The measure of U.S. consumer confidence fell in February to the lowest level since April 2009 as the outlook for jobs diminished. This is an obvious sign spending will be slow “as the economy recovers.” The banking community is gridlocked and recent short-term gains in the business community indicate an upturn. Meanwhile, a real recovery depends on consumers. Why?
Since consumer spending accounts for approximately 70 percent of overall U.S. economic activity depressed consumer confidence will undoubtedly lead to less consumer spending and sluggish growth in the economy. The economy that I refer to is the real economy as opposed to the Wall Street economy. The fact remains that if consumers have a lack of confidence in the economy, they are not likely to engage in spending sprees if they can and they certainly won’t make major purchases like appliances, houses and automobiles.
Despite media hype and the government spending, Americans are not seeing any real change in the economy. Politics seems to continually pin its hopes on Wall Street and stock market as a measure of confidence. Wall Street, now absorbed into the banking system, continues to function within the same dynamics as before the meltdown. Bundling securities continues unabated even though this, in large measure, has resulted in substantial reverses in resolving bank debt and cleaning up the meltdown mess. Lawmakers remain weak willed even though hands have been figuratively slapped for financial illiteracy by the Federal Reserve, the new kingpin of financial law.
This is no different from allowing the “Big 3” Credit Tracking Agencies to run the show in managing consumer credit, a definite conflict of interest since these businesses and the Federal Reserve have so much to gain from the system in place. This is illustrative as to why so little has been accomplished. The system has its’ hands in its’ own pockets. Corporations have adopted functions of government as lines continue to blur. The system grows with little benefit to anyone as corruption further stagnates the system. Politics is working in the same way to involve health care on a larger level. The government may have a system of checks and balances, but the founders of the country did not count on the corporate oligarchy now in place.
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Corporate results and outlooks have worsened. Automotive companies worldwide declared October figures were the weakest in 20 years. Economies have continued to weaken and as consumer credit and cash have dried up. Why wouldn’t they? Corporations, with the blessings of the U.S. Congress have sent a treasure trove of jobs overseas, milking the economy and American citizens for everything of real value for years while using the credit carrot to support spending. The federal government has added to the damage with heavy taxation and irresponsible governmental overspending. The mortgage crisis, compounded through a heavily compromised banking system has ensured an early downward trend in the national, if not global, economic cycle.
Before the election, no one wants to admit the evidence or the reality that the United States is in a recession. The European Union readily admits their recession. The U.S. government and its house of paid economists proudly hang onto false hope as if a recession is the end of the world.
Americans cannot deny the effects of the current economic crisis. Admitting a recession is likely to do little where the election is concerned, but there is always hope for the current administration. What most Americans do realize is that the economic crisis is a national security issue that was brought about by politicians in Congress and compounded by short-sightedness.
The media and the perception of confidence took a temporary nosedive after a banner day at the global superpower. There is so much going on, who can really know what is really driving the situation except perhaps confusion? The bottom line is that investors will continue to fret about the stock market and take profits while they can, even in a volatile market. That is human.
As part of the new building blocks in the national economy, the U.S. Treasury finally confirmed plans to use the initial $250 billion to invest in large banks and former investment banks with conditions. All but one bank took the federal government up on the offer. President Bush has requested another $100 billion for bailout aid as well as a move for the Federal Reserve to start buying up short-term debt from companies. Meanwhile, Henry Paulson has hired Mellon Bank of New York to assist the U.S. Treasury in buying failed mortgage securities or troubled assets.
As usual, the Federal Reserve’s main preoccupation is to manipulate public perception of interest rates and the classical perception of low inflation. Ben Bernanke is keenly interested in keeping national confidience in the hope of somehow strengthening the dollar and curbing the tide of what is proving to be nasty inflation in a time of wage stagnation. The Fed simultaneously manages interest rates while working to keep the economy from dropping into a recession. Uncle Ben has his work cut out for him, especially since we are probably already in a recession by his own definition. If he knows that, he isn’t saying. No surprise there. Besides, inflation is now a back door issue.
Uncle Ben has been busy on the dollar and liquidity front as well. Unknown trillions of dollars have been forced into the U.S. banking system in an effort to get banks moving again. Uncle Ben has been working with the help of central bankers around the globe to make this happen. So far, the efforts haven’t worked. One of the conditions on U.S. bailout funds for banks is that the money is used for loans instead of bank protection, which may begin to change the banking equation soon. Whether that condition works remains to be seen.
All this money flowing would appear to generate some positive and decisive activity. A nationally-recognized recession seems evident as Corporate America and Corporate Multinationals are starting to reap financial declines, further jeopardizing any chance at economic expansion and further withering job prospects. Huge injections of cash are generating one large problem that will come home with a vengeance given some time: a rather stiff inflation rate. The U.S. will soon wish for today’s inflation. But, we live in the real world, so we consider the price of food and fuel without faking the facts. Other issues like a high jobless rate coupled with that inflation will be still worse. Could stagflation be around the corner or are we already there? That depends on who you ask. ~ E. Manning
Governments and central banks around the world grasped at measures to contain the fast-spreading financial crisis today. Investor confidence reflected on global stocks. According to the media, investors have finally decided that a recession is inevitable.
The more powerful members of the EU have reacted in panic as market volatility continues. Similar events continue to unveil with bailouts in the works. Even Fortis has new ownership. In panic, central bankers are dumping billions of euros on the market, creating another global monetary inflation hazard. A few national banks throughout the EU have moved to guarantee depositor funds causing a rash of capital movement to guaranteed banks and undermining financial security for others. More European governments followed Germany’s lead offering guarantees to savers in a frantic effort to calm fears among investors over the worst financial crisis in 80 years. The big losers portend to be the shareholders of these institutions.
The British government has promised on Monday to protect citizens in the face of global financial turmoil. Investors are terrified that the government will require partial ownership in exchange for the bailout.
For more than a week, the U.S. Federal Reserve has been working to find new ownership and capital to cover to bankrupt Wachovia Bank, even issuing and quickly retracting their statements as deals have fallen through. Right now, the Fed is trying to coax Citigroup and Wells Fargo to break up the Wachovia’s assets. Even the Fed is learning to temper its enthusiasm as deals are worked out.
While none of this is especially good news on the surface, the really bad news remains the now unseen seeds planted by central bankers as they flood the market with euros or whatever monetary unit is seen as useful. This simply weakens an already weak economy and further dilutes the value of the currency, creating more inflationary pressure.
The really bad news behind all of this news is that the United States bailout success hinges so much on foreign investment from overseas. With a global crisis in the works, only the Muslim and Saudi countries are not yet reporting huge problems beyond apparent hyperinflation caused by the huge $700 billion yearly influx of greenbacks from America. They have so many devalued dollars that spending them is a challenge. Therein lies the crux of the problem. A vicious circle of events is creating a downward global spiral that cannot be readily or quickly overcome without a reinvention or substantial revision of a new monetary system, an idea that is reportedly in discussion by the International Society of Bankers (the global central banking franchises) as an easier way out of the looming crisis if events become unmanageable. ~ E. Manning
In dealing with the bailout the reader needs discernment that is provided on this website. Remember that the ultimate solution for global banking per the global central bankers is the integration of Basel II rules. Basel II rules don’t prohibit the kind of banking profitaking or abusive policies that we have seen in the United States over the last decade or more. Basel II, the creation of global bankers is little more than a charade, pretending to be a solution for little or nothing. Basel II merely restricts the surface exposure of the tricks that accountants play with the direction of their superiors.
The bottom line is that the liquidity crisis in America is in large due to semantics in accounting, combined with the fear of bankers. When payback has come home to roost, bankers have become very protective of themselves. The result is clear to see. These accounting tricks that are used by bankers and big business to bolster the bottom line while accentuating power and growth has become the established tour de force of the industry that they don’t want to give up. If you haven’t deduced the truth from reading this blog over the last year, know the truth now. The crisis that we have in largely based in fear because of rampant abuse of the system. Bankers know what awaits them because of what they have done along with the sponsorship of the U.S. government. Turning a blind eye to improper banking and accounting standards because those standards “enriched” the nation has finally completed the cycle. Regulations weren’t the problem. The will to enforce regulations along with acceptable standards was and still is the Achilles Heel of the system.
What everyone in the U.S. economy has forgotten about is the glory of small business creativity and empowerment that the United States as a nation used to enjoy. Instead, the U.S. has turned to fascist corporate policy and close scrutiny on personal freedom as the safe way to live and profit. Increasing control, now available through computers, the internet and global tracking technologies is becoming the established way of policing the nation. A meaningful grass roots recovery will be difficult to impossible until this changes. Ultimately, this is what is needed to restore any level of quick recovery to the nation. Politicians must give up some of the control that they are determined to enjoy. ~ E. Manning
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What is happening on Wall Street? Everyone wants to know why government has waited so long and who will be held accountable. Now we are in the midst of a financial panic. Communication at the top of government during the panic has been in contention among politicians. Some are pointing fingers of blame. Most are simply carrying a stiff upper lip and wearing a poker face.
bailout: hundreds of billions of dollars
There has been plenty of talk about effectively sucking up the bad securities with a vaccuum cleaner style policy that has yet to be revealed. This miraculous policy is what authorities will be working on today and this weekend in order to avoid what some say is an inevitable collapse. In essence, everything needs shoring up and the government seems intent on taking care of the world. Open the newspaper or check out the internet to see the flurry of activity by authorities “to address the underlying problem.” All of this is being touted to cost the American taxpayer far less than allowing the crushed system to play itself out. If you like big government or have the idea that only marketing matters, this may be the ultimate solution for you.
Recently bailed out Fannie Mae and Freddie Mac will be used to bolster the system, but all measures in place are deemed as “not enough.” Liquidity must be restored. Government is working to eliminate selling short by profiteers, which has worked to undermine the solidity of the system. They expect to buy out all of the securities, modernize the system to today’s standards and then set up new rules so that what led to the collapse can never happen again. U.S. Treasury Secretary Henry Paulson has revealed right now that saving the system from total collapse is what is on the financial and political plate this weekend rather than worrying about the idea of regulating the new policies that they want to put in place. Obviously, flooding the monetary system with a cash infusion yesterday has done nothing to take care of the crisis. That is no surprise.
Now a lame duck president is setting the direction for this nation with very little consultation, much like what he has done with other issues during his terms in office. There must be no controversy and authorities are in a great rush to action. Is that action warranted? Will the nation default on its debt? What will happen after the policy miracle of this weekend? Like it or not, prepare for a roller coaster ride. ~ E. Manning
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In the last few months, Busted Bankers has discussed the distinct and strongly lingering likelihood of a larger global downturn or collapse in global financial markets. In the past, you didn’t hear any of that in the States except among a smallist number of bloggers and from a few Scot and British financial specialists. These bankers approximately timed and named the general events that would transpire. Those general events have come home.
In the United States, we are chiefly concerned with covering up and dealing with public embarassment on virtually all levels. The inability to admit weakness is a larger flaw than the weakness itself. The confidence crisis here is based in that embarassment along with the truth that investors are spinning in circles looking for a “safe place” to shelter their money. Investors and consumers alike are discovering that there is little safety: that all the gains that have been made over the last decade or more could easily be swallowed whole.
Politician John McCain heralded the idea that “economic fundamentals” are strong. Unfortunately for politicians that long for a rosy picture, the global financial crisis was not created by healthy economic fundamentals, but through misappropriation, greed and fraud in the mortgage and finance industry as well as through creative banking instruments. That cold reality is beyond the realm of economic fundamentals, although even the Federal Reserve system in the U.S. wants to make these corrupted banking standards part of economic fundamentals. This global crisis may make that desire and tendency unpopular, if not impossible. (more…)
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