Busted: Bankers and The Global Economy

January 26, 2009

Economy and U.S. Treasury: A Dilemna of Principle?

geithner-for-treasury-secretaryThis afternoon the United States Senate will vote on Tim Geithner’s nomination for U.S. Treasury Secretary. He has been hand-picked by the Obama administration from the Federal Reserve. In a poll by American Solutions for Winning the Future, those participating in the poll thought of his nomination in light of his tax mistakes. With more than 83,000 people responding, an overwhelming 98% of those polled voted to oppose Geithner.

geithners-furrowed-brow2Is it wrong for someone who failed to pay $34,023 in taxes to become Treasury Secretary in charge of taxation and economic policy application? As U.S. Treasury Secretary, he will be in charge of administering any future bailouts with government funding through the taxpayer. American Solutions says that this is about principle. If Geithner is approved, will he will be a symbol of ‘favoritism’ and ‘rich politicians’ getting a different deal than the rest of us? Or perhaps Tim Geithner is someone just like you. He makes mistakes. Should Tim Geithner have a higher level of accountability than the average American citizen? Do we really want a crossover from the Federal Reserve in government administering your money? Is this a government buyoff to give the Federal Reserve more power in exchange for continuing support and funding from central bankers? What do you think? ~ E. Manning

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October 25, 2008

The Smell of Global Financial Fear

The world of finance doesn’t look pretty at all right now since the time has come to pay the piper. Through the smell of global panic and fear reigns the realization that like all economic cycles, eventually this one will change for the better. When that change happens depends on multiple factors, but sooner or later, the global plight will improve. However, that is not the immediate concern of world leaders. Their accountability and the fear of losing both their power and confidence of the people they lead seems to be at stake. The idea is that the all powerful and nameless investor must be placated at any cost. The reality in many cases is that the governments, central banks and large financial and insurance instituations, to name a few, are the investors. While the world is full of many small investors, the reality is that the parties involved in a global rush to solve the problem are servicing themselves.

Even stranger, the panicked U.S. government has been very quiet on the world scene dealing with their own issues internally in an effort to keep some stability before the Presidential election on November 4th. Instead, American citizens have a marvelous sideshow of Congressional hearings in which many charges and concerns have been made, most of them quite vague. Naturally, little blame has been assigned, but the finger-pointing is legendary. There have been charges by certain lawmakers that information is being withheld in hearings until after the election.

The United States seems no closer to arresting the criminals that have instrumental in bringing the nation and the world to its knees than when they started back in March 2007. The FBI has arrested mostly small-time operators and con men intent on harvesting relatively small deals earlier this summer. The U.S. government has been very hesitant to go beyond the scope of the easy pickings of the small guy. Capital is now so constrained that government intervention seems to be the requirement to save many banking corporations and Corporate Multinationals, notably in the auto industry. Authorities are trying to mask the fear that they feel as they seek to manage the fallout of the entire financial debacle.

Europe already admits to recession. Fear is that cooperation in shoring up banking systems could be threatened as governments begin to turn their attention to reviving domestic demand. What is worse is that shoring up the U.S. financial system through the latest bailout largely depended on a healthy global economy and copious amounts of foreign capital from investors. The global recession makes that old promise seem unlikely at best, furthering coloring negative results. German Finance Minister Peer Steinbrueck holds that “The danger of a collapse is far from over.”

The Middle East economies, unaquainted with working together, have began to consider doing so, recently showing more interest in working through Europe and Asia or perhaps the global summit in New York City next month. George Bush is keeping most ideas about the economic summit next month to himself. However, he stated that agreeing on common principles to reform regulators would be essential to preventing another disaster. The idea of unity is nice, but the reality is that unity in the system is what has brought the system to the brink of collapse. Clearly, more innovative ideas will be required beyond unity and placation of the masses. ~ E. Manning

August 3, 2008

False Confidence and Tough Times

You’ve probably heard the bad news and are likely to hear more based on underground information that isn’t public yet. Public information isn’t rosy either as otherwise tough line economists are finally admitting a “shallow recession”.

You’ve probably heard that the federal government admitted that 51,000 jobs vanished last month, with just over 1/2 million this year according to statistics. Growth has been reported as slow, but numbers have just been revised for an economic contraction in the last three months of 2007. The popular line is growing that data suggests a recession began late last year. That is really old news. The good news behind the bad news is that once you admit you have a problem, you stop trying to cover up for the problem that you don’t have. In fact, by simply admitting the truth collectively or individually, it is possible to look upward or at least past your situation. That is exactly what the economy really needs, a release from national credit addiction. Business and government need it more than consumers do.

Investment bankers like Goldman Sachs say the entire global economy is slowing, which makes any trade improvement opportunities unsustainable at best for the U.S. economy. Because of that many new opportunities in the U.S. economy are being cut off. Business is also worrying about Christmas sales and is reacting by importing less goods. Looking at the bright side, even if many Americans don’t have a traditional Christmas, we still have each other. The world isn’t over because of a disappointing holiday season except for unwise speculators.

For those businesses that must have an increase in sales, new ways to entice consumers must be discovered to garner what business there is. Otherwise, many businesses will be cutting back and closing stores. This move is expected before Christmas as business continues to contract, but many retailers will try to weather the storm. Panic may ensue, but rest assured that many businesses have simply reaped what they have sown. Let’s face the facts that Americans cannot continue to live on credits cards to finance cheap imported goods to make the business world ever larger profit margins. Inflation also continues to cut into margins on both sides for business. The beast of inflation is no longer reigned in.

Many Americans have decided to get down to brass tacks and quit fooling themselves. Even so, at the end of the year, the likes of Old Navy will still have tons of practically worthless stuff to sell at bargain basement prices in the new year that they paid pennies on the dollar for to manufacture overseas.

Tens of millions of Americans have for years borrowed aggressively against the value of their homes to finance trips to the mall, dinners out, vacations, medical bills and new cars. As housing values continue to fall and artificial financing possibilities wither, the cold reality of real life will finally begin to settle in. Expectations will have to be lowered, at least for now. Wages will have to increase to sustain the economy or prices will have to fall. Since most wages come from the halls of big business, you know that prices will fall.

Confidence is down and for good reason. But confidence is a short-term animal that economists and analysts put too much stock into. Business owners that have some common sense are not stockpiling goods like in days of old. Less stock and less sales mean less tax revenue, which will further hurt the cash that government craves. Confidence will continue to erode for a time and deficit will reign. In six months or more, we may actually know if the stimulus checks were effective in any way or not. Until then, speculation rules. Still, tough times don’t last forever, although getting through is no less difficult. Tough times is also what makes humans grow.

Aside from all the heavy spending, why is America in trouble? Never forget that our friends, the bankers and financiers have dumped the economic cart. Fraud and speculation has worn down the system where a little restraint and sense would have carried the economy a long way. Of course, government guarantees on virtually every financial measure and market don’t work and ultimately create more harm than good by further burdening the economy. We have nationalized banking, mortgage, finance and in some cases, business in general. You can’t take the risk out of business. Human nature mandates abusive practices where there is no risk or reason for accountability.

Happily, we have something to gain from the situation if we are collectively willing to learn from our mistakes and forbid the same behavior in the future. That would be incredible progress that has been slow in coming. Yes, this is a dismal science when times are tough. To some, times are never good enough as we race onward at breakneck speed to meet the rush of bills that are always coming due. That is the life of plenty that America has been sold.

If we are smart, we have other things that we can manage to do during the recovery besides continue to hurt others and the already ailing economy. Sitting still and taking stock may be the wisest move imaginable. We can trim back spending and expectations while looking for a new approach to life in America. Remembering who you really are is more important than false confidence.

While all of this is happening, the digital economy is really ready to take off in a big way with the next upturn. The powers behind the scenes, including the central bankers aren’t hurting. They continue to make it big during good times and bad. ~ E. Manning

July 22, 2008

Batten the Hatches, Reverse Course on Inflation

The Federal Reserve is unhappy. Inflation is not on course. Prices are not stable. Charles Plosser, president of the Philadelphia Fed, expects the Federal Reserve to take action before any signs of recovery are seen. While this may seem to be news, the Fed has already expected this turn of events in their policy.

The Fed’s is concerned that (more…)

April 9, 2008

Greenspan Gets It Rough

Filed under: banking, credit, federal reserve, money — Tags: , , , , , , , , — digitaleconomy @ 12:00 am

It must be rough when increasing numbers lay the blame for the current economic and financial mess at your feet. Alan Greenspan is blamed for easy money and lack of regulation. Mr. Greenspan thinks all the blame is unfair.

It is always easy to blame someone in hindsight. Second guessing and making interpolations is easy years down the road. The blame game is alive and well.

Alan Greenspan has been an international banker for years. He is not a lovely creature in the eyes of most. (more…)

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