The alarming news this weekend was not the economy or anything to do with the elections, but hidden in the sound bytes were a few very similar words mentioned by both Joe Biden and Colin Powell.
On Meet the Press, Colin Powell said, “There’s going to be a crisis come along on the 21st or 22nd of January that we don’t even know about right now.” And during a fundraiser in Seattle on the same day, Joe Biden said, "...we’re gonna have an international crisis, a generated crisis..." in reference to something happening almost immediately after the elections, but taking place next year.
The there was also word (from the Adirondack Daily Enterprise of all places) that top military leaders from the US and Europe privately met in rural New York state this weekend as well.
So the million dollar question is are these small blurbs related, and if they are, what do they know we don't.
One thing that strikes me is the dates Powell mentioned which are the beginning of the next President's term after these elections take place in November.
Right now most people might be thinking that this could be related to our current economic condition, but I highly doubt it.
In my opinion this has more to do with the question of Iran. Biden even went so far as to mention the Middle East and potentially Russia in reference to the challenge that presents the next President.
I would say that regardless of who is elected to the office in November, the question of Iran will remain the same. If Barack wins, then Bush will set the wheels in motion himself. If McCain wins, then it will happen either way as there are several indications that McCain is even more conservative than Bush.
An economic collapse, in my mind, does not require the joint secretive meetings of top military leaders from Europe and the US.
Four years ago, I as well as many others, suggested that the Republicans would lead us to a larger conflict in the Middle East and war with Iran. For the past year or so, Israel has been actively lobbying for assistance in bombing Iran assuming we are too weak politically to pull it off.
It makes a world of sense for crazy people to pull a last ditch stunt like this, especially with the situation in Iraq looking more manageable now.
Of course for the rest of us sane people these ominous signs leaking out in mainstream media are only adding fuel to the fire of speculation.
One can only hope our leaders are not as stupid as they seem, but if the last eight years are any indication I would wager this worst-case scenario is now on the table.
Tuesday, October 21, 2008
Friday, October 10, 2008
Who is steering this ship anyway?
While stock markets continue to feed off of one another in a seemingly never ending downward spiral that saw the Dow well below the 9,000 mark last week, people all over the world are busy holding their collective breath hoping this week might possibly be better.
And it might. Or better put, it better or we will all be suffering in a world of hurt.
With the stock price of many US companies like GM and Ford sitting at close to zero, it's hard to conceive that they could fall any further, but again, anything seems possible especially in this environment.
On Saturday, there were revelations that GM would possibly merge with Chrysler, but on Sunday there was the news that GM had already been in talks to merge with Ford beforehand. Then in an unusual move, both talks were suspended until the economy improves making it easier for a merger to take place.
However, even the head of the IMF has said not to expect any sort of recovery until late next year. I would say that even that estimate is optimistic.
GM, having already lost 70 billion dollars since 2004, is also looking for a bailout package, but the industry may only get around 50 billion or so if they're lucky. So it seems possible that the big three will quickly become a single entity, or face total bankruptcy if action isn't taken soon. Should a merger take place between GM, Ford and/or Chrysler expect massive layoffs and several US plant closures as they search for elusive profits and scale back similar product lines.
Individual states like Wisconsin will offer "too good to pass up" incentive packages in order to keep these plants form closing, but market conditions and basic viability will dictate their choices in this chaotic market.
Of course any talk of merger during this period of economic instability will result in massive layoffs, even more than usual as companies are looking to simply survive the crisis not prosper.
Currently the US has an estimated six percent unemployment rate, but we can expect this number to jump considerably in the months ahead. Already there are reports of massive budget shortfalls in several states like California, Illinois, Florida, etc.
For example, the Illinois comptroller recently reported a shortfall of over a billion dollars and stated they haven't been able to pay many of their bills. As these bills continue to pile up, several non-profit organizations and other contractors are on the brink of collapse. Many are attempting to hold out as long as possible, but most will not remain open by Christmas unless the state can find the money it desperately needs.
Like the auto industry, states are also facing a perfect storm of sorts.
With the credit markets all but dried up, there is no money to borrow to pay for what it owes. As more and more people find themselves out of work the tax base continues to shrink leaving less revenue to collect. So increasingly states will have to mimic corporate America and reduce their budgets further, or face the looming issue of bankruptcy.
As the downward spiral continues with the weakest falling first, we can expect property taxes (at least) to rise, services to be eliminated and projects to be shelved as the crisis begins to effect everyone.
Adding to the problem are millions of baby boomers who are seeing their retirement savings dry up almost completely leaving the majority of them with little option but to continue working for several more years. Many won't be able to keep their jobs, some will, but either way they will directly compete with the rest of us for the few remaining jobs left.
Luckily many of them already have homes that are bought and paid for, but this may be their only real investment left and it's certainly not a good time to sell.
Re-energizing the credit markets would go a long way toward helping the problem, but by most estimates the bubble is only half over. There are still massive problems lurking in the books of several companies in the US and around the world, so even if the government intervenes nothing will change until virtually all the bad debit is accounted for.
Some of these obligations will come due over the next two weeks and already there is talk of more companies, insurance providers and banks on the verge of collapse.
Both GM and Ford are already highly leveraged by well over a trillion dollars through credit default swaps as are issuers Hartford, MetLife, and Prudential on the insurance side.
As these issues continue to surface in the days, weeks and months ahead it will only fuel an increased sense of panic, especially on Wall Street.
Unfortunately while Main Street holds it collective breath, world politicians and the economies they represent are increasingly playing the blame game while on the surface appear to be cohesively working together.
It's becoming obvious that during the remainder of this lame-duck presidency, there will be little done to calm investors, sooth the nerves of companies and states facing bankruptcy, or placate other increasingly angry nations as we drive into uncharted territory.
As the election draws near one thing is for sure, the problems of Iraq, Iran, Afghanistan, energy, global warming and the economy started or ignored by this administration will need to be corrected by someone else.
And we've been told time and time again that our economy is simply too big to collapse, but like the largest cruise liner of it's time, all it takes is a lack of observation (or regulation) and a half-hidden iceberg to sink something of truly Titanic proportions. Leaving us all to ask, who is steering this ship anyway?
And it might. Or better put, it better or we will all be suffering in a world of hurt.
With the stock price of many US companies like GM and Ford sitting at close to zero, it's hard to conceive that they could fall any further, but again, anything seems possible especially in this environment.
On Saturday, there were revelations that GM would possibly merge with Chrysler, but on Sunday there was the news that GM had already been in talks to merge with Ford beforehand. Then in an unusual move, both talks were suspended until the economy improves making it easier for a merger to take place.
However, even the head of the IMF has said not to expect any sort of recovery until late next year. I would say that even that estimate is optimistic.
GM, having already lost 70 billion dollars since 2004, is also looking for a bailout package, but the industry may only get around 50 billion or so if they're lucky. So it seems possible that the big three will quickly become a single entity, or face total bankruptcy if action isn't taken soon. Should a merger take place between GM, Ford and/or Chrysler expect massive layoffs and several US plant closures as they search for elusive profits and scale back similar product lines.
Individual states like Wisconsin will offer "too good to pass up" incentive packages in order to keep these plants form closing, but market conditions and basic viability will dictate their choices in this chaotic market.
Of course any talk of merger during this period of economic instability will result in massive layoffs, even more than usual as companies are looking to simply survive the crisis not prosper.
Currently the US has an estimated six percent unemployment rate, but we can expect this number to jump considerably in the months ahead. Already there are reports of massive budget shortfalls in several states like California, Illinois, Florida, etc.
For example, the Illinois comptroller recently reported a shortfall of over a billion dollars and stated they haven't been able to pay many of their bills. As these bills continue to pile up, several non-profit organizations and other contractors are on the brink of collapse. Many are attempting to hold out as long as possible, but most will not remain open by Christmas unless the state can find the money it desperately needs.
Like the auto industry, states are also facing a perfect storm of sorts.
With the credit markets all but dried up, there is no money to borrow to pay for what it owes. As more and more people find themselves out of work the tax base continues to shrink leaving less revenue to collect. So increasingly states will have to mimic corporate America and reduce their budgets further, or face the looming issue of bankruptcy.
As the downward spiral continues with the weakest falling first, we can expect property taxes (at least) to rise, services to be eliminated and projects to be shelved as the crisis begins to effect everyone.
Adding to the problem are millions of baby boomers who are seeing their retirement savings dry up almost completely leaving the majority of them with little option but to continue working for several more years. Many won't be able to keep their jobs, some will, but either way they will directly compete with the rest of us for the few remaining jobs left.
Luckily many of them already have homes that are bought and paid for, but this may be their only real investment left and it's certainly not a good time to sell.
Re-energizing the credit markets would go a long way toward helping the problem, but by most estimates the bubble is only half over. There are still massive problems lurking in the books of several companies in the US and around the world, so even if the government intervenes nothing will change until virtually all the bad debit is accounted for.
Some of these obligations will come due over the next two weeks and already there is talk of more companies, insurance providers and banks on the verge of collapse.
Both GM and Ford are already highly leveraged by well over a trillion dollars through credit default swaps as are issuers Hartford, MetLife, and Prudential on the insurance side.
As these issues continue to surface in the days, weeks and months ahead it will only fuel an increased sense of panic, especially on Wall Street.
Unfortunately while Main Street holds it collective breath, world politicians and the economies they represent are increasingly playing the blame game while on the surface appear to be cohesively working together.
It's becoming obvious that during the remainder of this lame-duck presidency, there will be little done to calm investors, sooth the nerves of companies and states facing bankruptcy, or placate other increasingly angry nations as we drive into uncharted territory.
As the election draws near one thing is for sure, the problems of Iraq, Iran, Afghanistan, energy, global warming and the economy started or ignored by this administration will need to be corrected by someone else.
And we've been told time and time again that our economy is simply too big to collapse, but like the largest cruise liner of it's time, all it takes is a lack of observation (or regulation) and a half-hidden iceberg to sink something of truly Titanic proportions. Leaving us all to ask, who is steering this ship anyway?
Sunday, October 05, 2008
October Blues
For a hundred years or more, the American economy has dominated world markets, spurred unparalleled technological innovation and amassed vast amounts of capital well beyond any other nation in history.
Now, on "Black Monday" where, despite injecting hundreds of billions of dollars into credit markets by governments around the world, the final days of American economic hegemony are being increasingly discussed, not in the dark, quiet corners of conspiracy blogs, but in the national media and in legislative circles.
I'm sure this must be a surreal experience for some to see 1 trillion dollars of taxpayer money being thrown into the world economy only to see it being virtually ignored by the huge sucking sound coming from another almost 700 point drop in the Dow.
In just two days of trading we have been witness to a drop over 1,000 points. And on Tuesday, October 7th the total loss widened to over 1,500 in a continued world-wide decline in which the solvency of Brazil, Iceland and Pakistan have now come into question.
Tell me how we can stop the markets from crashing when our main solution is a huge bloated plan that is only designed to go into effect in a few weeks time at the earliest. At this rate, there might not be too much left for the bailout to save.
Unfortunately, from the time the bill was signed until today, the only other instrument the Fed has discussed is playing around with interest rates.
Obviously, we need more than getting housing prices to stabilize, and "confidence" to solve this epic crisis.
The bubble created by deregulating our housing market may have started this whole mess, but I wouldn't be too sure that our own governments 10 trillion dollar debt, among other things, won't add to these problems.
So it isn't too hard for us to see why lenders aren't feeling very generous lately, especially when average personal debit is over 10,000, not including our bill for financing this latest mega-bailout.
But is the answer just simple confidence? I highly doubt it. Consumers are also being socked with higher property taxes and fees at home, while states like California teeters on the brink of bankruptcy themselves. Fortunately, the price of gas is down for now, but that has also resulted in the devaluation of the Russian stock market by over 30 percent.
What we are really seeing is the spread of the housing debt bubble as it's moved from consumers defaulting, to the banks merging and crashing, and finally, to the solvency of governments themselves.
As prices fluctuate widely, companies, and even countries, will be seen to teeter on top of a precipice. So it's much wider than a domestic issue in which the average price of homes in the US can act as the silver bullet to world-wide stability.
The debit is already in circulation, and the bad bets made on the bad debit are also in circulation, making their rounds, too.
Sadly, our economy is about to go bust and our dominance over the world around us will be drastically reduced. But the issue that faces us now is not being properly addressed, and the people who are about to spend our money to help revive the economy are the very ones who perpetuated this whole mess in the first place.
In the short term, there are no real signs of relief either. Most companies expect a weak holiday shopping season to end out the year, and the only thing we can really look forward to is next spring where hopefully someone will buy a damn house.
Certainly, if the principle credit lines are not restored soon, people may have jobs but they might not be getting paid at all. And as the market continues to tank along with our home value and almost every other measure of our net worth, this just doesn't give us too much to be confident about.
Now, on "Black Monday" where, despite injecting hundreds of billions of dollars into credit markets by governments around the world, the final days of American economic hegemony are being increasingly discussed, not in the dark, quiet corners of conspiracy blogs, but in the national media and in legislative circles.
I'm sure this must be a surreal experience for some to see 1 trillion dollars of taxpayer money being thrown into the world economy only to see it being virtually ignored by the huge sucking sound coming from another almost 700 point drop in the Dow.
In just two days of trading we have been witness to a drop over 1,000 points. And on Tuesday, October 7th the total loss widened to over 1,500 in a continued world-wide decline in which the solvency of Brazil, Iceland and Pakistan have now come into question.
Tell me how we can stop the markets from crashing when our main solution is a huge bloated plan that is only designed to go into effect in a few weeks time at the earliest. At this rate, there might not be too much left for the bailout to save.
Unfortunately, from the time the bill was signed until today, the only other instrument the Fed has discussed is playing around with interest rates.
Obviously, we need more than getting housing prices to stabilize, and "confidence" to solve this epic crisis.
The bubble created by deregulating our housing market may have started this whole mess, but I wouldn't be too sure that our own governments 10 trillion dollar debt, among other things, won't add to these problems.
So it isn't too hard for us to see why lenders aren't feeling very generous lately, especially when average personal debit is over 10,000, not including our bill for financing this latest mega-bailout.
But is the answer just simple confidence? I highly doubt it. Consumers are also being socked with higher property taxes and fees at home, while states like California teeters on the brink of bankruptcy themselves. Fortunately, the price of gas is down for now, but that has also resulted in the devaluation of the Russian stock market by over 30 percent.
What we are really seeing is the spread of the housing debt bubble as it's moved from consumers defaulting, to the banks merging and crashing, and finally, to the solvency of governments themselves.
As prices fluctuate widely, companies, and even countries, will be seen to teeter on top of a precipice. So it's much wider than a domestic issue in which the average price of homes in the US can act as the silver bullet to world-wide stability.
The debit is already in circulation, and the bad bets made on the bad debit are also in circulation, making their rounds, too.
Sadly, our economy is about to go bust and our dominance over the world around us will be drastically reduced. But the issue that faces us now is not being properly addressed, and the people who are about to spend our money to help revive the economy are the very ones who perpetuated this whole mess in the first place.
In the short term, there are no real signs of relief either. Most companies expect a weak holiday shopping season to end out the year, and the only thing we can really look forward to is next spring where hopefully someone will buy a damn house.
Certainly, if the principle credit lines are not restored soon, people may have jobs but they might not be getting paid at all. And as the market continues to tank along with our home value and almost every other measure of our net worth, this just doesn't give us too much to be confident about.
Wednesday, October 01, 2008
Winners and Losers
In almost any game there is always a winner and loser, except for those rare times the game your playing allows for a draw of some sort. Even a coin has been known to land on it's side from time to time, but in the end there always seems to be the struggle of man to want to turn everything he does into some sort of a game.
Take a look at the movement of combining modern warfare with the video game industry and it's all to obvious that we've come a long way towards turning even the most hated of things into something possibly even fun.
But what's so fun about life now that we have experienced the single largest drop in the stock market's history? Well, I am sure that even on this day, there were winners and losers.
You wouldn't know it from watching the TV though as the pundits told us we had just lost over a trillion dollars. You also probably don't know that during these historic economic times, some are treating this like it's just like a game. Unfortunately, there are millions of us who have no idea there is even a game being played, so it's all on us.
It's called the game of economic redistribution where your money goes into the hands of the wealthy elite. Some have called it "trickle down", but in effect its more like "evaporate up".
The longstanding argument is that if you give all the perks to the top one or two percent of us, then they will in turn provide more for us in terms of job creation, etc. But in all these years the American taxpayer has seen jobs leave our country, and other ones being given away here at home. Of course many of these breaks still don't keep our industries from collapsing either, so the majority of us have yet to see any benefit from this unique economic model.
Now we are being asked to bail them out? And when we do, it's our money being lost in the markets? Seems like even if we win, we will lose this one.
It's a little ironic that Bush Co has given us all appeasement money after the first election and earlier this year, but in his last days will ask for it all back plus plenty of interest.
Who made up these rules anyway?
Take a look at the movement of combining modern warfare with the video game industry and it's all to obvious that we've come a long way towards turning even the most hated of things into something possibly even fun.
But what's so fun about life now that we have experienced the single largest drop in the stock market's history? Well, I am sure that even on this day, there were winners and losers.
You wouldn't know it from watching the TV though as the pundits told us we had just lost over a trillion dollars. You also probably don't know that during these historic economic times, some are treating this like it's just like a game. Unfortunately, there are millions of us who have no idea there is even a game being played, so it's all on us.
It's called the game of economic redistribution where your money goes into the hands of the wealthy elite. Some have called it "trickle down", but in effect its more like "evaporate up".
The longstanding argument is that if you give all the perks to the top one or two percent of us, then they will in turn provide more for us in terms of job creation, etc. But in all these years the American taxpayer has seen jobs leave our country, and other ones being given away here at home. Of course many of these breaks still don't keep our industries from collapsing either, so the majority of us have yet to see any benefit from this unique economic model.
Now we are being asked to bail them out? And when we do, it's our money being lost in the markets? Seems like even if we win, we will lose this one.
It's a little ironic that Bush Co has given us all appeasement money after the first election and earlier this year, but in his last days will ask for it all back plus plenty of interest.
Who made up these rules anyway?
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