What About The Little Guy?

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.

McShitstain-enomics

According to John McShitstain, his idiot economic advisors and the rest of the STUPID republicunts, the recession is only in our minds and we should all quit whinning.

Despite the fact that oil companies like BP Amoco are reporting record profits at the American consumers expense. To put this in perspective, the profit reprted by BP equates to a $95,000 profit PER MINUTE.

Thank the STUPID fucking republicunts for this economic disaster that America finds itself in. If you're even remotely thinking of voting for McShitstain and the same old shit we have had to edure over the last eight years, seek medical help immediately. You are a fucking mental case and need to be highly medicated.

Here is a list of some well established companies, American icons of our economy, that are whinning all the way to the poor house:

• Ann Taylor closing 117 stores nationwide.


• Lane Bryant, Fashion Bug, Catherines closing 150 stores nationwide


• Talbots will close all 78 of its kids and men’s stores plus another 22 underperforming stores.


• Gap Inc. closing 85 stores


• Foot Locker to close 140 stores


• Wickes Furniture is going out of business and closing all of its stores. The 37-year-old retailer that targets middle-income customers, filed for bankruptcy protection last month.


• Levitz - the furniture retailer, announced it was going out of business and closing all 76 of its stores in December. The retailer dates back to 1910.


• Home Depot store closings 15 of them amid a slumping US economy and housing market. The move will affect 1,300 employees. It is the first time the world’s largest home improvement store chain has ever closed a flagship store.


• Movie Gallery – video rental company plans to close 400 of 3,500 Movie Gallery and Hollywood Video stores in addition to the 520 locations the video rental chain closed last fall as part of bankruptcy.


• Sprint Nextel - 125 retail locations to close with 4,000 employees following 5,000 layoffs last year.


• Wilsons the Leather Experts – closing 158 stores


• Bombay Company: to close all 384 U.S.-based Bombay Company stores.


• KB Toys closing 356 stores around the United States as part of its bankruptcy reorganization.


• CompUSA (CLOSED).

Still thinking of voting for a STUPID republicunt?

Hang yourself.

America will be better off.

The American Dream *revisited*

Growing up as a child in America, I kept hearing about “the American dream”.

I had it driven into my brain that America was the greatest, most powerful and richest nation in the world and that people from other lands would do anything to be American. To live the American dream.

For the estimated 3.5 billion homeless people living in America, that dream has become a nightmare.

Let’s look at some statistics:

• 40% are families with children—the fastest growing segment


• 41% are single males.


• 14% are single females.
  
• 5% are minors unaccompanied by adults.
  (this means that nearly 1.5 million of homeless people are under 18 – I bet all you parents are quite proud)

The mobile and often hidden nature of homelessness makes this group difficult to accurately survey and completely accurate and comprehensive statistics are difficult to acquire, however, these figures seem to be reasonably accurate.

• 49% are African American


• 35% are Caucasian


• 23% are veterans


• 28% have more than a High School education

These are people like you and me. They could be your neighbors, your friends, your family but they are looked at as the dregs of society and a burden to the communities they wander, asking a passer by for some change in the hopes that their next meal can come from somewhere other than the garbage.

Contrary to some people’s beliefs they are not all lazy and shiftless. They are not all drug addicts or drunks. They are not all mentally ill.

These are people that have become victims of years of failed mismanagement of their country, where livable wages get left in the dust of runaway cost of living expenses. That is IF they’re fortunate enough to still have a job.

How long do you think you and YOUR family could survive if your job was cut? Especially in an unstable economy where the job market offers even LESS than the meager salary you once had, making it even MORE difficult to survive. That is IF you are fortunate enough to find another job quickly.

So if you think that it can’t possibly happen to you, think again.

Look around you and see what has become of the American Dream. Look at the prices you pay at the pump and the grocery store. Compare the cost of living today to the same time last year.
Now do the same with your income.

Has your income increased at the same percentage as your cost of living?
If you are like the 90% of the American population the answer is: no. You are moving backwards. Falling behind.

But there IS one thing that has been saving people from becoming homeless, at least for a while, and that one thing is debt. Credit cards. Buying now and paying later. The American way.

But that is merely an illusion.

A temporary fix.

The band aid on the cancerous tumor.

Because in reality, this is just putting you more behind. Burying you further. Enslaving you. Holding you hostage.

Being a slave and a hostage is NOT the American Dream.

Not MY American Dream anyway.

Why is it yours?

America's Economic Disaster

Who is a REAL domestic terrorist?

It seems that bush, that piece of shit American traitor, has succeeded in accomplishing on of Osama bin Laden's goals.

Bankrupting the United States

Despite what our asshole president claims, the economy is floating in a toilet awaiting the inevitable flush as the bowl keeps filling up with the turds of a failed presidency.

"It's . . . poetic justice, in that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end."

--Warren Buffett, American investor

“By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”

--John Maynard Keynes (1883-1946)

"New money that enters the economy does not affect all economic actors equally nor does new money influence all economic actors at the same time. Newly created money must enter into the economy at a specific point. Generally this monetary injection comes via credit expansion through the banking sector. Those who receive this new money first benefit at the expense of those who receive the money only after it has snaked through the economy and prices have had a chance to adjust."

--Friedrich A. Hayek (1899-1992), Austrian economist

When Fed Chairman Ben Bernanke says the economic situation is worsening, you'd better believe him. In fact, the U.S. credit markets are collapsing under our very eyes, and there is no end in sight as to when this will stop, let alone reverse itself.

1. Leading economic indicators for the U.S. economy are falling.

2. Consumer confidence sentiment is falling as mortgage equity withdrawals are drying up.

3. Employment numbers are falling.

4. The January 2008 report on the U.S. service economy indicates that it contracted early in the year for the first time in 58 months.

5. The number of new jobless claims is still dangerously high.

6. The housing crisis is getting up steam; banks have to place larger and larger subprime losses on their balance sheets, thus undermining their capital bases and bringing many of them to the brink of insolvency.

7. The credit-ratings agencies are under siege.

8. Bond guarantee insurance companies are in the process of loosing their triple-A ratings and some are on the brink of bankruptcy.

9. The $2.6 trillion municipal bond market is about to take a nosedive, if and when the bond insurers do not pull it through.

10. The leveraged corporate loan market is in disarray.

11. The more than a trillion dollar market for mortgage- and debt-backed securities could collapse completely if the largest American mortgage insurers continue to suffer crippling losses.

12. Large hedge funds are losing money on a high scale and they are suffering from a run on their assets.

13. In the U.S., total debt as a percentage of GDP is at more than 300 percent, a record level (N.B.: in 1980, it was 125 percent!).

14. And, finally, the worldwide hundreds-of- trillion dollar derivatives market could implode anytime, if too many financial institutions go under during the coming months, as most of these transactions are inter-institution trades.

The overall economic picture remains bleak.

This mess all began in the early 2000s when the Fed and the SEC adopted a hands-off approach to financial markets, guided by the new economic religion that "markets can do no wrong." What we are witnessing is the failure of nearly 30 years of so-called conservative debt-ridden and deregulation-ridden economic policies.

It must be understood that the most recent subprime problem really began in 2000, when the credit-rating agency of Standard & Poors issued a pronouncement saying that "piggyback" mortgage financing of houses, when a second mortgage is taken to pay the down-payment on a first mortgage, was no more likely to lead to default than more standard mortgages. This encouraged mortgage lending institutions to relax their lending practices, going as far as lending on mortgages with no down-payment whatsoever, and even postponing capital and interest payments for some time. And, with the Fed and the SEC looking the other way, a fatal next step was taken. Banks and their subsidiaries decided to follow new toxic and risky rules of banking.

Indeed, while traditionally banks would borrow short and lend long, they went one giant step further: they began transforming long-term loans, such as mortgages, car loans, student loans, etc., into short-term loans. Indeed, they got into the alchemist business of bundling together relatively long-term loans into packages that they sliced into smaller credit instruments that had all the characteristics of short-term commercial paper, but were carrying higher yields.

They then sold these new "structured investment vehicles" (SIVs), for a fee, to all kinds of investors who were looking for higher yields than the meager rates that alternatives were paying. And, since banks were behind these new artificial financial assets, the credit agencies gave them an AAA rating, which allowed regulated pension funds and insurance companies to invest in them, believing they were both safe and liquid. They were in for a shock. When the housing bubble burst, the value of real assets behind the new financial instruments began declining, pulling the rug out from beneath the asset-backed paper market (ABCP), which became illiquid and toxic.

With hardly any trading on the new instruments, nobody knew the true value of the paper, and thus nobody was willing to buy it. This crisis of confidence has now permeated to other credit markets and is threatening the entire financial system as the contagion spreads.

As late as 2003-04, then Fed Chairman Alan Greenspan was not the least worried by the subprime-financed-housing-mortgage bubble but was instead encouraging people to take out adjustable rate mortgages, even though interest rates were at a 30-year low and were bound to increase. Even in late 2006, newly appointed Fed Chairman Ben Bernanke professed not to be preoccupied by the housing bubble, saying that high prices were only a reflection of a strong economy. Mind you, this was more than one year after the housing market peaked in the spring of 2005. History will record that the Fed and the SEC did nothing to prevent the debt pyramid from reaching the dangerous levels it attained and which is now crushing the economy.

On a longer span of time, when one looks at a graph provided by the U.S. Bureau of Economic Analysis (BEA) which shows the relative importance of total outstanding debt (corporate, financial, government, plus personal) in relation to the economy, one is struck by the fact that this ratio stayed around 1.2 times GDP for decades. Then, something big happened in the early 1980s, and the ratio started to rise, with only a slight pause in the mid-1990s, to reach the rarefied level of 3.1 times GDP presently, nearly 200 percent more than it used to be.

The adoption of massive tax cuts coupled with government deficit spending policies, and deregulation policies, by the Reagan and subsequent administrations, all culminating in a grotesque way under the current administration, contributed massively to this unprecedented debt bubble. It took many years to build up the debt pyramid, and it will take many years to unwind it and to reduce this cumulative mountain of debt to a more manageable size.

That is the big picture behind this crisis. It is much bigger than the S&L crisis of the 1980s, which looks puny in comparison with the current one. That is why I think this crisis will linger on for at least a few more years, possibly until 2010-11.

From The Are You Out Of Your Fucking Mind Department...

The record $3.1 trillion budget proposed by President Bush on Monday would produce eyepopping federal deficits, despite his attempts to impose politically wrenching curbs on Medicare and eliminate scores of popular domestic programs.

The Pentagon would receive a $36 billion, 8 percent boost for the 2009 budget year beginning Oct. 1, even as programs aimed at the poor would be cut back or eliminated. Half of domestic Cabinet departments would see their budgets cut outright.

Slumping revenues and the cost of an economic rescue package will combine to produce a huge jump in the deficit to $410 billion this year and $407 billion in 2009, the White House says, just shy of the record $413 billion set four years ago.

But even those figures are optimistic since they depend on rosy economic forecasts and leave out the full costs of the war in Iraq. The White House predicts the economy will grow at a 2.7 percent clip this year, far higher than congressional and private economists expect, and the administration's $70 billion figure for military operations in Iraq and Afghanistan is simply a placeholder until the next president takes office.

Bush's lame-duck budget plan is likely to be ignored by Congress, which is controlled by Democrats and already looking ahead to November elections. His long-term projections are mostly academic since he's leaving office next January.

The president forecasts a $48 billion surplus by 2012, keeping a promise he made two years ago when strong revenue predictions made it look far easier. Now, he's relying on spending cuts -- for everything from transportation to Medicare and Medicaid to nonprofit groups that help the poor -- to do the job in order to keep his signature 2001 and 2003 tax cuts intact instead of expiring at the end of 2010.

"Our formula for achieving a balanced budget is simple: create the conditions for economic growth, keep taxes low and spend taxpayer dollars wisely or not at all," Bush said in his budget message.

From Creditor To Debtor: The Legacy Of The bush Regime

The military mis-adventurers of the Bush administration have much in common with the corporate leaders of the defunct energy company Enron. Both groups of men thought that they were the "smartest guys in the room," the title of Alex Gibney's film on what went wrong at Enron.

The republicunts in the White House and the Pentagon outsmarted themselves. They failed even to address the problem of how to finance their schemes of imperialist wars and global domination.

As a result, going into 2008, the United States finds itself in the position of being unable to pay for its own elevated living standards or its wasteful, overly large military establishment. Its government no longer even attempts to reduce the ruinous expenses of maintaining huge standing armies, replacing the equipment that seven years of wars have destroyed or worn out.

Instead, the bush administration puts off these costs for future generations to pay.

This utter fiscal irresponsibility has been disguised through many manipulative financial schemes, such as other countries lending us unprecedented sums of money, but the time of reckoning is fast approaching. America under bush is NOT the promised ownership society but we are now the OWNED society.

There are three broad aspects to our debt crisis.

First, in the current fiscal year, 2008, we are spending insane amounts of money on "defense" projects that bear no relationship to the national security of the United States. Simultaneously, we are keeping the income tax burdens on the richest segments of the American population at strikingly low levels.

Second, we continue to believe that we can compensate for the accelerating erosion of our manufacturing base and our loss of jobs to foreign countries through massive military expenditures. The mistaken belief that public policies focused on frequent wars, huge expenditures on weapons and munitions, and large standing armies can indefinitely sustain a wealthy capitalist economy.

The opposite is actually true.

Third, in our devotion to militarism, despite our limited and rapidly diminishing resources, we are failing to invest in our social infrastructure and other requirements for the long-term health of our country. These are what economists call "opportunity costs," things not done because we spent our money on something else. Our public education system has deteriorated alarmingly. We have failed to provide health care to all our citizens and neglected our responsibilities as the world's number one polluter.

Most important, we have lost our competitiveness as a manufacturer for civilian needs, an infinitely more efficient use of scarce resources than arms manufacturing.

Chris Matthews brings on Mad Money’s Jim Cramer to rant on about the state of the economy, the ridiculousness of Bush’s proposed stimulus plan and why the politicos in DC (both in the administration and on the campaign trail) are missing the looming crisis in a big way.

The news about our economy since the ball dropped this year in Times Square has not been all that rosy.

We've learned that in December, the unemployment rate shot up to 5 percent, and the manufacturing sector shrunk further into nothingness.

Santa Claus left retailers lumps of coal for Christmas, showing that consumers are not spending as much as other years. Reasons were runaway inflation fueled (no pun intended) by rising fuel costs that ultimately affect everything from groceries to clothes to, well just about everything.

A Brief Look A History

The Great Depression in the United States, worst and longest economic collapse in the history of the modern industrial world, lasting from the end of 1929 until the early 1940s.

Beginning in the United States, the depression spread to most of the world’s industrial countries, which in the 20th century had become economically dependent on one another. The Great Depression saw rapid declines in the production and sale of goods and a sudden, severe rise in unemployment. Businesses and banks closed their doors, people lost their jobs, homes, and savings, and many depended on charity to survive. In 1933, at the worst point in the depression, more than 15 million Americans—one-quarter of the nation’s workforce—were unemployed.

The depression was caused by a number of serious weaknesses in the economy. Although the 1920s appeared on the surface to be a prosperous time, income was unevenly distributed. The wealthy made large profits, but more and more Americans spent more than they earned, and farmers faced low prices and heavy debt. The lingering effects of WWI (1914-1918) caused economic problems in many countries, as Europe struggled to pay war debts and reparations.

The hardships suffered during the depression affected many Americans’ attitudes toward life, work, and their community. Many people who survived the depression wanted to protect themselves from ever again going hungry or lacking necessities.

There was an underlying economic problem. Income was distributed very unevenly, and the portion going to the wealthiest Americans grew larger as the decade proceeded. This was due largely to two factors: While businesses showed remarkable gains in productivity during the 1920s, workers got a relatively small share of the wealth this produced. At the same time, huge cuts were made in the top income-tax rates. Between 1923 and 1929, manufacturing output per person-hour increased by 32 percent, but workers’ wages grew by only 8 percent. Corporate profits shot up by 65 percent in the same period, and the government let the wealthy keep more of those profits. The Revenue Act of 1926 cut the taxes of those making $1 million or more by more than two-thirds.

As a result of these trends, in 1929 the top 0.1 percent of American families had a total income equal to that of the bottom 42 percent. This meant that many people who were willing to listen to the advertisers and purchase new products did not have enough money to do so. To get around this difficulty, the 1920s produced another innovation—“credit,” an attractive name for consumer debt. People were allowed to “buy now, pay later.” But this only put off the day when consumers accumulated so much debt that they could not keep buying up all the products coming off assembly lines. That day came in 1929.

American farmers—who represented one-quarter of the economy—were already in an economic depression during the 1920s, which made it difficult for them to take part in the consumer buying spree. Farmers had expanded their output during World War I, when demand for farm goods was high and production in Europe was cut sharply. But after the war, farmers found themselves competing in an over-supplied international market. Prices fell, and farmers were often unable to sell their products for a profit.

The stock market crash announced the beginning of the Great Depression, but the deep economic problems of the 1920s had already converged a few months earlier to start the downward spiral. The credit of a large portion of the nation’s consumers had been exhausted, and they were spending much of their current income to pay for past, rather than new, purchases. Unsold inventories had begun to pile up in warehouses during the summer of 1929.

The crash affected the economy the way exposure to cold affects the human body, lowering the body’s resistance to infectious agents that are already present. The crash reduced the ability of the economy to fight off the underlying sicknesses of unevenly distributed wealth, agricultural depression, and banking problems.