From Pravda.ru:
It must be said, that like the breaking of a great dam, the American decent into Marxism is happening with breath taking speed, against the back drop of a passive, hapless sheeple, excuse me dear reader, I meant people.
True, the situation has been well prepared on and off for the past century, especially the past twenty years. The initial testing grounds was conducted upon our Holy Russia and a bloody test it was. But we Russians would not just roll over and give up our freedoms and our souls, no matter how much money Wall Street poured into the fists of the Marxists.
Those lessons were taken and used to properly prepare the American populace for the surrender of their freedoms and souls, to the whims of their elites and betters.
First, the population was dumbed down through a politicized and substandard education system based on pop culture, rather then the classics. Americans know more about their favorite TV dramas then the drama in DC that directly affects their lives. They care more for their "right" to choke down a McDonalds burger or a BurgerKing burger than for their constitutional rights. Then they turn around and lecture us about our rights and about our "democracy". Pride blind the foolish.
Then their faith in God was destroyed, until their churches, all tens of thousands of different "branches and denominations" were for the most part little more then Sunday circuses and their televangelists and top protestant mega preachers were more then happy to sell out their souls and flocks to be on the "winning" side of one pseudo Marxist politician or another. Their flocks may complain, but when explained that they would be on the "winning" side, their flocks were ever so quick to reject Christ in hopes for earthly power. Even our Holy Orthodox churches are scandalously liberalized in America.
The final collapse has come with the election of Barack Obama. His speed in the past three months has been truly impressive. His spending and money printing has been a record setting, not just in America's short history but in the world. If this keeps up for more then another year, and there is no sign that it will not, America at best will resemble the Wiemar Republic and at worst Zimbabwe.
These past two weeks have been the most breath taking of all. First came the announcement of a planned redesign of the American Byzantine tax system, by the very thieves who used it to bankroll their thefts, loses and swindles of hundreds of billions of dollars. These make our Russian oligarchs look little more then ordinary street thugs, in comparison. Yes, the Americans have beat our own thieves in the shear volumes. Should we congratulate them?
These men, of course, are not an elected panel but made up of appointees picked from the very financial oligarchs and their henchmen who are now gorging themselves on trillions of American dollars, in one bailout after another. They are also usurping the rights, duties and powers of the American congress (parliament). Again, congress has put up little more then a whimper to their masters.
Then came Barack Obama's command that GM's (General Motor) president step down from leadership of his company. That is correct, dear reader, in the land of "pure" free markets, the American president now has the power, the self given power, to fire CEOs and we can assume other employees of private companies, at will. Come hither, go dither, the centurion commands his minions.
So it should be no surprise, that the American president has followed this up with a "bold" move of declaring that he and another group of unelected, chosen stooges will now redesign the entire automotive industry and will even be the guarantee of automobile policies. I am sure that if given the chance, they would happily try and redesign it for the whole of the world, too. Prime Minister Putin, less then two months ago, warned Obama and UK's Blair, not to follow the path to Marxism, it only leads to disaster. Apparently, even though we suffered 70 years of this Western sponsored horror show, we know nothing, as foolish, drunken Russians, so let our "wise" Anglo-Saxon fools find out the folly of their own pride.
Again, the American public has taken this with barely a whimper...but a "freeman" whimper.
So, should it be any surprise to discover that the Democratically controlled Congress of America is working on passing a new regulation that would give the American Treasury department the power to set "fair" maximum salaries, evaluate performance and control how private companies give out pay raises and bonuses? Senator Barney Franks, a social pervert basking in his homosexuality (of course, amongst the modern, enlightened American societal norm, as well as that of the general West, homosexuality is not only not a looked down upon life choice, but is often praised as a virtue) and his Marxist enlightenment, has led this effort. He stresses that this only affects companies that receive government monies, but it is retroactive and taken to a logical extreme, this would include any company or industry that has ever received a tax break or incentive.
The Russian owners of American companies and industries should look thoughtfully at this and the option of closing their facilities down and fleeing the land of the Red as fast as possible. In other words, divest while there is still value left.
The proud American will go down into his slavery with out a fight, beating his chest and proclaiming to the world, how free he really is. The world will only snicker.
Stanislav Mishin
Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts
Sunday, May 31, 2009
Wednesday, May 13, 2009
Once you go black you'll never go back.
Associated Press Excerpt: "Maggie and John Anderson of Chicago vowed four months ago that for one year, they would try to patronize only black-owned businesses. The "Empowerment Experiment" is the reason John had to suffer for hours with a stomach ache and Maggie no longer gets that brand-name lather when she washes her hair. A grocery trip is a 14-mile odyssey.
"We kind of enjoy the sacrifice because we get to make the point ... but I am going without stuff and I am frustrated on a daily basis," Maggie Anderson said. "It's like, my people have been here 400 years and we don't even have a Walgreens to show for it."
So far, the Andersons have spent hundreds of dollars with black businesses from grocery stores to dry cleaners. But the couple still hasn't found a mortgage lender, home security system vendor or toy store. Nonetheless, they're hoping to expand the endeavor beyond their Chicago home.
Plans are under way to track spending among supporters nationwide and build a national database of quality black businesses. The first affiliate chapter has been launched in Atlanta, and the couple has established a foundation to raise funds for black businesses and an annual convention.
"We have the real power to do something, to use the money we spend every day to solve our problems," Maggie Anderson said recently at a meet-and-greet in Atlanta. "We have to believe that black businesses are just as good as everybody else's."
Now, the Andersons are following up with 4,000 people who signed up for the experiment on their Web site to gauge their commitment and set up online accounts to track their spending. Hundreds have also joined the experiment's Facebook page, Maggie Anderson said.
Gregory Price, chairman of the economics department at Morehouse College, said black visionaries like Booker T. Washington and Marcus Garvey made similar calls to action.
"The idea is a sound one, given that black Americans are still underrepresented in the ranks of the self-employed and that entrepreneurship is a key component to wealth," Price said.
There are one million black businesses in the United States accounting for more than $100 billion in annual sales, according to the National Black Chamber of Commerce. The latest U.S. Census numbers report that blacks have more than $800 billion in expendable income each year.
-------------------------------------
Of course, if this were a bunch of whites trying to patronize white owned businesses the cry of racism from the left would be deafening.
Maggie Anderson's comment that "It's like my people have been here 400 years and we don't even have a Walgreens to show for it" shows just how ignorant Maggie is. Had blacks not decided to sell themselves out to the party of Nathan Bedford Forrest there would be considerably more wealthy blacks than we have today since segregation meant black business owners had a captive audience. (Historical note: Although Forrest has been associated with the KKK, no actual link was ever established. He did own and trade in slaves, but advocated reconciliation after the war. It is likely, however, that he did in fact have some klan involvement.)
After the Civil War, blacks amassed a considerable fortune due to segregation and they began to enjoy political clout as well. This was too much for the racist democrats to tolerate and so, a deal was more or less struck whereby blacks would vote democrat and the democratic party would "take care" of the blacks. Sure looks like that deal worked out well. (current President excepted)
During reconstruction, blacks had taken control of several southern state legislatures. (Mississippi and South Carolina) In 1870, Hiram Revels became the first black member of the Senate and also in 1870 Joseph Rainey became the first black member of the House of Representatives.
There were many black businesses that developed during reconstruction, from barber shops and insurance companies to hotels, restaurants and newspapers. White racist democrats were starting to get pissed that blacks were gaining so much clout. They had to put a stop to it. How? Desegregation was the easiest answer. As soon as blacks could start patronizing white owned businesses, many black owned businesses closed up and as the money dried up so did black political clout. Blacks apparently have yet to figure out how bad they have been chumped by the democrats, but one can hope that one day they can see the light.
On a personal level, I have no problem with limited segregation as it does tend to keep money within certain communities and it can spread the wealth around. The American Asian community is pretty tight and I really do not have a problem with that, nor do I have any particular issue with the Hispanic community. The key is moderation. As long as folks can have the opportunity to shop at desegregated stores within a given community then there should be no major issue with a few black only, white only, Hispanic only etc. business operating within the community.
Yeah, yeah, I know America is the big melting pot, but as long as we realize we ARE all Americans, a little segregation may not be all that bad...............as long as it doesn't get out of hand.
"We kind of enjoy the sacrifice because we get to make the point ... but I am going without stuff and I am frustrated on a daily basis," Maggie Anderson said. "It's like, my people have been here 400 years and we don't even have a Walgreens to show for it."
So far, the Andersons have spent hundreds of dollars with black businesses from grocery stores to dry cleaners. But the couple still hasn't found a mortgage lender, home security system vendor or toy store. Nonetheless, they're hoping to expand the endeavor beyond their Chicago home.
Plans are under way to track spending among supporters nationwide and build a national database of quality black businesses. The first affiliate chapter has been launched in Atlanta, and the couple has established a foundation to raise funds for black businesses and an annual convention.
"We have the real power to do something, to use the money we spend every day to solve our problems," Maggie Anderson said recently at a meet-and-greet in Atlanta. "We have to believe that black businesses are just as good as everybody else's."
Now, the Andersons are following up with 4,000 people who signed up for the experiment on their Web site to gauge their commitment and set up online accounts to track their spending. Hundreds have also joined the experiment's Facebook page, Maggie Anderson said.
Gregory Price, chairman of the economics department at Morehouse College, said black visionaries like Booker T. Washington and Marcus Garvey made similar calls to action.
"The idea is a sound one, given that black Americans are still underrepresented in the ranks of the self-employed and that entrepreneurship is a key component to wealth," Price said.
There are one million black businesses in the United States accounting for more than $100 billion in annual sales, according to the National Black Chamber of Commerce. The latest U.S. Census numbers report that blacks have more than $800 billion in expendable income each year.
-------------------------------------
Of course, if this were a bunch of whites trying to patronize white owned businesses the cry of racism from the left would be deafening.
Maggie Anderson's comment that "It's like my people have been here 400 years and we don't even have a Walgreens to show for it" shows just how ignorant Maggie is. Had blacks not decided to sell themselves out to the party of Nathan Bedford Forrest there would be considerably more wealthy blacks than we have today since segregation meant black business owners had a captive audience. (Historical note: Although Forrest has been associated with the KKK, no actual link was ever established. He did own and trade in slaves, but advocated reconciliation after the war. It is likely, however, that he did in fact have some klan involvement.)
After the Civil War, blacks amassed a considerable fortune due to segregation and they began to enjoy political clout as well. This was too much for the racist democrats to tolerate and so, a deal was more or less struck whereby blacks would vote democrat and the democratic party would "take care" of the blacks. Sure looks like that deal worked out well. (current President excepted)
During reconstruction, blacks had taken control of several southern state legislatures. (Mississippi and South Carolina) In 1870, Hiram Revels became the first black member of the Senate and also in 1870 Joseph Rainey became the first black member of the House of Representatives.
There were many black businesses that developed during reconstruction, from barber shops and insurance companies to hotels, restaurants and newspapers. White racist democrats were starting to get pissed that blacks were gaining so much clout. They had to put a stop to it. How? Desegregation was the easiest answer. As soon as blacks could start patronizing white owned businesses, many black owned businesses closed up and as the money dried up so did black political clout. Blacks apparently have yet to figure out how bad they have been chumped by the democrats, but one can hope that one day they can see the light.
On a personal level, I have no problem with limited segregation as it does tend to keep money within certain communities and it can spread the wealth around. The American Asian community is pretty tight and I really do not have a problem with that, nor do I have any particular issue with the Hispanic community. The key is moderation. As long as folks can have the opportunity to shop at desegregated stores within a given community then there should be no major issue with a few black only, white only, Hispanic only etc. business operating within the community.
Yeah, yeah, I know America is the big melting pot, but as long as we realize we ARE all Americans, a little segregation may not be all that bad...............as long as it doesn't get out of hand.
Friday, May 8, 2009
Another 539,000 jobs down the drain in April.
So, economists were expecting a job loss of 620,000 for April, but, surprise, the job losses were only 539,000. I guess the good news is that we have as many job losses in the first four months of 2009 than we had in all of 2008, but it could be worse.
Yet, the real estate market is rebounding. Really? See, there was a little thing called liar loans that did not just deal with falsified income and other documents. A good portion of liar loans were people claiming that investment properties were primary residences. The actual numbers are unknown, however, millions of these loans were made. So, in addition to the millions of bank owned houses that have yet to hit the market and the 1.8 million or so bad ALT-A loans we have an additional 2.5 million unemployed in 2009 thus far, who is going to be purchasing real estate?
Will the buyers be paying market value or distressed sale prices, which will end up being the market? Anyone who thinks the economy has bottomed out is sadly mistaken. Seventy percent of the U.S. employers are small business. How many small businesses have to begin hiring or how many new start up business do you need to absorb 2.5 million people who are out of work?
The better than expected employment news gave stocks a boost. Only in America can 539,000 people losing their jobs give the stock market a boost. The next time the market tanks it's going to be really ugly and the ignorant who have gotten back in are going to take a tremendous hit, while the more savvy investors might still make some coin.
From AP: "There are glimmers of hope. We are moving in the right direction in terms of layoffs. They are measurably less bad than what we've been through," said Mark Zandi, chief economist at Moody's Economy.com.
Still, companies will remain cautious in hiring, making it harder for laid-off workers to find new jobs.
If laid-off workers who have given up looking for new jobs or have settled for part-time work are included, the unemployment rate would have been 15.8 percent in April, the highest on records dating back to 1994. The total number of unemployed now stands at 13.7 million, up from 13.2 million in March.
Companies also kept a tight rein on workers hours. The average work week in April stayed at 33.2 hours, matching the record low set in March.
Since the recession began in December 2007, the economy has lost a net total of 5.7 million jobs.
As the recession eats into sales and profits, companies have turned to layoffs and other cost-cutting measures to survive the storm. Those including holding down workers' hours, and freezing or cutting pay."
----------------------------
Here's a news flash, Mark Zandi is, apparently, an idiot and if you have no job it's a bit difficult to make a mortgage payment. Also, if you had a full time job paying 60-80k/year and you now have a part time 30 hour per week job at minimum wage, you still cannot make a mortgage payment.
Obama's 2010 3.55 trillion dollar budget request asks for everything but actual assistance for homeowners who could use it. There are provisions for health care, education and infrastructure as well as for clean energy, but for the little guy who could really use a break, nada. The bright side is that the forecasted deficit is only 1.17 trillion dollars. Yippie!!!!
No way in hell are we anywhere the bottom of this mess.
------------------------
Update............From Peter Schiff's latest article: Strike up the band, boys, happy days are here again! Recently released short-term economic data, including unemployment claims, non-farm payrolls, home sales, and business spending, which had been so unambiguously horrific in February and March, are now just garden-variety awful. With the Wicked Witch of Depression now apparently crushed under the house of Obamanomics, the Munchkins of Wall Street have sounded the all clear, pushing the Dow Jones up 25% from its lows. But the premature conclusion of their Lollipop Guild economists, that the crash of 2008/2009 is now a fading memory, is just as delusional as their failure to see it coming in the first place.
Once again, the facts do not support the euphoria. Over the past few months, the government has literally blasted the economy with trillions of new dollars conjured from the ether. The fact that this "stimulus" has blown some air back into our deflating consumer-based bubble economy, and given a boost to an oversold stock market, is hardly evidence that the problems have been solved. It is simply an illusion, and not a very good one at that. By throwing money at the problem, all the government is creating is inflation. Although this can often look like growth, it is no more capable of creating wealth than a hall of mirrors is capable of creating people.
We are currently suffering from an overdose of past stimulus. A larger dose now will only worsen the condition.
The Greenspan/Bush stimulus of 2001 prevented a much needed recession and bought us seven years of artificial growth. The multi-trillion dollar tab for that episode of federally-engineered economic bullet-dodging came due in 2008. The 2001 stimulus had kicked off a debt-fueled consumption binge that resulted in economic weakness, not strength. So now, even though the recent stimulus administered a much larger dose, we will likely experience a much smaller bounce. One can only speculate as to how much time this stimulus will buy and what it will cost when the bill arrives.
My guess is that, at most, the Bernanke/Obama stimulus will buy two years before the hangover sets in. However, since this dose is so massive, the comedown will be equally horrific. My fear is that when the drug wears off, we will reach for that monetary syringe one last time. At that point, the dosage may be lethal, and the economy will die of hyperinflation.
-------------------
I think we will see hyperinflation in less than two years. And this from Americans for Democratic Action: "WASHINGTON - May 8 - The real unemployment rate released today by the Bureau of Labor Statistics is 15.8%, nearly 7 points higher than the rate officially reported.
The real rate includes marginally attached workers which the BLS reports “are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not looking currently for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.”
Yeah, 15.8% sounds about right.
Yet, the real estate market is rebounding. Really? See, there was a little thing called liar loans that did not just deal with falsified income and other documents. A good portion of liar loans were people claiming that investment properties were primary residences. The actual numbers are unknown, however, millions of these loans were made. So, in addition to the millions of bank owned houses that have yet to hit the market and the 1.8 million or so bad ALT-A loans we have an additional 2.5 million unemployed in 2009 thus far, who is going to be purchasing real estate?
Will the buyers be paying market value or distressed sale prices, which will end up being the market? Anyone who thinks the economy has bottomed out is sadly mistaken. Seventy percent of the U.S. employers are small business. How many small businesses have to begin hiring or how many new start up business do you need to absorb 2.5 million people who are out of work?
The better than expected employment news gave stocks a boost. Only in America can 539,000 people losing their jobs give the stock market a boost. The next time the market tanks it's going to be really ugly and the ignorant who have gotten back in are going to take a tremendous hit, while the more savvy investors might still make some coin.
From AP: "There are glimmers of hope. We are moving in the right direction in terms of layoffs. They are measurably less bad than what we've been through," said Mark Zandi, chief economist at Moody's Economy.com.
Still, companies will remain cautious in hiring, making it harder for laid-off workers to find new jobs.
If laid-off workers who have given up looking for new jobs or have settled for part-time work are included, the unemployment rate would have been 15.8 percent in April, the highest on records dating back to 1994. The total number of unemployed now stands at 13.7 million, up from 13.2 million in March.
Companies also kept a tight rein on workers hours. The average work week in April stayed at 33.2 hours, matching the record low set in March.
Since the recession began in December 2007, the economy has lost a net total of 5.7 million jobs.
As the recession eats into sales and profits, companies have turned to layoffs and other cost-cutting measures to survive the storm. Those including holding down workers' hours, and freezing or cutting pay."
----------------------------
Here's a news flash, Mark Zandi is, apparently, an idiot and if you have no job it's a bit difficult to make a mortgage payment. Also, if you had a full time job paying 60-80k/year and you now have a part time 30 hour per week job at minimum wage, you still cannot make a mortgage payment.
Obama's 2010 3.55 trillion dollar budget request asks for everything but actual assistance for homeowners who could use it. There are provisions for health care, education and infrastructure as well as for clean energy, but for the little guy who could really use a break, nada. The bright side is that the forecasted deficit is only 1.17 trillion dollars. Yippie!!!!
No way in hell are we anywhere the bottom of this mess.
------------------------
Update............From Peter Schiff's latest article: Strike up the band, boys, happy days are here again! Recently released short-term economic data, including unemployment claims, non-farm payrolls, home sales, and business spending, which had been so unambiguously horrific in February and March, are now just garden-variety awful. With the Wicked Witch of Depression now apparently crushed under the house of Obamanomics, the Munchkins of Wall Street have sounded the all clear, pushing the Dow Jones up 25% from its lows. But the premature conclusion of their Lollipop Guild economists, that the crash of 2008/2009 is now a fading memory, is just as delusional as their failure to see it coming in the first place.
Once again, the facts do not support the euphoria. Over the past few months, the government has literally blasted the economy with trillions of new dollars conjured from the ether. The fact that this "stimulus" has blown some air back into our deflating consumer-based bubble economy, and given a boost to an oversold stock market, is hardly evidence that the problems have been solved. It is simply an illusion, and not a very good one at that. By throwing money at the problem, all the government is creating is inflation. Although this can often look like growth, it is no more capable of creating wealth than a hall of mirrors is capable of creating people.
We are currently suffering from an overdose of past stimulus. A larger dose now will only worsen the condition.
The Greenspan/Bush stimulus of 2001 prevented a much needed recession and bought us seven years of artificial growth. The multi-trillion dollar tab for that episode of federally-engineered economic bullet-dodging came due in 2008. The 2001 stimulus had kicked off a debt-fueled consumption binge that resulted in economic weakness, not strength. So now, even though the recent stimulus administered a much larger dose, we will likely experience a much smaller bounce. One can only speculate as to how much time this stimulus will buy and what it will cost when the bill arrives.
My guess is that, at most, the Bernanke/Obama stimulus will buy two years before the hangover sets in. However, since this dose is so massive, the comedown will be equally horrific. My fear is that when the drug wears off, we will reach for that monetary syringe one last time. At that point, the dosage may be lethal, and the economy will die of hyperinflation.
-------------------
I think we will see hyperinflation in less than two years. And this from Americans for Democratic Action: "WASHINGTON - May 8 - The real unemployment rate released today by the Bureau of Labor Statistics is 15.8%, nearly 7 points higher than the rate officially reported.
The real rate includes marginally attached workers which the BLS reports “are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not looking currently for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.”
Yeah, 15.8% sounds about right.
Sunday, April 26, 2009
America's tent cities......what to do?..what to do?...Zyklon B anyone?
Photo by Rico Simke 
Photo Credit Jim Wilson/NYT
Fresno Tent City
While the United States has always had an underclass that included a limited number of folks living on the streets or in tents, we are seeing the number of tent cities swell in proportion to the worsening economy.
There are now fairly large tent cities in California, Nevada, Washington and Tennessee while smaller tent cities are springing up in Florida, Ohio and many other states across the country.
Some of these tent cities are well organized, while others have no general supervision. As these tent cities are unsightly, many areas are attempting to disband them. If the unemployment situation continues unabated, we will have another 5 million people out of work by the end of the year. Where will they go?
Photo Scott Sady/AP
Tent City in Reno, NV
Many homeless shelters are at capacity and many food banks are running out of food. Nationwide, fully 10% of the country is on food stamps. (Although climate is not much of a factor in the south, the colder northern climate is going to make it tough on the homeless/tent dwellers. ) Perhaps they can relocate to all of the soon to be vacant commercial property.
Photo Credit Jim Wilson/NYT
Fresno Tent City
You can almost hear the Oval Office speech now......"I've tried my best, I've tried harder than anything else in my whole life (cries a single tear from the left eye only) to deal with this horrific economy that I inherited from my numbskull predecessor, but, as the number of homeless has reached critical levels and disease is running rampant, I have no choice other than to round up certain segments of the population who are not able to become productive citizens and ship them off to one of the concentration camps that have been established, so that they can be humanely euthanized. Together we can get through these tough times, we'll just be doing it with a few less of our citizens. Allah, PBUH, bless you and Allah, PBUH, bless the United States of America."
Here's a few more NYT tent city photos:
We are going to be in BIG trouble soon.
Wednesday, April 8, 2009
It's the economy, stupid!!
Reprinted below is a March 9, 2009 post from my blogspot site dealing with my thoughts on the economic situation, though it concentrates on the housing fiasco. I had indicated my belief that the real estate market will not hit bottom until 2012. It may be even longer since the Government is permitting the use of automated valuation models and real estate agent broker price opinions (gee, no conflict of interest there) over actual appraisals performed by an independent third party for many types of property valuations now. This, along with the AMC mandate, will continue to guarantee inaccurate (fradulent) valuations of real estate.
I was listening to El Rushbo the other day (he may be an entertainer, but he's no economist) when he mentioned that things aren't all that bad since we still have over 91% of the population employed. Yes, however, you do not need an actual majority of the population out of work to destroy an economy. During the Great Depression an estimated 25%-30% of the population was unemployed. Thus, 70% of the depression era population was employed. Seven out of 10 people still had jobs and yet we had a catastrophe in economic terms. What Rush and many economists fail to figure is the level of unemployment that will trigger an automatic unemployment landslide.
Typically, U.S. unemployment runs between 5% and 6%. Let's use 6% as our baseline. Retail business generally operates on some fairly tight margins due to factors such as the actual operating costs to run a legitimate business plus the number of competitors, who can affect the gross profit margin as well. Another factor in setting a retail price is the number of customers that frequent the establishment, which also determines what you need to charge for a good or service to keep the doors open........all of this is common sense type stuff.
So, after all is said and done you end up with a net profit of 10%. If you increase your gross profit you will not be competitive. What happens if you lose 5% of your customers? You might be able to get by with a small price increase and you may do some belt tightening so you can still remain in business, but then you lose another 5% of your customers........what happens to your net profit? (I know a 10% customer loss may not translate to a 10% net profit loss, but it's just for example purposes)
Unemployment is currently pushing 9%, which is 3% over our 6% baseline. Considering that 10% of the U.S. is already on food stamps and that the Gov. unemployment rates are low based on how they are calculated, I would estimate actual unemployment at around 12% with another 3% underemployed. At 12% unemployment you are now 6% over the baseline. Factor in underemployment, at say an additional equivalent of 1.5% unemployment, and you are now 7.5% over the baseline.
Again, considering the tight margins that many retail businesses operate on, an additional 2% unemployment rate (6 million more folks out of work) increase could start an avalanche of business closures. Considering that we are now averaging 700,000/month losing their jobs, we could be 9 months away from an economic catastrophe. It does not matter what the stock market does, as long as folks keep losing their jobs. Many states are maxed out on their continued ability to pay unemployment benefits. A number of states are now fudging property values, keeping them artificially high by excluding distressed property sales in areas where those sales ARE the market value. Once the public figures out they have been getting screwed on their assessed values and demands a reduction in their assessed values, the tax revenues will further decrease.
Let's also remember that the top 20% of income earners pay about 80% of the taxes and, unlike the depression, most of the current job losses have been in the higher paying sectors, i.e. the folks losing their jobs (finance, construction, high paid assembly line work, real estate, etc) are the ones who have been paying taxes. The minimum wage earners CANNOT make up the revenue shortfall. You can raise taxes on the "rich", but they can afford to move to a lower tax state or area. (Ask Gov. Paterson about that one).
The bottom line is that it does not take a really significant amount of job loss to cripple an economy. If things do not turn around almost immediately on the job front, we are in big trouble.
-------------------------------
Monday, March 9, 2009
So, how bad will the economic situation get?
How bad will the economy get? There are differing opinions on this, but the facts speak for themselves. The general consensus is that the downward economic spiral began with the sub prime lending mess. In a nut shell, this was precipitated by groups such as ACORN, with the backing of some notable democrats, Barney Frank et al, pressuring congress to get banks to lend money to anyone who could fog a mirror. This led to the development and widespread use of exotic loan products such as Option ARM loans, pick-a-pay loans, NINJA loans (No Job, No Income or Assets) and so on. These loans could be bundled and sold via products such as MBS/mortgage backed securities. Credit rating agencies were complicit in this as well by rating these junk mortgage products as AAA rated or somewhere thereabouts. Since this freed up lending institutions to sell their (bad) paper, there was ever greater incentive to fund more and more of these loans.
Having a real estate appraisal background I can tell you many appraisers saw this coming two years before most everyone else. One of the reasons for this was that mortgage brokers work on commission and banks were also eager to sell their paper. One recent survey indicated that 90% of appraisers felt pressured to "make the deal work." The actual number was more like 99.9%. If an appraiser refused to "hit the number" the broker or LO needed to make the deal work (i.e. appraise the house high enough to payoff the house, which had declined in value, the new SUV's, the flat screen TV's and other toys) then the appraiser was blacklisted and these blacklists were shared with other lenders, so the honest ethical appraiser was driven out of business while the number hitting scumbag was thriving. Many banks made use of AMC's which are Appraisal Management Companies. Until the law changed, AMC's were owned by the banks (there is still a tight relationship between the banks and AMC's since, if the AMC does not play ball with the appraisal values the bank can stop using them.) who would skim up to 75% of the appraisal fee. Driving down the price paid to the independent fee appraiser also helped put the honest appraisers out of work. The AMC's would only assign work to the appraisers who could hit the number. They would also lower the pay and demand faster turn times so the appraisals were decreasing in quality and the only appraisers who were "approved" to work for the AMC's were the unethical appraiser. The HVCC/Home Valuation Code of Conduct, which is pending, mandates use of AMC's which will ensure the housing crisis will continue in perpetuity. Many lenders are already mandating use of AMC's in anticipation of the HVCC passage.
Now, I have already mentioned that a big problem was the government mandating that banks loan to anyone with a pulse. What if you were an honest bank that did not want to do this? Then you engaged in Red Lining. Red Lining is illegal discrimination, so banks that did not want to lend to risky borrowers would flag certain zip codes/areas and instruct their underwriters to kill the appraisal so the deal would not fly. The result of this was that rehabbers and certain homeowners were not able to conduct legitimate revitalization in some inner city neighborhoods.So, where is the housing situation at today? Currently banks are sitting on approximately 3 million foreclosed homes that have not been put on the market. While most people think the housing crisis is ending, keep in mind that the Alt-A (people with b,c,d, credit) defaults are just starting to hit and the conservative estimate is that there will be around 1.8 million Alt-A defaults. So 3 million homes plus 1.8 million homes = 4.8 million foreclosures that have yet to hit the market and further depress prices. Add to this 2 million unemployed in 2008 and 1.3 million unemployed so far in 2009 (which could end up being another 5 million unemployed by the end of 2009) and housing prices will not hit bottom for at least 3 years, or longer. Most people are not aware of just how bad the housing situation is due to the National Association of Realtor's propaganda division, which would make even Joseph Goebbels envious.We also tend to localize the economy to our own borders and not think about the situation in the rest of the world. It's as bad in Europe and Asia as it is in America.
We can't forget that all of the Obama bailouts WILL result in hyperinflation to equal Weimar Germany or Zimbabwe. Even before the bailouts, if everyone who held U.S. dollars cashed them in, they would only get 10 cents on the dollar in hard assets. Today it would be more like 3 cents on the dollar. I am expecting hyperinflation as early as 6 months and no later than 12 months. The stock market may be getting an upward bounce today, but I can see the DJIA at 5000 or 4000 shortly.As to actual unemployment, currently 31 million people are on food stamps. This is a bit over 10% of the U.S. population. The latest government unemployment figures show 8% unemployment, but as 12% of mortgages are in default or late pay status, this would indicate a true unemployment rate of at least 10%-13%. This does not include underemployment where, say, an engineer gets terminated and can only find work at a fast food joint. Consider that a majority of job losses have been occurring in the financial sector, the construction sector, the real estate sector and the high paying manufacturing sector. Remember that the top 20% of income earners pay about 80% of the taxes. Now, it is not an even sliding scale, but with the top 10% of the top 20% of income earners out of work, the result is a loss of up to 30% or so of federal, state and local tax revenue. Obama's plan may call for tax increases, but there will be no one to pay them.The retail sector will start losing more big retailers by mid-year and a 30% vacancy rate on commercial property is expected soon as well. The real estate trusts have been taking a hit. Worldwide freight shipments are down as is worldwide manufacturing. China is seeing a big increase in the number of unemployed (remember there are 1.3 billion Chinese, so a 10% unemployment rate over there puts 130 million out of work) as is much of Europe.For the first time since the Civil War, we could see Americans starving to death. This is not an exaggeration or scare tactic. An objective look at the facts can lead to no other conclusion. Folks need to get into a survival frame of mind.
I was listening to El Rushbo the other day (he may be an entertainer, but he's no economist) when he mentioned that things aren't all that bad since we still have over 91% of the population employed. Yes, however, you do not need an actual majority of the population out of work to destroy an economy. During the Great Depression an estimated 25%-30% of the population was unemployed. Thus, 70% of the depression era population was employed. Seven out of 10 people still had jobs and yet we had a catastrophe in economic terms. What Rush and many economists fail to figure is the level of unemployment that will trigger an automatic unemployment landslide.
Typically, U.S. unemployment runs between 5% and 6%. Let's use 6% as our baseline. Retail business generally operates on some fairly tight margins due to factors such as the actual operating costs to run a legitimate business plus the number of competitors, who can affect the gross profit margin as well. Another factor in setting a retail price is the number of customers that frequent the establishment, which also determines what you need to charge for a good or service to keep the doors open........all of this is common sense type stuff.
So, after all is said and done you end up with a net profit of 10%. If you increase your gross profit you will not be competitive. What happens if you lose 5% of your customers? You might be able to get by with a small price increase and you may do some belt tightening so you can still remain in business, but then you lose another 5% of your customers........what happens to your net profit? (I know a 10% customer loss may not translate to a 10% net profit loss, but it's just for example purposes)
Unemployment is currently pushing 9%, which is 3% over our 6% baseline. Considering that 10% of the U.S. is already on food stamps and that the Gov. unemployment rates are low based on how they are calculated, I would estimate actual unemployment at around 12% with another 3% underemployed. At 12% unemployment you are now 6% over the baseline. Factor in underemployment, at say an additional equivalent of 1.5% unemployment, and you are now 7.5% over the baseline.
Again, considering the tight margins that many retail businesses operate on, an additional 2% unemployment rate (6 million more folks out of work) increase could start an avalanche of business closures. Considering that we are now averaging 700,000/month losing their jobs, we could be 9 months away from an economic catastrophe. It does not matter what the stock market does, as long as folks keep losing their jobs. Many states are maxed out on their continued ability to pay unemployment benefits. A number of states are now fudging property values, keeping them artificially high by excluding distressed property sales in areas where those sales ARE the market value. Once the public figures out they have been getting screwed on their assessed values and demands a reduction in their assessed values, the tax revenues will further decrease.
Let's also remember that the top 20% of income earners pay about 80% of the taxes and, unlike the depression, most of the current job losses have been in the higher paying sectors, i.e. the folks losing their jobs (finance, construction, high paid assembly line work, real estate, etc) are the ones who have been paying taxes. The minimum wage earners CANNOT make up the revenue shortfall. You can raise taxes on the "rich", but they can afford to move to a lower tax state or area. (Ask Gov. Paterson about that one).
The bottom line is that it does not take a really significant amount of job loss to cripple an economy. If things do not turn around almost immediately on the job front, we are in big trouble.
-------------------------------
Monday, March 9, 2009
So, how bad will the economic situation get?
How bad will the economy get? There are differing opinions on this, but the facts speak for themselves. The general consensus is that the downward economic spiral began with the sub prime lending mess. In a nut shell, this was precipitated by groups such as ACORN, with the backing of some notable democrats, Barney Frank et al, pressuring congress to get banks to lend money to anyone who could fog a mirror. This led to the development and widespread use of exotic loan products such as Option ARM loans, pick-a-pay loans, NINJA loans (No Job, No Income or Assets) and so on. These loans could be bundled and sold via products such as MBS/mortgage backed securities. Credit rating agencies were complicit in this as well by rating these junk mortgage products as AAA rated or somewhere thereabouts. Since this freed up lending institutions to sell their (bad) paper, there was ever greater incentive to fund more and more of these loans.
Having a real estate appraisal background I can tell you many appraisers saw this coming two years before most everyone else. One of the reasons for this was that mortgage brokers work on commission and banks were also eager to sell their paper. One recent survey indicated that 90% of appraisers felt pressured to "make the deal work." The actual number was more like 99.9%. If an appraiser refused to "hit the number" the broker or LO needed to make the deal work (i.e. appraise the house high enough to payoff the house, which had declined in value, the new SUV's, the flat screen TV's and other toys) then the appraiser was blacklisted and these blacklists were shared with other lenders, so the honest ethical appraiser was driven out of business while the number hitting scumbag was thriving. Many banks made use of AMC's which are Appraisal Management Companies. Until the law changed, AMC's were owned by the banks (there is still a tight relationship between the banks and AMC's since, if the AMC does not play ball with the appraisal values the bank can stop using them.) who would skim up to 75% of the appraisal fee. Driving down the price paid to the independent fee appraiser also helped put the honest appraisers out of work. The AMC's would only assign work to the appraisers who could hit the number. They would also lower the pay and demand faster turn times so the appraisals were decreasing in quality and the only appraisers who were "approved" to work for the AMC's were the unethical appraiser. The HVCC/Home Valuation Code of Conduct, which is pending, mandates use of AMC's which will ensure the housing crisis will continue in perpetuity. Many lenders are already mandating use of AMC's in anticipation of the HVCC passage.
Now, I have already mentioned that a big problem was the government mandating that banks loan to anyone with a pulse. What if you were an honest bank that did not want to do this? Then you engaged in Red Lining. Red Lining is illegal discrimination, so banks that did not want to lend to risky borrowers would flag certain zip codes/areas and instruct their underwriters to kill the appraisal so the deal would not fly. The result of this was that rehabbers and certain homeowners were not able to conduct legitimate revitalization in some inner city neighborhoods.So, where is the housing situation at today? Currently banks are sitting on approximately 3 million foreclosed homes that have not been put on the market. While most people think the housing crisis is ending, keep in mind that the Alt-A (people with b,c,d, credit) defaults are just starting to hit and the conservative estimate is that there will be around 1.8 million Alt-A defaults. So 3 million homes plus 1.8 million homes = 4.8 million foreclosures that have yet to hit the market and further depress prices. Add to this 2 million unemployed in 2008 and 1.3 million unemployed so far in 2009 (which could end up being another 5 million unemployed by the end of 2009) and housing prices will not hit bottom for at least 3 years, or longer. Most people are not aware of just how bad the housing situation is due to the National Association of Realtor's propaganda division, which would make even Joseph Goebbels envious.We also tend to localize the economy to our own borders and not think about the situation in the rest of the world. It's as bad in Europe and Asia as it is in America.
We can't forget that all of the Obama bailouts WILL result in hyperinflation to equal Weimar Germany or Zimbabwe. Even before the bailouts, if everyone who held U.S. dollars cashed them in, they would only get 10 cents on the dollar in hard assets. Today it would be more like 3 cents on the dollar. I am expecting hyperinflation as early as 6 months and no later than 12 months. The stock market may be getting an upward bounce today, but I can see the DJIA at 5000 or 4000 shortly.As to actual unemployment, currently 31 million people are on food stamps. This is a bit over 10% of the U.S. population. The latest government unemployment figures show 8% unemployment, but as 12% of mortgages are in default or late pay status, this would indicate a true unemployment rate of at least 10%-13%. This does not include underemployment where, say, an engineer gets terminated and can only find work at a fast food joint. Consider that a majority of job losses have been occurring in the financial sector, the construction sector, the real estate sector and the high paying manufacturing sector. Remember that the top 20% of income earners pay about 80% of the taxes. Now, it is not an even sliding scale, but with the top 10% of the top 20% of income earners out of work, the result is a loss of up to 30% or so of federal, state and local tax revenue. Obama's plan may call for tax increases, but there will be no one to pay them.The retail sector will start losing more big retailers by mid-year and a 30% vacancy rate on commercial property is expected soon as well. The real estate trusts have been taking a hit. Worldwide freight shipments are down as is worldwide manufacturing. China is seeing a big increase in the number of unemployed (remember there are 1.3 billion Chinese, so a 10% unemployment rate over there puts 130 million out of work) as is much of Europe.For the first time since the Civil War, we could see Americans starving to death. This is not an exaggeration or scare tactic. An objective look at the facts can lead to no other conclusion. Folks need to get into a survival frame of mind.
Friday, March 27, 2009
Good nationalized health care? Yes, use dual currency.
Many conservatives are not relishing the possibility of socialized medicine. There is good cause for concern since most countries that have socialized medicine have problems with it. The main reason for this is that socialized medicine relies on tax revenue. A national health system IS expensive and in order to have a maintainable system costs must be kept to a minimum. Minimum cost=minimum care. Is there an alternative?
Yes, and the alternative is to nationalize health care and pay for it with a dual currency. Since we are using valueless fiat money now anyway, this system could work. Also, the private sector and the Government have accumulated significant assets, and this makes my system a bit more workable although we have printed enough money that we can't really back it with anything.
Here's the deal. You have two currencies, a private sector dollar and a government dollar. Codified, so that the rate of exchange is always 1:1. The Government nationalizes our health care system, puts doctors and nurses on a government wage scale based on current private sector salaries. The Government health care employees are paid in Government dollars which are exchanged 1:1 for private sector dollars. This precludes the use of tax money to fund the system.
In the private sector, the cost of a brick and mortar building is a liability, as is the medical equipment that's in it. (i.e. a private company has to charge enough to recoup their costs plus allow for entrepreneurial profit) In the Government's case the building and equipment become the asset that backs the government currency, so the government would have a vested interest in maintaining the buildings and constantly upgrading the equipment.
Dual currency would have other applicability as well. Let's say a city needed a new bridge. The City Government issues an RFP and awards the contract. The city pays the contractor in Government dollars which are exchangeable 1:1 for private sector dollars. The completed bridge then becomes the asset that helps back the Government currency. (rather than a tax liability)
In this manner, most taxes could be eliminated and there would be a great improvement in our infrastructure. Medical care would not suffer and business would no longer be burdened with skyrocketing health care costs. This is actually a workable plan, but things being what they are, I'm not getting my hopes up.
Yes, and the alternative is to nationalize health care and pay for it with a dual currency. Since we are using valueless fiat money now anyway, this system could work. Also, the private sector and the Government have accumulated significant assets, and this makes my system a bit more workable although we have printed enough money that we can't really back it with anything.
Here's the deal. You have two currencies, a private sector dollar and a government dollar. Codified, so that the rate of exchange is always 1:1. The Government nationalizes our health care system, puts doctors and nurses on a government wage scale based on current private sector salaries. The Government health care employees are paid in Government dollars which are exchanged 1:1 for private sector dollars. This precludes the use of tax money to fund the system.
In the private sector, the cost of a brick and mortar building is a liability, as is the medical equipment that's in it. (i.e. a private company has to charge enough to recoup their costs plus allow for entrepreneurial profit) In the Government's case the building and equipment become the asset that backs the government currency, so the government would have a vested interest in maintaining the buildings and constantly upgrading the equipment.
Dual currency would have other applicability as well. Let's say a city needed a new bridge. The City Government issues an RFP and awards the contract. The city pays the contractor in Government dollars which are exchangeable 1:1 for private sector dollars. The completed bridge then becomes the asset that helps back the Government currency. (rather than a tax liability)
In this manner, most taxes could be eliminated and there would be a great improvement in our infrastructure. Medical care would not suffer and business would no longer be burdened with skyrocketing health care costs. This is actually a workable plan, but things being what they are, I'm not getting my hopes up.
Monday, March 16, 2009
Dead Cat Bounce or sustained recovery?
I recently made a couple of posts dealing with the economic outlook and then the Dow goes from a low of 6469 to today's close at 7216. So the Dow jumps up about 747 points in a week or so. Is this the start of a sustained recovery or is it basically a temporary bounce? My feeling is that it is only a temporary bump up.
People obviously thought it was time to do some buying and this may continue for a bit, but there is really nothing going on in the U.S. or world economy to justify a sustained rally. The Chinese have been recently begging for assurances that we will not screw them over. Considering the actual value (or lack thereof) of the dollar, I'm surprised that we are not having to take a shoebox full of cash to the grocery store to buy a loaf of bread. The reason this is not happening is that, apparently, the rest of the world is worse off than we are and there needs to be at least one foundation currency. The fact that much of the TARP (Troubled Asset Relief Program) money has gone to European banks and other financial institutions is not sitting too well with me as it reminds me that about two thirds of our gold reserves went to rebuild Europe under the Marshall Plan. We are well past the time to keep bailing out ungrateful European countries.
Anyway, back on track. I still think we are going to see the Dow at 5000 or 4000 before we finally hit bottom. The big unknown is what will happen if we have another 9.11 or a conflict starts up somewhere. I feel there is a 99% probability Israel will attack Iran in the near future. Iran has about 6000 gas centrifuges in operation; this is not in dispute. (We had 20,000 gas centrifuges operating during the Manhattan Project, but 6000 is sufficient to produce enough enriched uranium to make a bomb.) Iran has produced enough enriched uranium to produce an atomic bomb....also remember Israel is a small nation and two or three nuke strikes would wipe it off the map. The Russians have completed the Bushehr reactor in Iran and it is undergoing testing. It can produce enriched uranium or plutonium, either of which can be used to make an atomic bomb.
The main issue for the Israelis at the moment, and the reason I think hostilities may be imminent, is that Russia is resuming sales of the S-300 ( NATO designation SA-10 Grumble) surface to air missile. Although the Russians have fielded a more advanced version known as the S-400 (NATO designation SA-21. The S-400 can engage spaceborne targets.), the S-300 is an extremely potent SAM. It can deploy within 5 minutes and can track 100 targets simultaneously and upgraded versions can engage up to 36 targets at the same time.
If you are an IDF General, you are acutely aware that you do not need to lose a bunch of multi-million dollar aircraft to a missile that cost a couple of hundred thousand dollars or less. Israel MUST strike Iran before these SAMs are deployed in significant numbers. All bets on the economy are off if that happens.
Another major terrorist attack could equally accelerate the death spiral of the economy. I hope I'm wrong, but facts are facts.
S-300 Launch
Update 03/22/2009: Looks like the Russians are holding off on the S-300's to Iran for a while. I still think we are going to see an Israeli attack on Iran soon since Obama's latest olive branch to Iran cannot be sitting too well with our Israeli friends. Israel is not going to allow Iran to ring its nuke facilities with S-300's and it is not going to give Iran time to develop an atom bomb or two either. Something has got to happen soon.
People obviously thought it was time to do some buying and this may continue for a bit, but there is really nothing going on in the U.S. or world economy to justify a sustained rally. The Chinese have been recently begging for assurances that we will not screw them over. Considering the actual value (or lack thereof) of the dollar, I'm surprised that we are not having to take a shoebox full of cash to the grocery store to buy a loaf of bread. The reason this is not happening is that, apparently, the rest of the world is worse off than we are and there needs to be at least one foundation currency. The fact that much of the TARP (Troubled Asset Relief Program) money has gone to European banks and other financial institutions is not sitting too well with me as it reminds me that about two thirds of our gold reserves went to rebuild Europe under the Marshall Plan. We are well past the time to keep bailing out ungrateful European countries.
Anyway, back on track. I still think we are going to see the Dow at 5000 or 4000 before we finally hit bottom. The big unknown is what will happen if we have another 9.11 or a conflict starts up somewhere. I feel there is a 99% probability Israel will attack Iran in the near future. Iran has about 6000 gas centrifuges in operation; this is not in dispute. (We had 20,000 gas centrifuges operating during the Manhattan Project, but 6000 is sufficient to produce enough enriched uranium to make a bomb.) Iran has produced enough enriched uranium to produce an atomic bomb....also remember Israel is a small nation and two or three nuke strikes would wipe it off the map. The Russians have completed the Bushehr reactor in Iran and it is undergoing testing. It can produce enriched uranium or plutonium, either of which can be used to make an atomic bomb.
The main issue for the Israelis at the moment, and the reason I think hostilities may be imminent, is that Russia is resuming sales of the S-300 ( NATO designation SA-10 Grumble) surface to air missile. Although the Russians have fielded a more advanced version known as the S-400 (NATO designation SA-21. The S-400 can engage spaceborne targets.), the S-300 is an extremely potent SAM. It can deploy within 5 minutes and can track 100 targets simultaneously and upgraded versions can engage up to 36 targets at the same time.
If you are an IDF General, you are acutely aware that you do not need to lose a bunch of multi-million dollar aircraft to a missile that cost a couple of hundred thousand dollars or less. Israel MUST strike Iran before these SAMs are deployed in significant numbers. All bets on the economy are off if that happens.
Another major terrorist attack could equally accelerate the death spiral of the economy. I hope I'm wrong, but facts are facts.
S-300 LaunchUpdate 03/22/2009: Looks like the Russians are holding off on the S-300's to Iran for a while. I still think we are going to see an Israeli attack on Iran soon since Obama's latest olive branch to Iran cannot be sitting too well with our Israeli friends. Israel is not going to allow Iran to ring its nuke facilities with S-300's and it is not going to give Iran time to develop an atom bomb or two either. Something has got to happen soon.
Wednesday, March 11, 2009
Market uptick, but economic outlook still sucks.
This is kind of a follow up to my earlier post on the economic outlook. I'm going to include some links to other sites, as well as excerpts from some of the articles that you may not generally find in the mainstream media (who are in the tank for Obama and will not generally publish anything that makes the milk chocolate messiah look bad). The market is up today and may stay there for a spell, but the reality is that the overall world economic outlook is bleak.
Link: http://www.rense.com/general85/fedd.htm
Excerpt from The Federal Reserve is Bankrupt:
By Matthias Chang3-10-9
The Federal Reserve is bankrupt for all intents and purposes. The same goes for the Bank of England!
This article will focus largely on the Fed, because the Fed is the "financial land-mine".
How long can someone who has stepped on a landmine, remain standing hours, days? Eventually, when he is exhausted and his legs give way, the mine will just explode!
The shadow banking system has not only stepped on the land-mine, it is carrying such a heavy load (trillions of toxic wastes) that sooner or later it will tilt, give way and trigger off the land-mine![1]
In a recent article, I referred tothe remarks of British Prime Minister Gordon Brown and President Obama calling for the shadow banking system to be outlawed.
Even if the call was genuine, it is too late. The land-mine has been triggered and the explosion cannot be averted under any circumstances.
The only issue is the extent of the damage to the global economy and how long it will take for the world to recover from this fiasco a financial madness that has no precedent. The great depression is "Mary Poppins" in comparison!
The idea of a central bank going bankrupt is not that outlandish. I am by no means the first author who has given this stark warning. What underlies this crisis (which I initially examined in an article in December 2006) is the potential collapse of the global banking system, specifically the Shadow Money-Lenders.
Nouriel Roubini, the New York University professor said [2]:
"The process of socialising the private losses from this crisis has moved many of the liabilities of the private sector onto the books of the sovereign. At some point a sovereign bank may crack, in which case, the ability of the government to credibly commit to act as a backstop for the financial system including deposit guarantees could come unglued."
Please read the underlined words again. "Sovereign bank" means central bank. When a central bank "cracks" i.e. becomes insolvent, "all hell breaks lose", because as the professor correctly pointed out, "any government guarantees will ring hollow and will be useless".
If a central bank goes belly up, it is as good as the government going bankrupt. Period!
In another article, Roubini admitted that the pressure on "the financial land-mine" is totally unbearable. He wrote: "The US Financial system is effectively insolvent". It follows that if the financial system is bankrupt, it is a matter of time before the "sovereign bank" goes belly up. This is a given!
Link: http://www.telegraph.co.uk/finance/financetopics/recession/4965408/Warren-Buffett-says-financial-crisis-is-economic-Pearl-Harbor.html
Excerpt from Warren Buffett says financial crisis is economic Pearl Harbor:
He also warned that recovery would not come quickly.
Acknowledging his own failure to foresee the scale of the crisis, he admitted: "It's fallen off a cliff. Not only has the economy slowed down but people have really changed their habits like I haven't seen."
Mr Buffett, recently ranked the second-richest American by Forbes magazine, said that fear was the greatest cause of damage to the economy, claiming it is now dominating the public's behaviour to an alarming degree.
Link: http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/4958395/Thanks-to-the-Bank-its-a-crisis-in-the-eurozone-its-a-total-catastrophe.html
Excerpt from Thanks to the Bank it's a crisis; in the eurozone it's a total catastrophe:
Spain's agony is already well advanced. Industrial output has fallen 24pc. Some 352,000 people have lost their jobs in two months. BBVA expects unemployment to reach 20pc next year, touching 4.5m. Premier Jose Luis Zapatero can do nothing as long as Spain remains in monetary union.
He cannot devalue to claw back 30pc in lost labour competitiveness against EMU's German bloc, or take emergency steps to slow the property crash. In an odd lapse last week – perhaps a slip – he advised Spaniards that the best thing to do in these dark times was to ****.
Yes, it is dangerous for the Bank of England to buy up a third of all long-dated gilts. But it would be even more dangerous to allow deflation to run its course in an economy where debt levels have reached such extremes. Debt and deflation are a deadly mix.
The errors that led to our current predicament are well-known. A small army of economists – Austrians, Monetarists, and Keynesians – warned that central banks were playing with fire by fixing the price of credit too low and ignoring asset bubbles. The $6.7 trillion in reserve accumulation by China, Japan, and the petro-powers drove bond yields too low for safety.
Credit signals were gravely distorted. In Britain, Gordon Brown poured petrol on the fire by pushing the fiscal deficit to 3pc of GDP at the top of the cycle. Wretched man. However much we rage at Sir Fred or Citi-wrecker Chuck Prince, let us not forget that this crisis was confected by governments. To blame the free market is to miss the bigger point.
But I digress. We are now faced with the post-debt wreckage. The task at hand is to hold our societies together as best we can. One dreads to think what would have happened if the Hoover-Brüning nostalgics had succeeded in blocking every remedy.
As it is we have seen industrial production collapse in every region. The drops in January were: Japan (-31pc), Korea (-26pc), Russia (-16pc), Brazil (-15pc), Italy (-14pc), Germany (-12pc). Falls that took two years from late 1929 have been compressed into five months.Spain's agony is already well advanced. Industrial output has fallen 24pc. Some 352,000 people have lost their jobs in two months.
Link:http://www.telegraph.co.uk/finance/economics/4966754/World-in-grip-of-Great-Recession-as-growth-dips-below-zero-IMF-warns.html
Excerpt from World in grip of Great Recession, IMF warns.:
Domestic demand across the world was being hit by continued deleveraging by world financial institutions and a collapse in consumer and business confidence.
"When we release our next package of forecasts at the spring session, that is to say in April, everything leads us to believe that it will indeed reveal a negative global growth for the first time in 60 years," he said
Link: http://www.bloomberg.com/apps/news?pid=20601068&sid=apE182UITs2E&refer=economy
Excerpt from German Manufacturing Orders Extend Record Plunge:
March 11 (Bloomberg) -- German manufacturingorders collapsed in January as the global recession smothered exports.
Orders plunged 38 percent from a year earlier, the biggest drop since data for a reunified Germany started in 1991, the Economy Ministry in Berlin said today. From December they fell 8 percent, four times as much as economists expected and extending their worst decline on record.
“The annual slump is absolutely catastrophic,” said Alexander Koch, an economist at UniCredit MIB in Munich. “The extent of declines is terrifying.”
Link: http://www.bloomberg.com/apps/news?pid=20601068&sid=a19xonLTkHIw&refer=economy
Excerpt from Global Confidence Drops as Economies Crumble, Bailouts Needed:
March 12 (Bloomberg) -- Confidence in the world economy dropped in March as the slump proved deeper than forecast and the Obama administration launched new rescues of financial institutions, a survey of Bloomberg users on six continents showed.
The Bloomberg Professional Global Confidence Index fell to 5.95 this month from 8.5 in February. A reading below 50 means pessimists outnumber optimists. Sentiment about Europe and the U.S. slid, while respondents in Asia were less pessimistic about their region, the survey showed.
The global economy may shrink for the first time since World War II, with trade collapsing by the most since the Great Depression, the World Bank said this month. The erosion of confidence is exacerbating the decline; U.S. banking stocks are down 26 percent since the last survey despite a third effort by the government to help Citigroup Inc.
“The financial crisis and the economic recession are feeding on each other, and that’s adding to pessimism,” said Martin van Vliet, an economist at ING Bank in Amsterdam who took part in the survey. “We’re still in no man’s land waiting for stimulus packages to take effect. The light at the end of the tunnel is still far away.”
I could have just as easily posted 100 more similar articles/forecasts. It amazes me at how many people have their heads in the sand. Basically, consider the world economy to be a large turd in the toilet bowl..........the flush lever has been pushed and nothing can stop it from going down the drain. My suggestion, stock up on guns, ammo and MRE's.
Link: http://www.rense.com/general85/fedd.htm
Excerpt from The Federal Reserve is Bankrupt:
By Matthias Chang3-10-9
The Federal Reserve is bankrupt for all intents and purposes. The same goes for the Bank of England!
This article will focus largely on the Fed, because the Fed is the "financial land-mine".
How long can someone who has stepped on a landmine, remain standing hours, days? Eventually, when he is exhausted and his legs give way, the mine will just explode!
The shadow banking system has not only stepped on the land-mine, it is carrying such a heavy load (trillions of toxic wastes) that sooner or later it will tilt, give way and trigger off the land-mine![1]
In a recent article, I referred to
Even if the call was genuine, it is too late. The land-mine has been triggered and the explosion cannot be averted under any circumstances.
The only issue is the extent of the damage to the global economy and how long it will take for the world to recover from this fiasco a financial madness that has no precedent. The great depression is "Mary Poppins" in comparison!
The idea of a central bank going bankrupt is not that outlandish. I am by no means the first author who has given this stark warning. What underlies this crisis (which I initially examined in an article in December 2006) is the potential collapse of the global banking system, specifically the Shadow Money-Lenders.
Nouriel Roubini, the New York University professor said [2]:
"The process of socialising the private losses from this crisis has moved many of the liabilities of the private sector onto the books of the sovereign. At some point a sovereign bank may crack, in which case, the ability of the government to credibly commit to act as a backstop for the financial system including deposit guarantees could come unglued."
Please read the underlined words again. "Sovereign bank" means central bank. When a central bank "cracks" i.e. becomes insolvent, "all hell breaks lose", because as the professor correctly pointed out, "any government guarantees will ring hollow and will be useless".
If a central bank goes belly up, it is as good as the government going bankrupt. Period!
In another article, Roubini admitted that the pressure on "the financial land-mine" is totally unbearable. He wrote: "The US Financial system is effectively insolvent". It follows that if the financial system is bankrupt, it is a matter of time before the "sovereign bank" goes belly up. This is a given!
Link: http://www.telegraph.co.uk/finance/financetopics/recession/4965408/Warren-Buffett-says-financial-crisis-is-economic-Pearl-Harbor.html
Excerpt from Warren Buffett says financial crisis is economic Pearl Harbor:
He also warned that recovery would not come quickly.
Acknowledging his own failure to foresee the scale of the crisis, he admitted: "It's fallen off a cliff. Not only has the economy slowed down but people have really changed their habits like I haven't seen."
Mr Buffett, recently ranked the second-richest American by Forbes magazine, said that fear was the greatest cause of damage to the economy, claiming it is now dominating the public's behaviour to an alarming degree.
Link: http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/4958395/Thanks-to-the-Bank-its-a-crisis-in-the-eurozone-its-a-total-catastrophe.html
Excerpt from Thanks to the Bank it's a crisis; in the eurozone it's a total catastrophe:
Spain's agony is already well advanced. Industrial output has fallen 24pc. Some 352,000 people have lost their jobs in two months. BBVA expects unemployment to reach 20pc next year, touching 4.5m. Premier Jose Luis Zapatero can do nothing as long as Spain remains in monetary union.
He cannot devalue to claw back 30pc in lost labour competitiveness against EMU's German bloc, or take emergency steps to slow the property crash. In an odd lapse last week – perhaps a slip – he advised Spaniards that the best thing to do in these dark times was to ****.
Yes, it is dangerous for the Bank of England to buy up a third of all long-dated gilts. But it would be even more dangerous to allow deflation to run its course in an economy where debt levels have reached such extremes. Debt and deflation are a deadly mix.
The errors that led to our current predicament are well-known. A small army of economists – Austrians, Monetarists, and Keynesians – warned that central banks were playing with fire by fixing the price of credit too low and ignoring asset bubbles. The $6.7 trillion in reserve accumulation by China, Japan, and the petro-powers drove bond yields too low for safety.
Credit signals were gravely distorted. In Britain, Gordon Brown poured petrol on the fire by pushing the fiscal deficit to 3pc of GDP at the top of the cycle. Wretched man. However much we rage at Sir Fred or Citi-wrecker Chuck Prince, let us not forget that this crisis was confected by governments. To blame the free market is to miss the bigger point.
But I digress. We are now faced with the post-debt wreckage. The task at hand is to hold our societies together as best we can. One dreads to think what would have happened if the Hoover-Brüning nostalgics had succeeded in blocking every remedy.
As it is we have seen industrial production collapse in every region. The drops in January were: Japan (-31pc), Korea (-26pc), Russia (-16pc), Brazil (-15pc), Italy (-14pc), Germany (-12pc). Falls that took two years from late 1929 have been compressed into five months.Spain's agony is already well advanced. Industrial output has fallen 24pc. Some 352,000 people have lost their jobs in two months.
Link:http://www.telegraph.co.uk/finance/economics/4966754/World-in-grip-of-Great-Recession-as-growth-dips-below-zero-IMF-warns.html
Excerpt from World in grip of Great Recession, IMF warns.:
Domestic demand across the world was being hit by continued deleveraging by world financial institutions and a collapse in consumer and business confidence.
"When we release our next package of forecasts at the spring session, that is to say in April, everything leads us to believe that it will indeed reveal a negative global growth for the first time in 60 years," he said
Link: http://www.bloomberg.com/apps/news?pid=20601068&sid=apE182UITs2E&refer=economy
Excerpt from German Manufacturing Orders Extend Record Plunge:
March 11 (Bloomberg) -- German manufacturingorders collapsed in January as the global recession smothered exports.
Orders plunged 38 percent from a year earlier, the biggest drop since data for a reunified Germany started in 1991, the Economy Ministry in Berlin said today. From December they fell 8 percent, four times as much as economists expected and extending their worst decline on record.
“The annual slump is absolutely catastrophic,” said Alexander Koch, an economist at UniCredit MIB in Munich. “The extent of declines is terrifying.”
Link: http://www.bloomberg.com/apps/news?pid=20601068&sid=a19xonLTkHIw&refer=economy
Excerpt from Global Confidence Drops as Economies Crumble, Bailouts Needed:
March 12 (Bloomberg) -- Confidence in the world economy dropped in March as the slump proved deeper than forecast and the Obama administration launched new rescues of financial institutions, a survey of Bloomberg users on six continents showed.
The Bloomberg Professional Global Confidence Index fell to 5.95 this month from 8.5 in February. A reading below 50 means pessimists outnumber optimists. Sentiment about Europe and the U.S. slid, while respondents in Asia were less pessimistic about their region, the survey showed.
The global economy may shrink for the first time since World War II, with trade collapsing by the most since the Great Depression, the World Bank said this month. The erosion of confidence is exacerbating the decline; U.S. banking stocks are down 26 percent since the last survey despite a third effort by the government to help Citigroup Inc.
“The financial crisis and the economic recession are feeding on each other, and that’s adding to pessimism,” said Martin van Vliet, an economist at ING Bank in Amsterdam who took part in the survey. “We’re still in no man’s land waiting for stimulus packages to take effect. The light at the end of the tunnel is still far away.”
I could have just as easily posted 100 more similar articles/forecasts. It amazes me at how many people have their heads in the sand. Basically, consider the world economy to be a large turd in the toilet bowl..........the flush lever has been pushed and nothing can stop it from going down the drain. My suggestion, stock up on guns, ammo and MRE's.
Monday, March 9, 2009
So, how bad will the economic situation get?
How bad will the economy get? There are differing opinions on this, but the facts speak for themselves. The general consesus is that the downward economic spiral began with the subprime lending mess. In a nut shell, this was precipitated by groups such as ACORN, with the backing of some notable dimocrats (intentional spelling), Barney Frank et al, pressuring congress to get banks to lend money to anyone who could fog a mirror. This led to the development and widespread use of exotic loan products such as Option ARM loans, pick-a-pay loans, NINJA loans (No Job, No Income or Assets) and so on. These loans could be bundled and sold via products such as MBS/mortgage backed securities. Credit rating agencies were complicit in this as well by rating these junk mortgage products as AAA rated or somewhere thereabouts. Since this freed up lending institutions to sell their (bad) paper, there was ever greater incentive to fund more and more of these loans.
Having a real estate appraisal background I can tell you many appraisers saw this coming two years before most everyone else. One of the reasons for this was that mortgage brokers work on commission and banks were also eager to sell their paper. One recent survey indicated that 90% of appraisers felt pressured to "make the deal work." The actual number was more like 99.9%. If an appraiser refused to "hit the number" the broker or LO needed to make the deal work (i.e. appraise the house high enough to payoff the house, which had declined in value, the new SUV's, the flat screen TV's and other toys) then the appraiser was blacklisted and these blacklists were shared with other lenders, so the honest ethical appraiser was driven out of business while the number hitting scumbag was thriving. Many banks made use of AMC's which are Appraisal Management Companies. Until the law changed, AMC's were owned by the banks (there is still a tight relationship between the banks and AMC's since, if the AMC does not play ball with the appraisal values the bank can stop using them.) who would skim up to 75% of the appraisal fee. Driving down the price paid to the independent fee appraiser also helped put the honest appraisers out of work. The AMC's would only assign work to the appraisers who could hit the number. They would also lower the pay and demand faster turn times so the appraisals were decreasing in quality and the only appraisers who were "approved" to work for the AMC's were the unethical appraiser. The HVCC/Home Valuation Code of Conduct, which is pending, mandates use of AMC's which will ensure the housing crisis will continue in perpetuity. Many lenders are already mandating use of AMC's in anticipation of the HVCC passage.
Now, I have already mentioned that a big problem was the government mandating that banks loan to anyone with a pulse. What if you were an honest bank that did not want to do this? Then you engaged in Red Lining. Red Lining is illegal discrimination, so banks that did not want to lend to risky borrowers would flag certain zip codes/areas and instruct their underwriters to kill the appraisal so the deal would not fly. The result of this was that rehabbers and certain homeowners were not able to conduct legitimate revitalization in some inner city neighborhoods.
So, where is the housing situation at today? Currently banks are sitting on approximately 3 million foreclosed homes that have not been put on the market. While most people think the housing crisis is ending, keep in mind that the Alt-A (people with b,c,d, credit) defaults are just starting to hit and the conservative estimate is that there will be around 1.8 million Alt-A defaults. So 3 million homes plus 1.8 million homes = 4.8 million foreclosures that have yet to hit the market and further depress prices. Add to this 2 million unemployed in 2008 and 1.3 million unemployed so far in 2009 (which could end up being another 5 million unemployed by the end of 2009) and housing prices will not hit bottom for at least 3 years, or longer. Most people are not aware of just how bad the housing situation is due to the National Association of Realtor's propaganda division, which would make even Joseph Goebbels envious.
We also tend to localize the economy to our own borders and not think about the situation in the rest of the world. It's as bad in Europe and Asia as it is in America. We can't forget that all of the Obama bailouts WILL result in hyperinflation to equal Weimar Germany or Zimbabwe. Even before the bailouts, if everyone who held U.S. dollars cashed them in, they would only get 10 cents on the dollar in hard assets. Today it would be more like 3 cents on the dollar. I am expecting hyperinflation as early as 6 months and no later than 12 months. The stock market may be getting an upward bounce today, but I can see the DJIA at 5000 or 4000 shortly.
As to actual unemployment, currently 31 million people are on food stamps. This is a bit over 10% of the U.S. population. The latest government unemployment figures show 8% unemployment, but as 12% of mortgages are in default or late pay status, this would indicate a true unemployment rate of at least 10%-13%. This does not include underemployment where, say, an engineer gets terminated and can only find work at a fast food joint. Consider that a majority of job losses have been occurring in the financial sector, the construction sector, the real estate sector and the high paying manufacturing sector. Remember that the top 20% of income earners pay about 80% of the taxes. Now, it is not an even sliding scale, but with the top 10% of the top 20% of income earners out of work, the result is a loss of up to 30% or so of federal, state and local tax revenue. Obama's plan may call for tax increases, but there will be no one to pay them.
The retail sector will start losing more big retailers by mid-year and a 30% vacancy rate on commercial property is expected soon as well. The real estate trusts have been taking a hit. Worldwide freight shipments are down as is worldwide manufacturing. China is seeing a big increase in the number of unemployed (remember there are 1.3 billion Chinese, so a 10% unemployment rate over there puts 130 million out of work) as is much of Europe.
For the first time since the Civil War, we could see Americans starving to death. This is not an exaggeration or scare tactic. An objective look at the facts can lead to no other conclusion. Folks need to get into a survival frame of mind.
Having a real estate appraisal background I can tell you many appraisers saw this coming two years before most everyone else. One of the reasons for this was that mortgage brokers work on commission and banks were also eager to sell their paper. One recent survey indicated that 90% of appraisers felt pressured to "make the deal work." The actual number was more like 99.9%. If an appraiser refused to "hit the number" the broker or LO needed to make the deal work (i.e. appraise the house high enough to payoff the house, which had declined in value, the new SUV's, the flat screen TV's and other toys) then the appraiser was blacklisted and these blacklists were shared with other lenders, so the honest ethical appraiser was driven out of business while the number hitting scumbag was thriving. Many banks made use of AMC's which are Appraisal Management Companies. Until the law changed, AMC's were owned by the banks (there is still a tight relationship between the banks and AMC's since, if the AMC does not play ball with the appraisal values the bank can stop using them.) who would skim up to 75% of the appraisal fee. Driving down the price paid to the independent fee appraiser also helped put the honest appraisers out of work. The AMC's would only assign work to the appraisers who could hit the number. They would also lower the pay and demand faster turn times so the appraisals were decreasing in quality and the only appraisers who were "approved" to work for the AMC's were the unethical appraiser. The HVCC/Home Valuation Code of Conduct, which is pending, mandates use of AMC's which will ensure the housing crisis will continue in perpetuity. Many lenders are already mandating use of AMC's in anticipation of the HVCC passage.
Now, I have already mentioned that a big problem was the government mandating that banks loan to anyone with a pulse. What if you were an honest bank that did not want to do this? Then you engaged in Red Lining. Red Lining is illegal discrimination, so banks that did not want to lend to risky borrowers would flag certain zip codes/areas and instruct their underwriters to kill the appraisal so the deal would not fly. The result of this was that rehabbers and certain homeowners were not able to conduct legitimate revitalization in some inner city neighborhoods.
So, where is the housing situation at today? Currently banks are sitting on approximately 3 million foreclosed homes that have not been put on the market. While most people think the housing crisis is ending, keep in mind that the Alt-A (people with b,c,d, credit) defaults are just starting to hit and the conservative estimate is that there will be around 1.8 million Alt-A defaults. So 3 million homes plus 1.8 million homes = 4.8 million foreclosures that have yet to hit the market and further depress prices. Add to this 2 million unemployed in 2008 and 1.3 million unemployed so far in 2009 (which could end up being another 5 million unemployed by the end of 2009) and housing prices will not hit bottom for at least 3 years, or longer. Most people are not aware of just how bad the housing situation is due to the National Association of Realtor's propaganda division, which would make even Joseph Goebbels envious.
We also tend to localize the economy to our own borders and not think about the situation in the rest of the world. It's as bad in Europe and Asia as it is in America. We can't forget that all of the Obama bailouts WILL result in hyperinflation to equal Weimar Germany or Zimbabwe. Even before the bailouts, if everyone who held U.S. dollars cashed them in, they would only get 10 cents on the dollar in hard assets. Today it would be more like 3 cents on the dollar. I am expecting hyperinflation as early as 6 months and no later than 12 months. The stock market may be getting an upward bounce today, but I can see the DJIA at 5000 or 4000 shortly.
As to actual unemployment, currently 31 million people are on food stamps. This is a bit over 10% of the U.S. population. The latest government unemployment figures show 8% unemployment, but as 12% of mortgages are in default or late pay status, this would indicate a true unemployment rate of at least 10%-13%. This does not include underemployment where, say, an engineer gets terminated and can only find work at a fast food joint. Consider that a majority of job losses have been occurring in the financial sector, the construction sector, the real estate sector and the high paying manufacturing sector. Remember that the top 20% of income earners pay about 80% of the taxes. Now, it is not an even sliding scale, but with the top 10% of the top 20% of income earners out of work, the result is a loss of up to 30% or so of federal, state and local tax revenue. Obama's plan may call for tax increases, but there will be no one to pay them.
The retail sector will start losing more big retailers by mid-year and a 30% vacancy rate on commercial property is expected soon as well. The real estate trusts have been taking a hit. Worldwide freight shipments are down as is worldwide manufacturing. China is seeing a big increase in the number of unemployed (remember there are 1.3 billion Chinese, so a 10% unemployment rate over there puts 130 million out of work) as is much of Europe.
For the first time since the Civil War, we could see Americans starving to death. This is not an exaggeration or scare tactic. An objective look at the facts can lead to no other conclusion. Folks need to get into a survival frame of mind.
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