Busted: Bankers and The Global Economy

January 20, 2009

Economy: Unemployment & Opportunity

recessionTimes are not good for the United States right now, but this recession has not made a decisive turn for worse just yet this year. The unemployment rate, (see poll) 7.2 percent in December, remains below the average peak unemployment of 7.6 percent during the previous 10 post-World War II recessions. The nation has been in similar straits before, but has a measure of hope in focus today with the inauguration of a new president (see poll).

What has been so menacing is the real feeling coupled with the likelihood that the nation is headed for far worse. Indicators are that an enduring recession or depression is likely. The published government unemployment rate is expected to climb to 9% this year and is likely to eclipse that figure, even though the reality is that unemployment is much higher. Incomes are stagnant or declining. Jobs are scarce, with a decline of full-time employment that will actually pay the bills. Getting enough part-time jobs to get through this crisis isn’t an option. Business is down with little hope of any improvement for some time. The business economy is looking at lean times with capital goods purchases almost non-existent compared to the norm. Economic contraction is the only news that America has to look forward to for the next 2 years. Politicians say that Americans are now confronted with the fact that sacrifice is essential as Congress spends more taxpayer money than ever before. (more…)

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November 3, 2008

Admission of Recession Before the Election?

consumer business crisis

consumer business crisis

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.

Trillions of dollars in bailouts have avoided a banking collapse. Congress is eagerly seeking to make things right by spending more taxpayer money than American taxpayers don’t have in the form of a fiscal stimulus package. Congress is remaining very independent before the election, scarcely mentioning the upcoming global summit in New York City. A public date for the summit hasn’t been set as the nation and much of the globe looks in the yawning chasm of a recession of unknown breadth and depth. The current administration is doubtful that anything real will come from the summit. ~ E. Manning

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

October 24, 2008

The Fear of EU Leaders

U.S. quietly key player

U.S. quietly key player

President Nicolas Sarkozy of France, the current placeholder of the rotating EU presidency, is spearheading the planned global summit in New York City. He expects concrete decisions to come out of the economic summit next month, which must address the underlying causes of the crisis rather reciting world crisis effects. “We have all understood that it will not be possible to simply meet and have a discussion. We need to turn it into a decision-making forum.”

Most of the world economies seem keenly interested in creating a new global solution to save the global economy and themselves from much economic pain. EU leaders and some other world leaders have voiced a certain amount of fear regarding the cooperation of the United States, who has remained very much on the back burner of the global summit considering its usual role. The election is undoubtedly playing a role in U.S. hesitation and resistance. 

Even Japan and China have become very interested in global economic solutions. Sarkozy told Chinese President Hu Jintao that he fears the United States, which is wary of excessive regulation, would be content if the summit produced “principles and generalities.” That is the real fear of EU leaders since they seem to be looking for radical global change and protection rather than placation and stop gap measures. ~ E. Manning

Global Financial Overhaul Recommended

October 20, 2008

Filed under: economy, politics — Tags: , — digitaleconomy @ 4:58 pm

March 26, 2008

McCain: A Radical New Mortgage Idea

mccain-mortgage-crisis-speech.jpgPresidential candidate John McCain has just proposed an earthshaking idea that is likely to infuriate bankers, mortgage profiteers and securities investors alike. In a speech on March 25, McCain proposed that the mortgage industry is responsible to return the favor of government support to reboot the housing market by offering zero percent mortgages to responsible credit-worthy borrowers. Somehow, this news managed to miss most of the mainstream press in lieu of “more newsworthy” sound bites. Most news services portrayed his speech negatively with the concept that McCain was not going to support bailing out borrowers in the mortgage crisis in the traditional sense.

“We should also convene a meeting (more…)

March 13, 2008

Massive Bank Failures Still Expected

In the past year there have been four bank failures. The chairman of the Federal Deposit Insurance Corp and banking industry experts foresee many bank failures down the road. “Regulators are bracing for 100-200 bank failures over the next 12-24 months,” says Jaret Seiberg, an analyst with the financial services firm, the Stanford Group. Expected loan losses, the deteriorating housing market and the credit squeeze are blamed for the drop in bank profits.

All this bad news is expected despite the recent moves by the Fed to bolster the banking system to the tune of $200 billion in 28 days cycles through September. The Fed has also just increased the Fed TAF auction to $100 billion for the indefinite future through September. This is a huge hunk of credit to temporarily sustain the banking economy. Perhaps the move by the Fed is simply a grand tactic to forestall any problems through the election if bank failures are still expected on a grand scale. Is the reaction of the Federal Reserve overkill or admission of the seriousness of the economic situation facing the U.S. and other parts of the economic world? What do you think? Don’t hold back.

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