Category — The US Economy

The Obama administration keeps refusing to do what is really necessary to end the economic tradgedy that has the name U.S. stamped all over it. Instead of biting the bullet and letting economic forces do their job; instead of letting weak companies and weak banks fail, the administration keeps trying to reinflated the burst credit bubble in the hopes the economy will recover before the economy collapses entirely. The administration is living on hope.

By continuing to prop up the banks, the administration is placing into effect a plan by which the banks are buying time, rather than restructuring their bad loans. If restructuring those loans cause a bank to fail, so be it. Let’s face it the banks are not lending, and companies with too much debt are not hiring. And Mr. average is afraid to spend or invest, and is hoping he won’t be next in the unemployment line.

The stimulus package is a huge failure and in particular it has failed to create jobs. And you cannot for one minute believe what the BLS (Bureau of Lying Statistics) is telling us about jobs. This group of profound liars create jobs that don’t exist and plunk them into the employment report.

The Democrats, Obama, and his gang of criminal appointees cannot blame George Bush for this. It belongs entirely to them now. The administrations failure to act sanely will bring down the Obama house of cards, but we will all pay through the nose for it.

Nothing new about GM, not really. Not even the name “Government Motors.” The Govt., will own 70% of GM. Ah! Such hopes people have. Let’s play follow the leader, or is it leaders, who have now saddled the U.S. taxpayer wth ownership of a company that is doomed to fail, even under Bankruptcy reorganization.

The auto industry is running at about 40% of capacity. GM is running at about 34% of capacity, so even if half of the remaining factories shut down, it’s going to be a long hard struggle to reach as high as breakeven. GM will still be carrying a huge debt load, and how in the world is it going to compete with the non-union car makers like Honda and Toyota? Can you imagine the kinds of executive and economic decisions that will be made with the government as the major shareholder?

I just read an article in Business week where the author thinks we won’t have inflation coz the FED won’t raise interest rates. It seems to me that he is wrong on two counts: 1. The FED can’t control long bond rates which are rising. 2. The FED is trashing the dollar by printing so many. That mean all commodities that are priced in dollars will rise, giving us inflation.

Another point he seems to have missed is that in some areas inflation is already there, and it is the stated policy of Bernanke to inflate.

Capital Spending has fallen off a cliff. Higher prices for good used by businesses–computers and machinery are causing some companies to hold back. Capital expenditures have fallen in technology, telecom, materials, industrials, health care, financials and non-cyclical consumer goods. The only companies that haven’t cut global spending are energy and utilities.

I can only hope the Business Week writer is right and I am wrong. But I think we will inflation, probably in spades.

Due to layoffs, creditworthy and conservative borrowers simply can’t afford their mortgage payments. Moody’s macro website, Economy.com, predicts 60% of all mortgage defaults this year will be caused primarily by unemployment - up from 29% last year.

Economists are referring to this next round of foreclosures as the “third wave,” different from the first round, when speculators dumped property because of plunging prices, and the second wave, when subprime borrowers’ introductory interest rates reset. The “third wave” consists of your neighboor who lost his job and after sending out about 2,000 resume’s, can’t even get a single job interview.

What a horrible feeling that must be. Where do you turn? Who needs or wants you? Yet, there are over 3 million jobs going without someone to fill them. There is an actual shortage of qualified workers in the fields of accounting, and healthcare. The factory jobs have gone overseas.

Two houses down from me sits a lovely 2-story home. It has been empty for over a year. The single mom who owned it, lost her job and left in the middle of the night. Since then there has been water damage. Water damage in Central Texas soon turns into a major mold problem. The house may have to be gutted before it can be sold. Sad!

If you want to know when the economy might recover, pay attention to part-time employment figures. Since the fall of 2007, the number of employees forced to work part-time due to the economic slowdown has doubled to over nine million people - that’s two million more than at any time in 54 years of collecting the data. You can see the spike in the chart.

You can also see a close correlation between the start of a recession and a sharp shift to using part-time workers. And, conversely, that when an economy recovers, the use of part-time workers falls off quickly. From what you see on the chart, it doesn’t look like we are even close to an economic recovery.

Does the current stock rally have long legs? Not if you give meaning to corporate insiders.

Insiders at America’s publicly traded companies are selling stock at the fastest pace since October 2007 - the month the stock market peaked.

Why should we pay attention to what the insiders are doing? It’s because they know way more about their companies than we do. If insiders are selling, then why the heck should anyone buy? The reason is that we have to dig to find the truth, and there is nothing regulatory that compels companies to tell the truth.

The only thing we outsiders have to go buy is common sense along with being alert to legally reported insider trading, which is required by the regulatory authorities.

Timothy Geithner, who was head of the New York Federal Reserve Bank now claims he is not a banker. Then just what the heck is he?

Piecing together interviews with Treasury Secretary Tim Geithner we can find that he denies ever being a banker… a lawyer… or a regulator. Wouldn’t it be nice to know the expertise of the man in charge of saving our economy? After all, he is the man responsible for saving the economy!

The government did it again! They have pushed more money into AIG by purchasing preferred shares of AIG stock. It doesn’t matter, they are just printing the money and adding to the debt. The real and true U.S. debt is now over $70 trillion. We will never be able to pay that back, but it will be burden on future generations for as long as the U.S. exists. The administration is impoverishing the nation.

I getting sick of it, are you? American International Group Inc, which has received more than $150 billion in taxpayer support since last September, has closed a deal to access nearly $30 billion in additional federal funds. So here we go again, bailing out AIG with our, our kids, and grand kids money.

In a filing with the U.S. Securities and Exchange Commission on Monday, AIG said it would issue and sell to the U.S. Treasury 300,000 preferred shares, including warrants to purchase common stock, in exchange for up to $29.835 billion.

The original amount agreed in early March was $30 billion, but officials subtracted $165 million in retention bonuses paid to employees of the AIG Financial Products unit last month.

Big deal! Treasury is right there on your side, saving us another $165 million. Don’t you just love those guys?

The Whitehouse is now occupied by an eco-idiot. An eco-idiot is twice cursed. An eco-idiot knows nothing about ecology nor anything about the economy.

As part of his effort to “create manufacturing jobs for folks who are making cars,” President Obama announced yesterday that he will be accelerating plans to use $285 million from the stimulus bill to buy 17,600 new cars for government workers.

The news was welcomed on a number of fronts:

First, the impact this will have on the domestic automobile industry and the hard working families who depend on it cannot be overstated as it can take, at current sales levels, more than half a day to sell 17,600 cars.

But that’s not all! Just think how much these 17,600 cars will help with global warming. Many of them will be hybrids. Hybrids are very helpful. When the batteries wear out, they make excellent toxic material to place in our landfills.

Just think! You will have helped keep automakers in business for an extra day. After all, it’s your money–or is it your grandkids money? They may be the ones paying for this.

Where will the money come from? Just another digital entry on a FED computer. It’s not real. The dollar will have been devalued by another $285 billion, but that’s peanuts compared with the $70 trillion or so that can never be repaid–even by your great, great, great, great grandchildren.