As the financial meltdown continues apace, one thing we're bound to be seeing a lot of are articles like this one, inviting readers to join the pity party for the real victims -- all those former Master-of-the-Universe investment bankers whose investment portfolios have taken such a rude hit of late, and who are now forced to make such heartrending decisions as the following:
Who can they let go from the staff? Most would rather do without the nanny than without the cleaner. With any luck the cleaner likes children anyway and will help out in a pinch. If there is a cook, she goes before the nanny. The cleaner also knows how to roast a chicken and wash up. Forget the garden altogether - expect to see a lot of weeds as the crisis worsens - although the unemployed may take some comfort in doing the gardening themselves.
Oh noes!
Even more tragic are the breathless reports informing readers that "one tumbling titan after another" is being forced to give up his high-end mistress. "I can't afford her anymore!" they plaintively wail.
To which I say -- cry me a river, bitchez! You were the geniuses who engineered this fiasco, in spite of credible warnings that a financial disaster of epic proportions was in the making. If these dudes are, in effect, being killed by their own swords -- being economically wiped out by the insanely complex and wildly unsound investment strategies and financial instruments that they themselves invented, refined, and foisted on the rest of the world -- well, that would be poetic justice now, wouldn't it?
But they aren't the only ones who will be hurting, of course. My brother, a middle manager at Merrill Lynch with a mortgage to pay and a wife and three kids to support, is very worried about his job. And he's one of the lucky ones, given that the acquisition of Merrill Lynch by Bank of America has at least allowed that firm to survive.
And there's no question that the turmoil on Wall Street will be reflected on Main Street, as credit becomes harder to come by for businesses and individuals alike, and the entire economy contracts as a result.
As we've seen thus far, when it comes to the suffering of their buddies on Wall Street, Bush, Paulson, and company have been the milk of human kindness itself, engineering lavish, taxpayer-funded bailouts for Bear Sterns, Fannie, Freddie, and AIG. But when it comes to the suffering of middle Americans, that same milk abruptly turns dry, sour, and very curdled indeed. We've seen precious little help, for example, for individuals overwhelmed by debt and in danger of losing their homes. Yet, according to economist Noriel Roubini, the most effective way to deal with the current crisis would be a program that brings relief to distressed homeowners in danger of defaulting on their mortgages.
As you may know, Roubini is the "Dr. Doom" who was one of the few economists who saw the writing on the wall and predicted the current crisis. He studied of economic crises that took place in the 90s in places like Asia, Mexico, Brazil, and Russia, and saw that all those economies shared common weaknesses:
On the eve of the crises that befell them, he noticed, most had huge current-account deficits (meaning, basically, that they spent far more than they made), and they typically financed these deficits by borrowing from abroad in ways that exposed them to the national equivalent of bank runs. Most of these countries also had poorly regulated banking systems plagued by excessive borrowing and reckless lending. Corporate governance was often weak, with cronyism in abundance.
After analyzing the markets that collapsed in the '90s, Roubini set out to determine which country's economy would be the next to succumb to the same pressures. His surprising answer: the United States'.
At the time, Roubini's Cassandra-like warnings about the U.S. economy fell on deaf ears, but now they look all too prescient. As one of the few people who forecast the disaster that is now hitting U.S. markets like a tsunami, he has surely earned the right to be taken very seriously indeed.
And this is what he's saying: of all the fiscal tools available, "government purchase of distressed mortgages to provide debt relief to households " would be "the most important and effective to resolve this severe financial and economic crisis." Here's why: the root of the problem, he says, is that households are carrying too much debt. The actions taken so far to resolve the crisis -- tax rebates for households, and bail-outs of institutions like AIG and Freddie Mac, will not solve the problem, for the following reasons:
First, you cannot grow yourself out of a debt problem: when debt to disposable income is too high increasing the denominator with tax rebates is ineffective and only temporary; i.e. you need to reduce the nominator (the debt). Second, rescuing distressed institutions without reducing the debt problem of the borrowers does not resolve the fundamental insolvency of the debtor that limits its ability to consume and spend and thus drags the economy into a more severe economic contraction.
Since government purchase of mortgages at a discount would leave many distressed banks even more undercapitalized than they were in the first place, we may also need to create a public institution that would recapitalize those banks (an RFC-like agency, if you will). For more details about how a mortgage relief and public recapitalization program might work, read the whole post.
One point Roubini strongly emphasizes is that it's important for lawmakers to enact this kind of program as soon as possible. If we wait for a new president, the situation will only continue to rapidly deteriorate. Not only will this make a solution even more costly than it already is, but it will make what is already bound to be a severe recession even worse. Unless policymakers act soon, he warns, we may be facing a multi-year recession "like the one that afflicted Japan for a decade after the bursting of its real estate and equity bubble."
Now there's a scary thought.
Friday, September 12, 2008
A Message From America's Next President
You'd be surprised by how many people you know who aren't registered to vote.
Support The Troops?
Now that the RNC is, thankfully, over, I would like to make an observation while shaking my index finger in a scolding manner for those of you that are even thinking of voting Republican in the forthcoming election.
- The Republican candidate voted against the Webb amendment calling for adequate troop rest between deployments.
- The Republican candidate voted against an amendment that would provide $20 million to the Department of Veterans Affairs (VA) for health care facilities.
- The Republican candidate voted against increasing Veterans medical services funding by $1.5 billion in FY 2007 to be paid for by closing corporate tax loopholes.
- The Republican candidate voted to table an amendment by Senator Dodd that called for an additional $322,000,000 for safety equipment for United States forces in Iraq.
- The Republican candidate urged other Senate members to table a vote (which never passed) to provide more than $1 billion for National Guard and Reserve equipment in Iraq related to a shortage of helmets, tents, bullet-proof inserts, and tactical vests.
- The Republican candidate voted against increasing the amount available for medical care for veterans by $650,000,000.
When it comes to their claim to support the troops, the Republican candidate and his party are flat-out liars.
The message is simple - if you really support the troops, stop voting Republican and bring them home.
Buy Fed Up A Damn Beer!
Wednesday, September 10, 2008
Warning Signs - What Have We Learned From 9/11?
Remember.
Learn.
The latest book by Fed Up American takes a look back at the events that changed the course of America and the American way of life. Have we learned anything over the last seven years about our country, our constitution, our elected leaders and ourselves?
An interesting retrospect laid out in Fed Up American style and flair. I will happily send you a copy for a small donation ($1, $5, $10 – ANY DONATION AT ALL WOULD BE APPRECIATED) to help support my efforts as a Fed Up American.
Click on the link below and enter your donation amount as "unit price" and I will immediately email you a copy of this thought provoking book.
Republicans Target Obama’s Base
In light of what the GOP is trying to pull off against the American people again in a Presidential election on the surface seems blatantly transparent to those of us with a semi functioning cerebral cortex but what is going on behind the scenes is what frightens me.
On the outside, with the smear campaigns and the personal attacks against Obama and Biden, with the selection of the least qualified but young and pretty VP candidate, with their refusal to campaign on issues, and all the other shock and awe tactics they have and have yet to employ, show how desperate the Republican party is and what depths they will sink to “win” another presidential election.
The Republicans have taken the election process and transformed it into something that barely resembles its former self, just as they have done with the Constitution. Republicans from coast to coast are trying to stack the deck against the Democrats by purging voters most likely to vote for Obama from the voting registrations.
Mainly targeting middle class, lower income and minority communities, they are pulling out all stops to minimize the votes that Obama is expected to receive. As evidenced by the Republican Party’s actions in Michigan. The chairman of the Republican Party in Macomb County Michigan, a key swing county in a key swing state, is planning to use a list of foreclosed homes to block people from voting in the upcoming election as part of the state GOP’s effort to challenge some voters on Election Day.
State election rules allow parties to assign “election challengers” to polls to monitor the election. In addition to observing the poll workers, these volunteers can challenge the eligibility of any voter provided they “have a good reason to believe” that the person is not eligible to vote. One allowable reason is that the person is not a “true resident of the city or township.”
The rules further state that you can’t challenge people without a factual basis for doing so. I personally don’t think a foreclosure notice is sufficient basis for a challenge, because people often remain in their homes after foreclosure begins and sometimes are able to negotiate and refinance.
This pathetic strategy shows just how desperate the Republicans are.
They are scared of a President the caliber of Obama. Obama will hold these criminals accountable for their past transgressions and crimes against the American people and they are desperately trying to avoid sharing the same fate as lobbyist Jack Abramoff and other fallen Republican scoundrels.
I can see them all scurrying about, trying desperately to cling to that last bit of debris from their sinking Republican ship to avoid drowning in a sea of accountability for the crimes they have committed. They are all traitors and should be treated as such.
All elected officials are sworn to duty to protect and defend the Constitution of the United States and the Republicans fall far short of that duty. As a matter of fact, they have gone out of their way to destroy the very document that represents the foundation of America, the same document that they were elected to defend and protect.
But the ultimate power does not rest in the hands of the Republicans. Nor do the Democrats hold all the cards. We The People have the power. We have the power to elect true American leaders into our governing positions from President all the way down to local townships.
We just need to exercise that power and take back control of what was once the greatest nation in the world.
My Latest Book!
What Have We Learned Since 9/11?
The latest book by Fed Up American takes a look back at the events that changed the course of America and the American way of life.
Have we learned anything over the last seven years about our country, our constitution, our elected leaders and ourselves?
An interesting retrospect laid out in Fed Up American style and flair.
I will happily send you a copy for a small donation ($1, $5, $10 – ANY DONATION AT ALL WOULD BE APPRECIATED) to help support my efforts as a Fed Up American.
Click on the link below and enter your donation amount as "unit price" and I will immediately email you a copy of this thought provoking book.
What Have We Learned Since 9/11?