How did we get so poor so fast? Under the radar of stimulus bills and bailouts, economists are toting up the damage and super-investors like Warren Buffet are still trying to figure out what happened.
Now we learn the economy is shrinking twice as fast as originally thought--at an annualized rate of 6.2 percent in the last three months of 2008 rather than the original estimate of 3.2, making it the worst quarter since 1982.
The downward spiral, reflected in a sinking stock market, has troubled banks taking taxpayer money but hesitating to lend and nervous companies laying off workers (an expected 700,000 job losses in February) leading to deeper consumer cuts in spending that will deprive businesses of revenue and more falling behind on house, car and credit card payments, multiplying losses throughout the financial system.
Looking back at how all this happened, even the Sage of Omaha is blaming himself for doing "some dumb things" but aiming most of his scorn at derivatives devised by “a nerdy-sounding priesthood, using esoteric terms such as beta, gamma, sigma and the like...Beware of geeks bearing formulas.”
With typical Warren Buffet bluntness, he concludes, “Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal disease: It’s not just whom you sleep with, but also whom they are sleeping with.”
But Buffet's aw-shucks posture of earthy wisdom is too easy on himself and lesser investors who thrived in a world where manipulating money was the most prized skill of all, at the extremes allowing con artists like Bernard Madoff to bilk so-called savvy investors of billions.
Now, as the government tries to move money into the real world--agricultural subsidies from corporate farms to feeding poor children, students loans from private banks to direct Pell grants--much of the effort is still going into propping up "too big to fail" entities like AIG, the remnants of a financial system that detached itself from reality and shows few signs of finding its way back.
When the stimulus money finally starts flowing into the hands of people who work and make things or help sick people or teach children, that will be a sign that the downward spiral may finally be ending.
Showing posts with label job losses. Show all posts
Showing posts with label job losses. Show all posts
Monday, March 02, 2009
Sunday, December 21, 2008
How Bush Pushed Housing Heroin
If he were still with us, our departed president might be trying to figure out how he made this mess. But as his ghostly presence emanates interviews and speeches about how he stuck to his principles in the face of reality, journalists are piecing together the tale of the Bush housing bubble that has now splattered over the world economy.
"White House Philosophy Stoked Mortgage Bonfire" is the headline in today's New York Times over a 2002 picture of a smiling George W. Bush selling his new plan for minority home ownership against a backdrop of "A Home of Your Own" logos, the domestic equivalent of "Mission Accomplished" in Iraq:
"Eight years after arriving in Washington vowing to spread the dream of homeownership, Mr. Bush is leaving office, as he himself said recently, 'faced with the prospect of a global meltdown' with roots in the housing sector he so ardently championed...
"From his earliest days in office, Mr. Bush paired his belief that Americans do best when they own their own home with his conviction that markets do best when let alone.
"He pushed hard to expand homeownership, especially among minorities, an initiative that dovetailed with his ambition to expand the Republican tent--and with the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards."
In effect, the President became the pusher-in-chief for a housing heroin cartel of banks, mortgage brokers and Wall Street sharks that was hooking millions of Americans with nothing-down, low-start variable rate loans that would get them high on home ownership and send them crashing when inflated prices inevitably started falling.
The Times takeout is full of head-shaking statements by the "experts" who helped him foster and for years ignore the growing bubble, but it ends with an image that sums it all up:
"With 31 days left in office, Mr. Bush says he will leave it to historians to analyze 'what went right and what went wrong,' as he put it in a speech last week to the American Enterprise Institute.
"Mr. Bush said he was too focused on the present to do much looking back.
“'It turns out,' he said, 'this isn’t one of the presidencies where you ride off into the sunset, you know, kind of waving goodbye.'”
But that is exactly what George W. Bush will be doing next month as he leaves behind a nation in the throes of financial withdrawal and heads, smiling and sober, for the two homes he owns free and clear in Texas
"White House Philosophy Stoked Mortgage Bonfire" is the headline in today's New York Times over a 2002 picture of a smiling George W. Bush selling his new plan for minority home ownership against a backdrop of "A Home of Your Own" logos, the domestic equivalent of "Mission Accomplished" in Iraq:
"Eight years after arriving in Washington vowing to spread the dream of homeownership, Mr. Bush is leaving office, as he himself said recently, 'faced with the prospect of a global meltdown' with roots in the housing sector he so ardently championed...
"From his earliest days in office, Mr. Bush paired his belief that Americans do best when they own their own home with his conviction that markets do best when let alone.
"He pushed hard to expand homeownership, especially among minorities, an initiative that dovetailed with his ambition to expand the Republican tent--and with the business interests of some of his biggest donors. But his housing policies and hands-off approach to regulation encouraged lax lending standards."
In effect, the President became the pusher-in-chief for a housing heroin cartel of banks, mortgage brokers and Wall Street sharks that was hooking millions of Americans with nothing-down, low-start variable rate loans that would get them high on home ownership and send them crashing when inflated prices inevitably started falling.
The Times takeout is full of head-shaking statements by the "experts" who helped him foster and for years ignore the growing bubble, but it ends with an image that sums it all up:
"With 31 days left in office, Mr. Bush says he will leave it to historians to analyze 'what went right and what went wrong,' as he put it in a speech last week to the American Enterprise Institute.
"Mr. Bush said he was too focused on the present to do much looking back.
“'It turns out,' he said, 'this isn’t one of the presidencies where you ride off into the sunset, you know, kind of waving goodbye.'”
But that is exactly what George W. Bush will be doing next month as he leaves behind a nation in the throes of financial withdrawal and heads, smiling and sober, for the two homes he owns free and clear in Texas
Wednesday, December 17, 2008
Less
After generations of expecting more from life than those who came before them, Americans are entering uncharted economic territory--the landscape of less.
Every day, new numbers map the terrain. As the Fed cuts interest rates to near-zero to stimulate spending, two out of every three Americans now say they have been hurt by the downturn and that the country has slipped into long-term decline.
A new Washington Post-ABC News poll finds 66 percent worried about maintaining their standard of living, with almost two in 10 families experiencing a job loss in recent months, more than a quarter seeing their pay or hours reduced, and 15 percent falling behind on rent or mortgage payments.
The Consumer Confidence Index has hit an all-time low in its 41 years of existence, reflected in slow holiday sales.
Even with falling prices, a federal agency is predicting the steepest drop in gasoline consumption this year and next since 1979-1980, some of it the result of fewer people driving to work amid record job losses and business bankruptcies.
Less is definitely more on the minds of Americans than ever before as they look ahead to an economic recovery with tightened belts.
Every day, new numbers map the terrain. As the Fed cuts interest rates to near-zero to stimulate spending, two out of every three Americans now say they have been hurt by the downturn and that the country has slipped into long-term decline.
A new Washington Post-ABC News poll finds 66 percent worried about maintaining their standard of living, with almost two in 10 families experiencing a job loss in recent months, more than a quarter seeing their pay or hours reduced, and 15 percent falling behind on rent or mortgage payments.
The Consumer Confidence Index has hit an all-time low in its 41 years of existence, reflected in slow holiday sales.
Even with falling prices, a federal agency is predicting the steepest drop in gasoline consumption this year and next since 1979-1980, some of it the result of fewer people driving to work amid record job losses and business bankruptcies.
Less is definitely more on the minds of Americans than ever before as they look ahead to an economic recovery with tightened belts.
Friday, May 02, 2008
Dumbing Down the Election
Ever since George Bush sold the idea he would be a compassionate conservative, respect for voters' intelligence has been going rapidly downhill. The gas-tax holiday is a new low.
Described by New York Mayor Mike Bloomberg as "about the dumbest thing I’ve heard in an awful long time from an economic point of view” and in the face of bipartisan disapproval in Congress, John McCain and Hillary Clinton are out there trolling for votes on the theory that economically hard-pressed Americans are morons.
Giving consumers 18 cents on $4-a-gallon at the gas pump may sound good, but it would add up to a saving of less than $30 for most families, encourage consumption and cost the government $9 billion and the economy 300,000 jobs.
The tax supports the federal Highway Trust Fund, which finances road projects nationwide and is already facing a $3.4 billion shortfall, according to the American Association of State Highway and Transportation. The federal transportation department says every $1 billion in highway spending creates 34,779 jobs.
But the candidates are banking on voters' inability to grasp the fact that a pre-election handout won't solve their problems but make them worse in the long run. Even the Wall Street Journal says the idea “smacks of poll-driven gimmickry.”
But Hillary Clinton is out there claiming to be "the only candidate who has a plan to give relief to the nation’s drivers" while John McCain is promising them "a little break."
How dense do they think we are?
Described by New York Mayor Mike Bloomberg as "about the dumbest thing I’ve heard in an awful long time from an economic point of view” and in the face of bipartisan disapproval in Congress, John McCain and Hillary Clinton are out there trolling for votes on the theory that economically hard-pressed Americans are morons.
Giving consumers 18 cents on $4-a-gallon at the gas pump may sound good, but it would add up to a saving of less than $30 for most families, encourage consumption and cost the government $9 billion and the economy 300,000 jobs.
The tax supports the federal Highway Trust Fund, which finances road projects nationwide and is already facing a $3.4 billion shortfall, according to the American Association of State Highway and Transportation. The federal transportation department says every $1 billion in highway spending creates 34,779 jobs.
But the candidates are banking on voters' inability to grasp the fact that a pre-election handout won't solve their problems but make them worse in the long run. Even the Wall Street Journal says the idea “smacks of poll-driven gimmickry.”
But Hillary Clinton is out there claiming to be "the only candidate who has a plan to give relief to the nation’s drivers" while John McCain is promising them "a little break."
How dense do they think we are?
Tuesday, April 15, 2008
Recession Rolls On
As Americans mail in tax returns and wait for their economic stimulus checks, they will find fewer places to spend the money when it arrives. Retail chains are closing stores and going out of business in the face of declining sales and mounting debt, the New York Times reports:
"Since last fall, eight mostly midsize chains--as diverse as the furniture store Levitz and the electronics seller Sharper Image--have filed for bankruptcy protection...
"But the troubles are quickly spreading to bigger national companies, like Linens ‘n Things, the bedding and furniture retailer with 500 stores in 47 states...
"Even retailers that can avoid bankruptcy are shutting down stores to preserve cash through what could be a long economic downturn. Over the next year, Foot Locker said it would close 140 stores, Ann Taylor will start to shutter 117 and the jeweler Zales will close 100."
As food prices rise at a record rate and gasoline prices keep climbing, they crowd out other purchases--people are spending less on furniture, clothing and electronics. As jobs disappear in these contracting companies, the recession may worsen and snowball beyond the pathetic efforts of a clueless Congress and President to affect them.
Meanwhile, billions of American dollars keep disappearing into the sinkhole of Iraqi corruption. At least business is booming at banks in Switzerland and the Cayman Islands.
"Since last fall, eight mostly midsize chains--as diverse as the furniture store Levitz and the electronics seller Sharper Image--have filed for bankruptcy protection...
"But the troubles are quickly spreading to bigger national companies, like Linens ‘n Things, the bedding and furniture retailer with 500 stores in 47 states...
"Even retailers that can avoid bankruptcy are shutting down stores to preserve cash through what could be a long economic downturn. Over the next year, Foot Locker said it would close 140 stores, Ann Taylor will start to shutter 117 and the jeweler Zales will close 100."
As food prices rise at a record rate and gasoline prices keep climbing, they crowd out other purchases--people are spending less on furniture, clothing and electronics. As jobs disappear in these contracting companies, the recession may worsen and snowball beyond the pathetic efforts of a clueless Congress and President to affect them.
Meanwhile, billions of American dollars keep disappearing into the sinkhole of Iraqi corruption. At least business is booming at banks in Switzerland and the Cayman Islands.
Friday, April 04, 2008
A Country With Nobody in Charge
The Bush era is closing on a downer. More than four out of five Americans, 81 percent, are unhappy with the way the country is going, the New York Times/CBS News mood poll tells us today, with the economy replacing terrorism and the war in Iraq at the top of their worry list.
They blame government for the housing crisis more than banks or home buyers and favor help for individuals rather than financial institutions.
But that's not what's happening in Washington. After the $29 billion bailout of Bear Stearns, the Senate is cobbling a $15 billion bill that provides tax breaks for home builders but leaves out a provision Bush threatened to veto that would have allowed bankruptcy judges to restructure mortgages to keep owners in their homes. They did include $100 million for counseling people facing foreclosure, presumably to help the newly homeless feel better about their situation.
The March decline of 80,000 jobs is the third in a row, signifying a real recession. For those who still have jobs, wage increases failed to match inflation, in effect giving them a pay cut.
As voters watch their Executive Branch and Congress fumble and stumble on the economy, they may also be depressed by the bottomless quagmire in Iraq that continues to consume lives and billions of dollars. The Petraeus-Ryan tap dancing team will bring very little convincing cheer from a country where the newly trained freedom fighters desert in droves when called into action.
Somebody should check on what the 19 percent of Americans who think the country is going in the right direction have been smoking.
They blame government for the housing crisis more than banks or home buyers and favor help for individuals rather than financial institutions.
But that's not what's happening in Washington. After the $29 billion bailout of Bear Stearns, the Senate is cobbling a $15 billion bill that provides tax breaks for home builders but leaves out a provision Bush threatened to veto that would have allowed bankruptcy judges to restructure mortgages to keep owners in their homes. They did include $100 million for counseling people facing foreclosure, presumably to help the newly homeless feel better about their situation.
The March decline of 80,000 jobs is the third in a row, signifying a real recession. For those who still have jobs, wage increases failed to match inflation, in effect giving them a pay cut.
As voters watch their Executive Branch and Congress fumble and stumble on the economy, they may also be depressed by the bottomless quagmire in Iraq that continues to consume lives and billions of dollars. The Petraeus-Ryan tap dancing team will bring very little convincing cheer from a country where the newly trained freedom fighters desert in droves when called into action.
Somebody should check on what the 19 percent of Americans who think the country is going in the right direction have been smoking.
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