Busted: Bankers and The Global Economy

September 24, 2009

Too Big To Fail Means Big Growth

Filed under: banking, corporatism, credit — Tags: , , , , , , , — digitaleconomy @ 8:27 am

big banks

See the article at the Washington Post.

June 13, 2008

National Dependence on Consumer Credit

Credit plays a central role in the working of the U.S. economy. The U.S. economy has come to rely almost entirely on consumer spending as an engine of growth, accounting for about 70 percent of national gross domestic product.

Some would say that credit is the lifeblood of the American economy. The truth is that banks have made credit financing the lifeblood because bankers and financiers have made expansion for the U.S. economy possible beyond what would normally be possible. The idea isn’t a bad thing in and of itself when used in moderation. However, like a crack addict, the national addiction for credit has spiraled out of control. The end result is that financing has been used to bolster pricing and industrial strength for the last thirty years or more resulting in an ultimate impasse.

The impasse is that because of wages and economic weakness caused by financing virtually everything combined with undermining the economy solely for corporate and personal profit, the economy is no longer able to sustain the same level of financing and high prices. As a result, a market crash or at least a spiraling drop in prices must occur to balance the inequity. Part of what the nation is seeing now is a balancing of this inequity.

Well-entrenched business must realize that old business ways must change in order to survive the recession. Expectations must be lowered. For example, the auto industry must develop new approaches to power vehicles and lower prices. Consumers, in general, can no longer afford to buy high priced products on credit, depending instead on wages to sustain them and making due with less. This is one side of the economic picture. In general, a large portion of the American populace has become a generation of struggling underachievers as a result of economic land mines in their life.

The Federal Reserve and federal government is trying to come up with creative ways to “inspire” the economy. Unfortunately, the very regulations designed to encourage actually discourage and destroy. The government has overstepped its’ bounds and because of this, is reaping the reward now and in the future for itself and the people.

May 1, 2008

Aussie Bank CEO Claims Worst is Over

Westpac is a multinational financial services company and the fourth largest bank in Australia. Westpac has come through the first six months of the global credit crunch with a 34 per cent rise in profit, prompting its new chief executive Gail Kelly to declare that the “worst is over”.

Kelly also warned that the banking industry’s global era of growth had ended, noting that slower loan expansion, increased bad debt charges, persistently higher funding costs and continued market (more…)

April 20, 2008

Is Credit a Human Right?

U.S. banks have been quietly considering getting into the microcredit market in the effort to be more visionary in their growth. Besides, over the long haul, bankers see the growing microcredit market as a possible threat to their supremacy in the financial sector.

Banks in France, notably banks that began as village banks are deeply linked to the well-being of their community. For U.S. banks, that mindset is a considerable change in concept. French banks like Credit Agricole began to loan small amounts to the rural poor trapped by the old system of moneylenders. (more…)

April 9, 2008

Fed: Global Economic Outlook

Filed under: banking, central bank, federal reserve, investment, money — Tags: , , , , , , , , , , — digitaleconomy @ 2:32 am

In the major advanced foreign economies, the growth rate of gross domestic product declined in the fourth quarter. The source of the slowdown has varied substantially across economies. In the Euro area and in the United Kingdom, output was restrained by a softening in domestic demand. In contrast, Canadian domestic demand continued to increase at a very strong pace, but because of an offsetting steep decline in net exports, real GDP rose only modestly. Japan was the exception among the advanced foreign economies to the pattern of slower growth; real GDP there strengthened in the fourth quarter with higher domestic spending and continued strength in exports.

Early first-quarter economic indicators for advanced foreign economies pointed to slowing growth. Growth slowed a bit in emerging markets, though it continued to advance at a fairly strong rate. In emerging Asia, the pace of real GDP growth picked up in the fourth quarter in China and South Korea, but it softened in most other countries. The rate of increase in economic activity slowed in Brazil, Mexico, and several other countries in Latin America in the fourth quarter, but remained generally strong.

The outlook for the United States is seen as negative and fragile. The Fed reported problems of declining asset values, credit losses, and strained financial market conditions could be quite persistent, restraining credit availability and economic activity, delaying and dampening economic recovery.

March 3, 2008

Small Banks Likely to go Under

Filed under: banking, credit, federal reserve, money, politics — Tags: , , , , , , , , — digitaleconomy @ 11:14 am

The economy is not close to a 1970s-style mix of stagnant growth and high inflation, Federal Reserve Chairman Ben S. Bernanke said yesterday. He painted a sour outlook and cautioned that the downturn is likely to cause some small banks to go under. This is a blunt admission for Bernanke, the yes man. However, why would the fallout be limited to small banks with so many large banks in trouble?

At a recent news conference, President Bush said, “I don’t think we’re headed to a recession, but no question we’re in a slowdown.”

Are you confused yet? You would be listening to the likes of Bernanke and Bush. However, at the moment, Bernanke is closer to the truth.

In his second straight day of congressional testimony, Bernanke repeatedly made it clear that he believes the greatest risk facing the economy is slow growth, not high inflation. Unfortunately, the reality is that the United States has both limited or stalled growth and mild inflation. The mild inflation is caused by the excessive credit lines extended to the government as well as the continuous printing of money to “bolster the economy”. The stagnation is caused by outrageous energy prices and continued rising prices across the board. Whether you want to compare today to the 1970’s is another matter entirely. We have a few economic factors going on that don’t compare to the 1970’s.

February 16, 2008

Cracks Show in Fed Leadership

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

Philadelphia Fed President Charles Plosser stated, “There are those who have expressed the view that in times of economic weakness, the Fed must not worry about inflation and should focus its entire effort on restoring economic growth by dramatically driving interest rates down as far and as rapidly as possible.” He called this a “damn the torpedoes, full speed ahead” approach to policy.

Marketwatch Article

It becomes more and more evident as time passes that not all the Fed leadership agrees with the policy decisions of Ben Bernanke. Plosser stated that ignoring inflation during times of economic weakness stunts long-term growth. I am glad that someone has the lights turned on upstairs regarding inflation and devaluation. However, the Fed’s role at this time is not one of doing the right thing over the long-term. The customer, Uncle Sam, is only interested in mitigating the short-term by avoiding bank crashes and artificially stimulating the economy. Bernanke is interested in keeping his customer happy and Bernanke’s bosses have not told him otherwise.

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