become the first sustained period of economic growth since World War II that fails to offer a prolonged increase in real wages for most workers."
The median hourly wage has declined 2% for American workers since 2003, taking inflation into account. This has occurred during the time when Enron was raiding its pension fund and CEOs had (and still have) obscene compenstion packages. The company I work for, a global systems integrator, recently gave its CEO an additional half a million dollar raise while doling out worker raises of less than 1% on average.
We're almost to the end of King - oops, I mean President Bush's two terms in office. In true royal fashion, the Bush administration has succeeded in issuing a number of 'edicts' that have resulted in
(1) The Highest US Inflation Rate in almost 20 Years - http://news.bbc.co.uk/2/hi/business/7509729.stm
(2) Over 3,000 dead and 100,000 wounded since the war began in Iraq. (source: http://www.antiwar.com/casualties/)
(3) The price of gas and diesal fuel have hit new record highs - http://money.cnn.com/2008/07/16/news/economy/gas/
To all this - I say Thank God for America!! We can vote him out of office and elect someone with ethics - like Barack Obama!
