Busted: Bankers and The Global Economy

September 5, 2008

FDIC: Dismal Banking and Another Failure

As you’ve probably heard by now, industry results for banking in the second quarter were pretty dismal. The results were not surprising as the industry coped with financial market disruptions, the housing slump, worsening economic conditions, and the overall downturn in the credit cycle.

The main reasons for the drop off are the same that we’ve been seeing since the second half of last year:

declining non-interest income,
rising non-interest expense,
decrease in gains on securities sales,
and mounting loss provisions.

The eleventh bank failure of the year came into play with Silver State Bank of Henderson, Nevada. What is the problem with banking? Mainly liquidity. That is often an elusive problem for banks with abused balance sheets and a nation full of securitized bonds that are pretty much worthless.

August 14, 2008

American Households Face Financial Headwinds

Americans survived the attack of Hurricane Katrina and much of the nation felt the effects for years. What Americans are going now is not a hurricane or strong storm winds, but headwinds of a financial nature brought about by a number of converging factors. If you pick up the paper or look at the internet, you can hardly avoid the headlines and the details of economic carnage.

financing prosperity
financing prosperity

Aside from the banking and mortgage crisis, automakers are on top of the economic worry list, facing a continual onslaught of sliding auto sales as Americans can no longer afford to finance overpriced vehicles. Instead, many Americans out of necessity are keeping what they already drive. That is life in America today in the current economic cycle of life.

Gasoline prices have brought about hardship and fueled inflationary pressures for the nation and the world. Complaining sources indicate that retail sales have fallen again after downward pressure from lack of taxpayer stimulus payments. All of that bad news is presented with the auto industry, which is pulling down retail sales figures. Indications were that stimulus payments received by Americans did what they were designed to do, but never enough for the longing imaginations of business. Were it not for autos, retail sales would be up .4 percent, comparable to the month before. The nation has seen gains in retail since February for small ticket items, a bright spot despite the bleak outlook. The majority of Americans are buying smaller purchases for disposable items. Devalued money only goes so far and consumers are stretching it to the max.

retailer desperation
retailer desperation

Retailers are once again grousing about less than perfect sales as back-to-school shopping hits the retail scales. This reality reflects the desperate nature of retailers. Business inventories are overstocked, even despite negative forecasts, business chose to invest in stock for sales in the hope for a better holiday. They choose to talk about the cautious consumer, further enforcing a negative business mindset by downplaying the prosperity they have. The reality is that business is counting on the Holiday Season to somehow pull them through into a pinnacle of victory that rarely comes. They talk the same games every year. Talking business down even when business is up is not the way to foster prosperity.

Enough with the auto industry and consumer financing schemes! Americans don’t need all that now. This writer has made certain that he is on a spending vacation. Many others are in the same reality, whether out of necessity or self-imposed discipline. Americans need to regroup and explore the economic world they live in for any advantage that they can find to keep them moving forward. The nation is catching its collective breath after a financial burnout. The nation cannot continue to finance away the future for the moment nor continue to give money away. Money is our blood, sweat and tears: the building blocks of life. Bankers and Americans alike must face the facts. We are at a new place in the business cycle and in life.

If we stop grousing about how bad things are when they are not Mr. Retailer, we can actually enjoy what we have. Prosperity is relative. Unfortunately, Retail America has outrageous expectations and government statisticians are ever hopeful of a tax windfall, yet eternally unsatisfied that they can’t fleece their victims more effectively to bolster government agendas with more give-away programs.

big ticket greed

big ticket greed

Hope springs eternal in government to squirm away from the worst slump in housing in many decades and a severe credit crunch from pushing the country into a deep recession, ignoring the fact that we didn’t get here as a nation simply as part of an economic cycle or downturn. Bankers and financiers brought us here, fare and square to this place in the road and aside from a few unscrupulous home buyers, Americans are victims from lack of banking regulation and integrity, endless profiteering through investment vehicles combined with government inattention, always hoping for better on the gravy train of tomorrow. The nation has been firmly addicted to credit and keeping up with the Joneses. This part of the cycle is payment for that.

It time for a new chapter in America including rethinking what we do for a better future, inflation aside. Todays sales figures will ultimately take care of themselves as the nation rebalances from a huge economic and worldwide debacle perpetrated through boundless greed and financed through predatory lending across the board by winners like GMC, Capital One and Countrywide. Financial predators have abounded.

What the nation does will either slow down the cycle of recovery or get it over with faster. The decision is up to America, partly grounded in our own attitudes. As a retired financial analyst and economist, I know the difference between economic theory and reality. I’ve lived it in the trenches. This writer is for getting the economic pain over with instead of prolonging the pain through more addictive medication. ~ E. Manning

June 29, 2008

Panic in Support for the Euro Reported

Germans have begun to reject euro bank notes with serial numbers from Italy, Spain, Greece and Portugal. This reality is raising concerns that public support for the monetary union may be waning in the Germany, perhaps in reaction to Ireland’s rejection of EU’s founding attempts.

Bankers, being naturally detail oriented, have detected a curious pattern where customers are withdrawing cash directly from branches as they screen bank notes to determine the origin of issue. More Germans are asking for paper from the southern states to be exchanged for German notes.

Each country prints its own notes according to its economic weight in European Union under strict guidelines from the European Central Bank in Frankfurt. For example, German notes have an “X”‘ at the start of the serial numbers.

Some people clearly suspect that southern bank notes may lose (more…)

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