BUSINESS
Sarkozy Plans New Financial Crisis Meeting
In my readings and judgement of the outcome of the G20 Summit in Washington, I have to say that that there was alot of talk, regulatory promises and reportage etc, but was anything achieved ? Was anything signed off ? Nope. I guess Bush Jnr firmly expects that the world financial crisis can just wait for its own solution. Clearly leaders such as ex-UK Prime Minister Tony Blair, current UK Prime Minister Gordon Brown and French President Nicholas Sarkozy were, perhaps, a little disappointed at this lack of urgency and response to the financial crisis. Which is why Mr Sarkozy has decided to hold his own European crisis meeting on January 8, 2009.
I was particularly amused to read of this meeting in the NY Times, that well known bastion of truth and unbiased reporting, which contained the headline, “Sarkozy’s Fiscal Meeting Raises Diplomatic Hackles“. Dotted about their parlez were declarations such as:
“President Nicolas Sarkozy of France left the summit meeting on the financial crisis here last weekend in a triumphal mood, declaring that it had tamed the animal spirits of American capitalism. Then he went home and announced that he would hold his own summit meeting in a few weeks in Paris — on the same topic.”
“That has raised hackles in diplomatic circles, not just because the [European] meeting appears to compete with a planned gathering of 20 world leaders next April. Mr. Sarkozy’s aggressive statements have put American officials on edge, with some saying that he seemed determined to turn the global crisis into a referendum on the ills of untrammeled capitalism.”
In reports of this meeting by such as Reuters and the Washington Times, the headlines and assessments were somewhat less biased and stirring. These newspapers suggest that the future summit planned for the G8 on April 2009 wasn’t exactly a rush to inspire confidence or respond adequately to the current economic crisis.
Therefore, as to the reasons why European leaders want to further address this financial crisis, these reasons are many. ALL governments have their own economic and political Think Tanks and advisers who are not stupid. Their only function must be to develop policies which aid their own country. Here, as a best guess, is what they have probably been pondering concerning the US Bailout Plans and the latter’s performance so far:
- At the recent G20 financial conference, President Bush Jr made damn sure nothing was signed. Plenty of talking and blabbing, but no urgency, no direct effective response. Bush Jr, evidently, doesn’t want any of the blame - he just wants to hand it off to President Obama.
- The US government’s Bailout response to the financial crisis, via the voodoo-thinking of the US Treasury and the Fed, can only be described as very ad hoc, messy, ill-thought out and verging on the incompetent. With something approaching 73 Treasury advisers - all ex-Wall Street, Paulson has been inexplicably saving more and more Wall Street Institutions. Therefore, his credibility as a neutral political player is very suspect. Perhaps Paulson’s so-called tenet of “Recapitalizing the banks” should be re-read as “Recapitalizing Wall Street” with taxpayers money.
- Just days before the $700 billion Bailout went into effect, Paulson bought $630 billion in credit default swaps in foreign currencies. This has caused the recent surge in the value of the US Dollar. When these swaps expire in early January 2009 - all these dollars will flood the currency markets once again and drag the dollar - and other currencies - down. Perhaps both Sarkozy and Gordon Brown have spotted this ruse, and perhaps they are aware of the currency problems that will occur in early January because of this heavy-handed play by Paulson.
- With her current Dollar problems, Energy problems, relationship problems with both China and Russia and a heavy, crippling Fiscal Debt, can the US government lead and focus effectively on the financial crisis in Global friendly terms, rather than eventually promoting its own isolationist and protectionist policies that would economically hurt both Asian and European economies and trade ?
- When Obama takes rein as the next US President, then Bush Jr, Paulson and Bernanke might well all be out of a job. Why should they care what happens in April at the the next slow-moving G8 Financial Summit ?
- With all the shadow agendas that have been perpetuated by the Bush Jr administration over the years, why should the stated economic intentions of either Paulson or Bernanke - both Bush’s main fiscal henchmen - be believed or trusted ?
- With the recent projected downgrade of America’s influence in both the global economic and political spheres by 2025 - according to a recent US NIC Report - European Leaders should help contribute to take the lead in sorting out the current economic and financial mess.
These will be the passing thoughts of those leaders and economists concerned with the European Conference in January 2009. It’s certainly a warming thought to realize that at least a few World Leaders are intent on taking this international financial crisis seriously…
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GM Bailout - the Truth and the Bunk
Bend over and brace yourself America — here it comes again.
Martin Walker write in a Washington (UPI) Nov 19, 2008 datelined article that, “(A) GM bankruptcy would not save money for the U.S. economy. The healthcare and pension obligations would simply shift to state welfare, Medicare and Medicaid and the pension guarantee system.”
There are 479,000 retirees getting GM pensions. Pensioners are quarantined a maximum of $40,000 a year from The Pension Benefit Guaranty Corp. PBGC is another one of those federal shadow corporations nobody pays much attention to until the defecation hits the impeller. But, it GM fails PBGC could wind up paying 20 billion a year to GM pensioners, or for any other qualifying company that fails. So in that context a $25 billion “bridge-to-nowhere-loan” to GM looks cheap is there is even a slight chance it will reverse track and could be paid back.
Second, he says a Chapter 11 bankruptcy filing would likely hit sales hard, as consumers fear that multiyear warranties and their local dealerships and future supplies of spare parts might not be reliable. Frankly that’s mostly a boogieman.
Third, Walker argues there is a strategic aspect to the U.S. auto industry. It is a critical part of the national industrial base and the economy as a whole, as well as the defense sector. But, what he doesn’t say many of US military vehicles are being made elsewhere anyway because U. S. plants can’t or won’t do it.
Detroit he points out is the key partner in the Army’s Tank Automotive Research, Development and Engineering Center and the Fuel Efficient Ground Vehicle Demonstrator Project. Detroit Diesel and ArvinMeritor are irreplaceable links in the military’s long supply chain but they can run just fine without help from legions of General Motors Institute graduates’ help.
Fourth, GM is profitable in Europe, Latin America, Asia and the Middle East. GM upped its profits in Europe by 65 percent last year. GM also posted records in Asia, Latin America and the Middle East. In China, GM leads all automakers in sales. In 2007 sales rose 20 percent for GM in China compared with 2006, and GM became the first manufacturer to sell 1 million vehicles in China.
But, that may not last. Opel, GM’s German wing wants Berlin to bail it out and Brussels to restructure aid under the European Union’s proposed scheme to help its auto industries retool for a green future. But Opel, like the British wing of GM known as Vauxhall, is looking hard at buyout options and there are buyers.
Fifth, and maybe most important people are still going to buy cars. The credit crunch has been complicating things since the boneheads in Congress shoveled money to banks without a demand to lend it – so they aren’t – but will. But forget about the U. S. the growing wealth of the developing world means a boom is on the way.
Walker says there are now 800 million vehicles on the world’s roads; by 2020 there are expected to be 1.5 billion, with strong growth in China, India and elsewhere.
The good news is things like the Volt, GM’s electric-powered (but still hybrid) car coming to market within 18 months. Ford and Chrysler have hybrid vehicles already, and fully electric and fuel-cell cars are in development.
He argues all these good idea should not go to waste what he doesn’t say is they won’t. Remember GM and to some extent Ford and Chrysler won’t let that happen and their foreign operations although related are more independent that dependent.
Sixth, remember GM and Ford are well advanced on the restructuring path, after new agreements with the labor unions, improved quality and models, and ongoing reform of its sprawling dealer network.
United Auto Workers union is talking about funding a voluntary employee beneficiary association has ended its $50 billion liability in unfounded benefits. This has already saved GM $5 billion.
Moreover, healthcare reform, a likely priority of the incoming Obama administration, could shift the remaining burden of health costs from companies to a national insurance system that should further relieve the auto industry’s current high cost structure. The bugaboo is those costs will fall on taxpayers.
The rub in all this is that the current crash sneaked up on America driving car and truck sales down from 16 to 13 million units and it is still headed south.
GM’s current North American operating costs of $31 billion a year at its 24 plants need to be slashed by at least a third. That costs jobs and wrecks communities. I know I watched steel plants close followed by blocks of closed stores and even the local movie house. Three plants are already slated for closure.
Walker’s argument that GM’s has “spawned a “sprawling and swollen dealership network” but he forgets that dealerships – including some 4,000 in small-towns are private businesses and that will take care of itself. So keep hands off.
He rightly points out if Congress decides against a GM bailout it need not be the end of the world. When UK Prime Minister Margaret Thatcher refused further subsidies to British Leyland, the last U.K.-owned major car manufacturer things came back and UK now makes and exports more cars and employee more people than it did then. Plus, Walker finally says, given the manufacturing presence of Honda, Toyota, BMW, Mercedes and Hyundai, the U.K. experience may well be repeated in the United States, even if Ford and GM collapse.
After all based on current share price Ford and GM both could be bought for less than $10 billion so somebody will – clean house; flush those toilets and clean the bowls and get on with it.
The Democrats in Congress are so beholding to tens of millions of contributions from big labor and millions of workers to keep them in office they will likely not do what’s right. So here comes $25 billion and probably $50 billion or more and things will still be a fouled up as Hogan’s goat.
Martin Walker hit a pretty solid ball but I had to short stop it and hold him up on first base. But, he still did better than those strike outs in Washington DC.
NIC Report: US Geopolitical Influence to Diminish by 2025
In a report just out from the US National Intelligence Council called Global Trends 2025: A Transformed World, the assessments therein will be used to predict possible world “futures” with application to current US political strategies. Points made in the analysis have highlighted the following:
- The whole international system—as constructed following WWII—will be revolutionized. Not only will new players—Brazil, Russia, India and China— have a seat at the international high table, they will bring new stakes and rules of the game.
- The unprecedented transfer of wealth roughly from West to East now under way will continue for the foreseeable future.
- Unprecedented economic growth, coupled with 1.5 billion more people, will put pressure on resources—particularly energy, food, and water—raising the specter of scarcities emerging as demand outstrips supply.
- The potential for conflict will increase owing partly to political turbulence in parts of the greater Middle East
For a longer assessment of this document, here is a wider report and view from The Times :
The next two decades will see a world living with the daily threat of nuclear war, environmental catastrophe and the decline of America as the dominant global power, according to a frighteningly bleak assessment by the US intelligence community.
“The world of the near future will be subject to an increased likelihood of conflict over resources, including food and water, and will be
haunted by the persistence of rogue states and terrorist groups with greater access to nuclear weapons,” said the report by the National Intelligence Council, a body of analysts from across the US intelligence community.
The analysts said that the report had been prepared in time for Barack Obama’s entry into the Oval office on January 20, where he will be faced with some of the greatest challenges of any newly elected US president.
“The likelihood that nuclear weapons will be used will increase with expanded access to technology and a widening range of options for limited strikes,” the 121-page assessment said.
The analysts draw attention to an already escalating nuclear arms race in the Middle East and anticipate that a growing number of rogue states will be prepared to share their destructive technology with terror groups. “Over the next 15-20 years reactions to the decisions Iran makes about its nuclear programme could cause a number of regional states to intensify these efforts and consider actively pursuing nuclear weapons,” the report Global Trends 2025 said. “This will add a new and more dangerous dimension to what is likely to be increasing competition for influence within the region,” it said.
The spread of nuclear capabilities will raise questions about the ability of weak states to safeguard them, it added. “If the number of nuclear-capable states increases, so will the number of countries potentially willing to provide nuclear assistance to other countries or to terrorists.”
The report said that global warming will aggravate the scarcity of water, food and energy resources. Citing a British study, it said that climate change could force up to 200 million people to migrate to more temperate zones. “Widening gaps in birth rates and wealth-to-poverty ratios, and the impact of climate change, could further exacerbate tensions,” it said.
“The international system will be almost unrecognisable by 2025, owing to the rise of emerging powers, a globalising economy, a transfer of wealth from West to East, and the growing influence of nonstate actors. Although the United States is likely to remain the single most powerful actor, the United States’ relative strength – even in the military realm – will decline and US leverage will become more strained.”
Global power will be multipolar with the rise of India and China, and the Korean peninsula will be unified in some form. Turning to the current financial situation, the analysts say that the financial crisis on Wall Street is the beginning of a global economic rebalancing.
The US dollar’s role as the major world currency will weaken to the point where it becomes a “first among equals”.
“Strategic rivalries are most likely to revolve around trade, investments and technological innovation, but we cannot rule out a 19th-century-like scenario of arms races, territorial expansion and military rivalries.” The report, based on a global survey of experts and trends, was more pessimistic about America’s global status than previous outlooks prepared every four years. It said that outcomes will depend in part on the actions of political leaders. “The next 20 years of transition to a new system are fraught with risks,” it said.
The analysts also give warning that the kind of organised crime plaguing Russia could eventually take over the government of an Eastern or Central European country, and that countries in Africa and South Asia may find themselves ungoverned, as states wither away under pressure from security threats and diminishing resources..
The US intelligence community expects that terrorism would survive until 2025, but in slightly different form, suggesting that alQaeda’s “terrorist wave” might be breaking up. “Al Qaeda’s inability to attract broad-based support might cause it to decay sooner than people think,” it said.
On a positive note it added that an alternative to oil might be in place by 2025.
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Related Articles :
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Little More Than A Third Want BIG 3 Bailout.
48% Say Let Car Companies Fail - That Was Before Corporate Jet Joke.
Nearly half of U.S. voters (48%) say it is better for the economy to let companies like General Motors fail rather than providing government subsidies to keep them in business. Last week that number was 46%, and the poll was taken before revelations of the corporate jet fleet hauling GM, Ford and Chrysler’s CEO banck and forth to their Washington DC beg-a-thon.
Thirty-five percent (35%) believe it’s better to subsidize their continued existence, according to a new Rasmussen Reports national telephone survey. Seventeen percent (17%) are undecided.
Sixty-four percent (64%) of Republicans and 60% of unaffiliated voters say it’s better to let troubled companies like GM fail, compared to 26% of Democrats.
Fifty percent (50%) of Democrats think it’s better to subsidize them, but just one-quarter of GOP and unaffiliated voters agree.
Fifty-three percent (53%) of investors say it is better to let companies like GM fail, compared to 38% of non-investors.
12% of voters, about one of eight, say their personal finances will be significantly hurt if General Motors files for bankruptcy protection. Seventy-three percent (73%) say their finances will not be impacted, while 15% aren’t sure.
Barney And The Brain Dead Car Bosses - Contempory Fairy Tale (Pun Intended)
Never Use a Gold Collection Plate.
My late uncle, Rev. John, used to say “Never use a gold collection plate.” GM, Ford and Chrysler’s CEOs could have benefited from his advice as the hypocrites swooshed into Washington DC aboard private jets yesterday to beg for $25 billion in taxpayer money at least in part to pay for their fleets of jets. Apparently they have all cut costs by laying off their public relations department, or if they haven’t – they should and get someone who is not so completely tone deaf.
Only Congressman Barney Frank out did that troika of hypocrites by charging that denying them the bailout was really about hurting blue collar assembly line workers having already shoveled tens of billions to bailout to white collar bankers. Frank’s first class hypocrisy was heightened by failing to mention that his homosexual boyfriend lover at Fannie Mae was one of the first beneficiaries; how much money he and his mostly Democrat cohorts rake in from United Auto Workers or that he took a sweetheart mortgage from failed Countrywide.
It was Mark Twain who said, “Suppose you were an idiot. And suppose you were a member of Congress….But then I repeat myself.” Makes you wonder how Twain would amend his sarcasm to include the trio of arrogant auto executives having covered the mush mouthed Congressman and his cronies..
Dollar Health: A Word from the Bears
With all the current global problems, as the financial crisis continues to writhe, bleed and affect the global markets, as the oil price sinks inexplicably lower, with Peak Oil looming so close on the horizon, huge US Fiscal Debt problems, and China and Russia soon to unload their $ trillions - what chance the dollar ?
Perhaps a wide variety of expert views might help - from people who have long experience and know the markets intimately and who are taken seriously, whenever they utter their opinions and truths. Many have been saying it - that the dollar is a flawed currency now, some say possibly doomed.
Warren Buffet says :
“The rest of this the world owns $10 trillion of us, or $3 trillion net.” That is, U.S. claims on foreign assets run to only $7 trillion. “If lots of people try to leave the market, we’ll have chaos because they won’t get through the door.” In a nutshell, the trade deficit is forcing foreign central banks to ingest U.S. currency at a rate approaching $2 billion a day. Buffett continues: “If we have the same policies, the dollar will go down.”
Peter Schiff in his articel “The Humpty Dumpty Economy” explains:
“Reminiscent of his Bazooka maneuver, quick draw Paulson reversed course quickly with his decision to not use any TARP funds to buy the assets that the plan was specifically funded to procure. Instead, he will simply dole out the loot to his buddies on Wall Street and use it for whatever seemingly worthy initiative strikes his fancy. Although Congress loves to grandstand about oversight, it has thus far shown no courage to interfere, or even question, the change in strategy. Paulson claims that he is simply rolling with the punches. The truth however, is that the original plan was flawed from inception, as I clearly pointed out in a string of commentaries following his proposal. How could the Treasury Department, with all its funding and PhD’s, not make similar predictions? Paulson is either a liar or completely incompetent. My guess is he is both.”
Marc Faber, a well known European market analyst, writes:
“Simply put, whereas in the past cash could be perceived as ‘reasonably’ safe, today cash may, courtesy of modern central banking under the auspices of the US Fed, actually have become quite a dangerous asset class due to its depreciation not only against asset prices but also against consumer prices, if these were measured properly by government agencies.”
In a recent interview from the Financial Times regarding the dollar and US Economy, Jim Rogers had this to say:
FT: It’s a year since we last interviewed you. You were aggressively bearish about the dollar, but you thought there would probably be a rebound and you would take that as an opportunity to get further out of the dollar. Have you made a further exit from the dollar?
JR: Not yet, no.And the reason I haven’t is because we’re in a period of forced liquidation of everything. We’ve had only eight or nine periods like this in the past 150 years, where everybody has to reverse their positions on everything.There is a gigantic short position in the dollar and they’re all having to cover as they reverse their positions, so this rout is going to go on much further than I would have expected - to my delight, because then I’ll get to sell at higher prices. I don’t know whether I’ll get out this month or this year even - maybe next year, but I do plan to get out of the rest of my US dollars, because this is an artificial rally caused purely by short covering.
FT: How will you tell when that deleveraging is finally over?
JR: I’m sure I won’t get it right, but I do hope that when there’s a lot of euphoria about the dollar and everybody’s saying, well, see, there’s no problem with the dollar . . . I hope I’m smart enough to recognise it and finally get out of the dollar, because it is a flawed and, maybe, even doomed currency.
FT: Do you see the sell-offs we’ve seen in commodities as a drastic correction?
JR: Well, we’re in a period of forced liquidation of all assets . . . we’re getting the business cycle effect on demand right now, certainly, but unless the world’s in perpetual economic decline, commodities are the only thing going to come out of this OK.
FT: Does this mean you’re actually buying back into commodities at the moment, or is this an area you’re standing clear of?
JR: No, no. In October when I started covering my shorts in the US stock market, I started buying Chinese shares, Taiwan shares. I started buying commodities again. No, no, I’ve added to those positions.
FT: What’s your strategy towards emerging market stocks?
JR: My hope is that I’m smart enough and brave enough at some point along the line to buy some of them back. But I’m not even thinking about it right now . . . The world’s financial situation is in a mess, and there are a lot of people who have to liquidate. I mean, we must have had 30,000 MBAs flying around the world looking for emerging markets. All of that money has got to come home.
FT: How do you think the world should go about redesigning the regulatory system, and are you worried that we’re going to end up with a swing towards over-regulation?
JR: Well, we probably will. The problem is that people like Alan Greenspan would never let the market work . . . For 15 years, under Greenspan, and now Bernanke, they would not let the market work. Had they let Long-Term Capital Management fail, back in 1998, we wouldn’t have these problems now, I assure you. Lehman Brothers would have been smashed. Goldman Sachs, Bear Stearns, would have been smashed. We wouldn’t have these problems now. That only happened because every time they turned around they propped these guys up, gave them more money, and that’s why we have the problem. . . . But now, of course, they’re going to blame it on other people and cause more regulations.
FT: You’re arguing we need to allow some more big institutions to fail?
JR: One failed. Why didn’t they let Fannie Mae and Freddie Mac? I mean, I was short Fannie Mae, and they should have let it fail, go zero. AIG - they should have let it fail. They should have let all of these guys fail, and we would clean out the system . . . What they’re doing is, they’re taking the assets away from the competent people, giving them to the incompetent people and saying to the incompetent: ‘OK, now you can compete with the competent people, with their money.’ I mean, this is terrible economics. This is outrageous economics.
Should Reporters Have To Know What They Are Talking About?
…most print reporters and nearly all television newsreaders have little or no economic or scientific education - nor are they the sharpest knives in the drawer.
Forty-six percent (46%) of Americans say most reporters and media outlets try to make the economy seem worse than it really is, according to a new Rasmussen Reports national telephone survey.
Sixteen percent (16%) say most reporters and media outlets try to make the economy look better than it really is, while 25% say they present an accurate picture. Thirteen percent (13%) are undecided.
Investors are even more skeptical. Fifty-one percent (51%) say the media makes the economy appear worse than it actually is, compared to 40% of non-investors.
(See article GM Bailout - the Truth and the Bunk
A private analysis I am privileged to, found that most print reporters and nearly all television newsreaders have little or no economic or scientific education. Further a small study and analysis showed print reporters to have average IQ and television newsreaders to be somewhat below average in native intelligence as measured on the Stanford-Binet 5th generation scale that is the most up-to-date.
I must disclose that in 1960 as a completely hollow-headed boy I was an invited participant in the recalibration that resulted in the 4th revision of the standard Stanford-Binet scalling..
A Frightening Indictment from the Bailout
This extract was taken from the WSJ, an analysis from Seeking Alpha, in a surprisingly open piece, which seems to justify all the worries we all have concerning the nature of the US TARP $700 billion Bailout. While certain people blandly heave a sigh of relief at the supposed purpose of the bailout, certain other darker aspects of US banking behaviour have become very evident. This was bound to bubble and slither to the surface of this lumpy financial soup. The apparent greedy and fraudulent behaviour of the US banks is hardly surprising. Predictably, this is purely about survival - almost Darwinian in fact - this is about earning buckets of money quickly and easily, responsibility to shareholders, and about ‘winning’. I suppose we shouldn’t be surprised at the distrust, I guess we can all just sigh and yawningly dismiss it as just business as usual after all…
From Seeking Alpha:
The Wall Street Journal published something on its Real Time Economics Blog that we found to be extremely disturbing. Call us naive, but somehow we can’t help but feel that things are far worse than imagined after reading it.
Secretary Paulson clashed with members of the House Financial Services Committee during his testimony on Tuesday morning. He’s against using TARP funds to purchase troubled mortgage assets from the banks and Representatives are, somewhat justifiably, feeling as if Mr. Paulson is not following through on the intent of the legislation.
But that isn’t what’s troubling us because we believe Mr. Paulson is acting with the best intentions at heart and we also believe that members of Congress who voted for the TARP in good faith (and went to great pains to convince others to do so) are justified in grilling the Secretary pretty hard on why tactics appeared to have changed in mid-stream.
The problem lies with the reason Mr. Paulson is reluctant to use the funds in this manner, which he of course did not allude to during his testimony.
According to the WSJ:
Within the Treasury there’s a view that if the government is going to cover half the loss, banks will modify the terms of a loan for weak borrowers they know can’t make their payments, then foreclose and get the government to make up half the loss.
In other words, the Treasury feels that the reason it can’t use the funds in the manner Congress intended is because it believes the banks would act in an unscrupulous manner in order to subvert the intentions of the United States government at a time when the economy is facing its worst crisis since the Great Depression?
If the WSJ is correct this really is a terrible indictment on our society and out of all the things which have gone wrong since the crisis started in the summer of 2007, this has to rank as one of the worst. Is there no end to the greed?
Credit crunch
Here’s the scariest thing about the credit crunch. We don’t know whom to credit anymore. In boardrooms and showrooms all over America all you see are incompetence, failure and overpaid losers. Entire industries are about to go away, to China, to Japan, to nowhere, and the best the CEO’s of America can do is beg. Business by the incompetent, of the incompetent and for the incompetent is killing us.
We’ve got the top job covered. I’m pretty sure we hired a competent guy for that. If anybody can pull off the miracle of making Washington work, Obama can.
But the rot in New York and now Detroit is devastating, and we don’t get to fire those idiots, like we did our nation’s First Idiot. It scares me to death.
I don’t know how you take an industry that thrived for a century, whose brands were once beloved, coveted and iconic as a GTO’s split grille, and drive it straight into the ground, just because gas went up for a couple of quarters. I don’t know how you plow through a hundred years worth of profits in two. Call me naïve, but I actually thought it wasn’t possible to screw up that bad.
This isn’t Amalgamated Buggy Whip we’re talking about. Cars haven’t gone away, they’re still as necessary as ever. It’s not even an American crisis, the Toyota plants in the USA will survive just fine. It’s a management crisis of what we still call The Big Three, for no good reason.
General Motors gone? Ford history? Chrysler, Chevy, Caddy disappeared? Who did that? Is it possible to be that stupid by accident? Or were the Big Three killed on purpose? Maybe there was a hostile takeover by the Republican Guard when we weren’t looking.
And, of course I mean the Iranian Republican Guard, not the GOP Republican guard. Not that there’s all that much difference.
Sorry, that was a cheap shot, but I’m feeling real cheap these days. Great Depressions will do that to you. And this one is looking greater every day.
Seriously, where is the competence? Wall Street firms that survived two world wars and the first depression killed dead in six months. Auto companies that put the world on wheels, now reduced to begging for bailouts, threatening to go bust and take the entire American economy with them.
I want to help, but I don’t consider Detroit’s current management credit worthy. It’s not just money they’re fresh out of, it’s ideas, it’s smarts, it’s competence. That’s the real credit crunch.
I’m scared that 25 billion won’t do it. Detroit has blown through several times that much in the past few years. There is no end to their failures. These guys could screw up a wet dream.
Hell, these guys did screw up a wet dream. Most of us had our first taste of sweet, forbidden sex in their products. I mean, they used to call it parking. You didn’t walk to Lover’s Lane, you drove. In daddy’s car. And it wasn’t a Subaru.
So, what’s the solution? I don’t know. If I did I’d be sending off my resume right now. But I have one idea.
From what I hear, Detroit is well-endowed with homeless people. That is a class of folks who have loads of experience in Making Do With Less. Surely there is among them a genius of thrift, an Edison of improvisation, a Rockefeller of the Streets.
Find him. Or her. Job one for the auto companies for the next few years will be begging. Why not hire a professional?
The Big Hole In the Bail Out Bucket Idea
Just 26% of U.S. adults are at least somewhat confident that U.S. policymakers know what they are doing
At least 30 states are currently in recession and 19 others are at risk, according to Moody’s Economy.com. In March, Moody’s considered only five states to be in recession: ARIZONA, CALIFORNIA, FLORIDA, MICHIGAN and NEVADA. But conditions have deteriorated quickly, with the trouble that began in the housing market now spreading to other sectors of the economy, particularly manufacturing and retail sales. According to Moody’s, the only thing keeping states in the middle of the country from also slipping into recession is the continued strength of agriculture and energy. In fact, ALASKA’s petroleum propelled economy is the only one that is still expanding.
Just 26% of U.S. adults are at least somewhat confident that U.S. policymakers know what they are doing when it comes to addressing the nation’s current economic problems, according to a new Rasmussen Reports national telephone survey.
It should not go unnoticed that New York Gov. David Paterson (D) who is legally blind sees how to fix deficits more clearly than many. His plan calls for a $2 billion reduction in state spending by April, and a $5.2 billion reduction over the next 16 months.
California’s Gov. Schwarzenegger has collapsed to state employee unionist dumping his no new tax ethos for a few paltry cuts and a package of tax increases including a regressive proposal to up sale taxes by 1.5%. and boost vehicle licensing fees bringing both to the nation’s top rates in what is already the nation’s most taxed.
Car dealers say raising sales taxes and vehicle tile and licensing fees are among the dumbest ideas and will do more harm to an industry many think is still using a stage coach approaches in the jet age.
Others insist this is time for another FDR-like WPA (Work Progress Administration) claiming a dollar spent on infrastructure turns into $1.60 in economic benefit. Admittedly WPA helped but didn’t end the depression — building, among other things, more brick outhouses than anything else leading to the at least partially complimentary aphorism “built like a brick sh**house.”
Dispassionate analysts point out that’s not ending the Great Depression but World War II; followed by the decades of Cold War that did and sustained recovery.
U. S. Shutsdown Iran Money Conduit
U-turn” bank transfers were designed to move money through the United States en route to offshore banks.
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U. S. officials said the Treasury Department would block short-term money transfers in the United States, a method used by the Teheran regime. The so-called U-turn” bank transfers were designed to move money through the United States en route to offshore banks. “Given Iran’s conduct, it is necessary to close even this indirect access,” Treasury Undersecretary Stuard Levey said.
Under the measure, Treasury would outlaw the processing of U-turn transfers by U.S.-licensed banks. Officials said the restriction would prevent most transfers by non-Iranian offshore banks for Iranian entities. “This regulatory action will close the last general entry point for Iran to the U.S. financial system,” Treasury said.
Officials said Iranian banks and the Teheran government were increasingly using U-turn to avoid U.S. sanctions. They said Teheran recruited Asian, African and European banks to handle Iranian foreign transactions.
The Bush administration has determined that Iranian banks were aiding Teheran’s missile and nuclear program. Treasury has already imposed sanctions on such Iranian state-owned banks as Melli, Mellat, Saderat, Sepah, Future Bank and the Export Development Bank of Iran.
The latest measure, announced on Nov. 6, stipulated that no U.S.-licensed bank could conduct a U-turn transaction for Iran. Officials said the exception would be the transfer of Iranian funds to families or humanitarian relief. The United States contains a small but wealthy Iranian community, mainly located in Los Angeles “Allowable funds transfers under specific or general OFAC [Treasury's Office of Foreign Assets Control] licenses would include: payments arising from over-flights of Iranian air space; legal services; intellectual property protection; and authorized sales of agricultural products, medicine, and medical devices to Iran,” Treasury said.
Gordon Brown and the G20 - Krugman’s Verdict
The first assessments of the current G20 Financial Summit are out. And amid the muddle and fumblings of other countries as to what can be done, one leader seems to have quietly taken the reins of this gathering with a definitive plan. Gordon Brown, the current PM of UK, introduced this financial plan to the EU last month. A few European countries, then virtually all states decided to run with it because it was so good. Now he has introduced this plan to the G20 Meeting. I certainly don’t agree with all of his plan, but at least Mr Brown has brought the G20 together with a reasonably focused response. This, after all, is what a leader should do. President Bush is hosting the meeting - and reportedly all he brought to the meeting table was a neat haircut and a weary smile. He also served tea and coffee during the intervals (without any help at all, so they say). The following short article is from the UK Guardian, which includes quotes of high praise from Paul Krugman, the well known and highly respected US economist.
“From the way Gordon Brown was talking about the G20 summit at his Downing Street press conference this week, you could be forgiven for thinking that he sees it as his chance to audition for the role of chancellor of the exchequer for the world. But if that doesn’t work out, and if the voters boot him out at the general election, he has brilliant future as a university professor.
That’s not my verdict but Paul Krugman’s - and he’s just won the Nobel Prize for economics, so he should know. Krugman hailed Brown as the saviour of the world economy in a New York Times column last month and last night he and other economists met the prime minister after he arrived in New York for the G20 summit.
After the meeting, Krugman told the BBC’s Nick Robinson, for a Today programme interview, why he was so impressed by what Brown had done.
We had this completely muddle-headed response from the United States, the US Treasury: “Something must be done, the markets are frozen up.” But then the plan made no sense. It was really great confusion, and not much coming out of the eurozone. Then Gordon Brown comes along and says we are going to recapitalise the banks, which is what economists like myself had been saying. It provided the signal that we could do a straight-forward, well-focused response to this crisis. Britain is not one of the world’s biggest economies but Britain has ended up setting the template for everyone else’s response, which is quite amazing.
Then Robinson asked Krugman how Brown had gone down with the academics. Krugman was effusive.
He’s pretty good. If this prime minister thing doesn’t work out, he’s got a pretty good career as an academic [ahead of him]. It was amazing. The level of discussion was, particularly for someone accustomed to the US for the last few years, awesome.”
Bill’s Business vs Hillary’s Politics
In an AP article posted today, many examples showing conflict of interest between the Clintons indicated a problem if Hillary is selected to Secretary of State.
Since leaving the White house, the Clinton’s have earned $100 million mostly via speeches, investments, and book royalties. Not to mention the $353 million Bill earned for his Foundation which funds the presidential library; he also raised money for the global anti-aids initiative, and other charitable causes. So he’s been busy.
But then…
Hillary Clinton has campaigned as a champion of workers’ rights. Earlier this year, Brazilian labor inspectors found what they called “degrading” living conditions for sugar cane workers employed by an ethanol company in which Bill Clinton invested.
and…
In the Senate, Clinton was an outspoken critic of a proposed deal under which a Dubai company planned to buy a British business that helped run six major U.S. ports. Meanwhile, the company, named DP World, privately sought Bill Clinton’s advice about how to respond to the controversy in Washington over the port plan, which the company later abandoned.
The former president has raised money overseas beyond the Chinese Internet company’s contributions: from the Saudi royal family, the king of Morocco, a foundation linked to the United Arab Emirates and the governments of Kuwait and Qatar, The New York Times reported last year.
Other examples are given that indicate more dealings that benefit HIM much more directly than the rest of the country. I wonder if the world leaders he’s been fleecing will expect some return on their investment if Hillary is appointed.
I personally feel ok with Hillary as SoS, just not with Bill running around. He shows time and time again that he looks out for Bill first.
The other names I’ve heard don’t inspire a “change” type of feeling in me. Just “change back”.
I hope Obama chases energy independance as the vehicle to correct our economy. Don’t leave any option off the table. OIL, Wind, Solar, CNG, geothermal (I’m a big fan of this simple technology). Instead of investing billions in BIG dead horses like GM, invest in jobs and companies that are the future.
As China Slowly Dumps the Dollar
In my last blog about the dollar - China and Russia to De-Emphasize the World Trade Dollar I discussed the meeting that occurred between these two countries over two weeks ago. I stated that it was their avowed intention - more or less - to topple the dollar’s top position as the World Reserve Currency. In another article I showed how Mr Paulson and the Treasury had blatantly manipulated the currency markets to prop up the dollar value, buying $630 billion worth of foreign currencies via credit default swaps. This action has rapidly and artificially increased the strength of the dollar as well as depressed the value of commodities such as oil. All manipulated, all temporary. Paulson did this to ultimately manipulate US market confidence so that he could say, “Hey look guys, the dollar is now really strong…See, there’s no need to worry about the dollar now !!” as a nicely timed defense strategy at the G20 Summit which is ongoing now. These credit default swaps purchased by Mr Paulson’s brotherhood will expire in 84 days from October - which means that shortly after Xmas or New Year the US dollar will crash big as the world currency markets will become flooded - once again - by that worthless and over-inflated piece of paper known as the dollar. And therefore, as a result of its clever timing and set-up, this ‘hot potato’ will be conveniently passed to the new President-elect Obama in January, just in time for Bush Jnr to wave goodbye and laugh, now completely blameless for all these and future events that he has helped - and so effortlessly it seems - to create through his truly dumb, voodoo-economic policies.
Meanwhile here is more related bad news from China. This article was from today’s Motley Fool and its content shows how China is responding to the weak and globally hurtful dollar. Of course the Chinese have clocked what Paulson’s brotherhood is up to, and their greatest wish seems to be - together with Russia - to slowly destroy the dollar. They will do this by unloading and spending all their dollar reserves domestically, and they will obviously stop buying US debt. Read on:
Brazil’s President Lula told his country in September, “People ask me about the [financial] crisis, and I answer, go ask Bush. It is his crisis, not mine.”
Fifty days later, British Treasury Secretary Stephen Timms told a conference of G-20 nations gathered in Sao Paulo, Brazil: “We are in extraordinary times, the global economy is facing shocks which are wholly without precedent and we need a new approach. … It is a global crisis. It therefore requires an international response.”
In other words, what goes around, comes around. Global schadenfreude toward a stupid and greedy United States and its subprime mortgage meltdown has rapidly become global concern about how to rescue the world from an all-encompassing financial disaster.
And if that were not enough, the International Monetary Fund (IMF) recently lowered its outlook for the entire global economy.
One country’s plan to step up
Against that backdrop, China announced a 4-trillion-yuan ($586 billion) stimulus package for its domestic economy this past Sunday. It plans to fund extensive infrastructure construction, aid poor farmers, and cut export taxes.While China’s plan has clear beneficiaries, and should help keep more laborers in their jobs and prop up domestic consumer spending, the most important (and underreported) aspect of the plan is how it will fundamentally change the economic relationship between the U.S. and China.
Here’s how it was
One of the big debates over the past half-decade was whetherChina had reached a point in its economic development at which its internal economic gravity would allow it to “decouple” from the global economy. If so, it could continue along its fantastic growth trajectory, even as growth in the U.S. or Europe ceased or reversed.
That may sound like gobbledygook, but it’s important. The U.S. has a $20 billion monthly trade deficit with China. It’s funded by China’s willingness to hold U.S. treasuries in its Central Bank (essentially, we’re borrowing the money). China manages the arrangement by pegging its currency (the yuan) to the dollar at an artificially low rate, and by not worrying so much about certain niceties like environmental regulation and labor protection.
It’s a mutually beneficial arrangement — a weak yuan supports Chinese exporters, helping the country industrialize and quickly integrate rural migrants into its urban workforce, with the salutary effect of keeping inflation and potential political unrest low. For its part, the U.S. has gotten dirt cheap financing, by virtue of China parking more than a trillion dollars in U.S. government securities. That has supported the dollar and allowed the Federal Reserve to fuel consumer spending by keeping interest rates low.
China’s stimulus package heralds the unwinding of this relationship.
Here’s how it will be
This is why the decoupling argument matters. Many analysts have pointed to the thousands of factories that have shut down in China in these past few months as evidence that a slowdown in American spending will cause a depression in China — potentially even leading to regime change. But in fact, our trade imbalance with China is artificially preserved by the aforementioned currency peg, and by the decision of China’s state-run banks to make uneconomic loans to businesses it deemed worth propping up.China has paid heavily for this relationship. Rather than invest its surplus cash in its own country, the Chinese poured money back into the U.S. to further spur our debt-fueled consumption. (Put less artfully, some poor Chinese guy in Shaanxi province was essentially helping you pay your mortgage.)
The announced stimulus package reverses that. Hundreds of billions of dollars that would have gone to propping up the greenback are now being reinvested in China, helping it to transition from its reliance on exports to a self-sustaining economy. So while China isn’t yet decoupled from its export markets, this new spending plan will help it along that path.
What you need to do to survive
China’s huge currency reserves are about to be put to use, and while there will be some real and perhaps severe bumps along the way, the China that comes out on the other side will be a heck of a lot stronger, more independent, and more decoupled than the one we’ve seen up to now.Chinese premier Wen Jiabao called his country’s stimulus the “biggest contribution to the world.” We don’t know whether that’s true, but we do know that China’s ability to reach deep into its huge coffers to finance further growth gives it a significant advantage over the rest of the world’s struggling economies. This is why we continue to believe in the Chinese miracle, and why we think more American investors should be taking advantage of this current temporary downturn to diversify their portfolios into previously expensive Chinese stocks.
