Time and again we are told that we have to pick ourselves up by our bootstraps, by ourselves, for ourselves, yet that is the exact same system that has been in place for decades and is in fact not working. The ideas put forth by the Republican Party are based on feeling no loyalty to anyone or anything; do only for yourself in everything all the time and let everyone else fall by the wayside. Within this “pull yourself up by your own bootstraps” belief system, the person who fails is considered lazy – therefore it is okay if he starves to death or dies from disease if he cannot afford healthcare.
That is a grim picture of the world – a dog eat dog viewpoint – one that is full of suffering and strife for millions of our citizens.
Middle class spending is the engine of our economy. But the middle class is losing ground with the typical family's take-home pay now at 1996 levels. Businesses are tied to the middle class, whether through direct sales and services or indirectly through government contracts paid for with our tax money. If the middle class is squeezed and refuses to spend what little resources they have left, then business profits will fall. It becomes a non-ending downward cycle.
Instead of trying to reach your business goals using people as stepping stones within a mountain of suffering humanity, what would it be like to realize how connected to one another we truly are – and how connected businesses are to the general welfare of the public. It is time for small businesses to hire people in a concerted effort to bring down the unemployment numbers so the middle class will feel secure enough to start spending again. No matter which party is in power, government can only do so much with tax cuts, small stimulus packages, etc.
It is businesses, both big and small, that will pull this economy out of the doldrums by their willingness to stop sitting on trillions of dollars of cash and, instead, investing it in American workers.
We are not islands within our own nation; nor is our nation an island within the world. We are all tied together and integral to each other’s survival. Only when we act in a manner where we acknowledge, strengthen, and participate in that connection will we fix the "middle class squeeze."
Showing posts with label recession. Show all posts
Showing posts with label recession. Show all posts
Wednesday, October 12, 2011
Sunday, February 8, 2009
I hope you all have lifeboats
The economic downturn has already gone way beyond the subprime mortgages and risky derivatives. The crisis began with housing, but the implosion of the Bush era laissez-faire policies of deregulation, where bankers and the financiers did as they pleased with little regard of the consequences, has finally caused a negative reaction throughout all economic sectors, not just in the U.S. but around the world. Jobs are being lost by the millions worldwide. The Bush regime caused this economic calamity not only through bank deregulation, but also through giving excessive tax cuts to the wealthy while, at the same time, spending on an expensive budget-busting, deficit-increasing, $12 billion dollars-a-month, unnecessary war.
The dominoes are falling. Here is what is happening now:
· Consumers, their wealth decimated and their optimism shattered by collapsing home prices and a sliding stock market, have cut back their spending and sharply increased their saving which is a huge blow to the economy right now. Savings are good in the long run, but a sudden turning off of the shopping spigot worsened the economic downturn. This has caused massive job loss worldwide in retail and manufacturing.
· Credit is still tight while some banks continue to fail. Not only are those who worked in the financial sector losing their jobs, but people are losing their savings, including retirement savings. Others cannot get loans to purchase houses, cars, appliances, etc, regardless of credit rating.
· Real estate developers, watching rents fall and financing costs soar, have stopped building, with many completely shutting the doors of their businesses, causing major job losses in the construction and real estate sectors.
· Manufacturing and retailers are canceling plans to expand capacity, since they aren’t selling enough to use the capacity they have. There is no demand for their products.
· Exports (goods sold to other countries), which were one of the U.S. economy’s few areas of strength over the last couple of years, are now plunging.
By decreasing interest rates, the Federal Reserve has always been our main line of defense against recessions, but they have already cut the prime lending rate (the rate for banks lending to each other) to near zero and can do nothing more to stop or even slow down the economic free fall.
This country is moving closer to an extremely deep, catastrophic recession, if not a depression, as Congressional Republicans stubbornly spout their worn out clichés about wasteful government spending and the wonders of tax cuts — as if the economic failure of the last eight years never happened. Republicans seem to have no sense of reality. Because their ideology gets in the way, they lack the ability to understand that the U.S. is falling into an abyss, and once we do, it will be very hard to get out again. These old disciples of Reaganomics are clueless that allowing the market to “work through” this problem will likely send us into a depression. In fact, Gordon Brown, the British Prime Minister, said this past Tuesday that the world economy was already heading for a 1930s-style depression.
Republicans seem to be confused about the nature of bipartisanship. Since President Obama spent time inviting Republicans to the Whitehouse and visiting them on the Hill in the spirit of bipartisanship, Republicans act as if they have a free pass to rewrite the entire legislative package and its intent. But that is not what bipartisanship is. Bipartisanship is the willingness to compromise and incorporate ideas that Republicans and Democrats alike agree are good for the country. Yet, even though Democrats, at the insistence of the President, removed some spending items from the stimulus bill and put in tax cuts to please Republicans, Congressional Republicans formed a locked-step barricade to a Recovery and Relief bill that is our best chance to try to stop an impending catastrophe. They proudly point to sticking together to vote against the Democrats’ economic stimulus plan, and to how the Senate Republicans, except for about three moderates, are doing the same.
There is no true willingness on the part of Republicans to compromise, even though they say they are willing. There seems to be only a desire to beat the Democrats, weaken the President, and have things their way. This is not bipartisanship. They should listen to Republican Governor Charlie Crist who said, “My guy didn't win but President Obama is my man now and he's my president. I want him to succeed because that means my country succeeds. That's the only way a true American should feel.”
After the stimulus bill left the House last week, a small bipartisan group of moderates from the Senate worked around the clock over the past few days to hammer out a better compromise that they felt both sides of the aisle could approve. They added more tax cuts and cut spending further, including cutting out aid to the states, to where the bill is now about 45% tax cuts and 55% spending. As Susan Collins, R-ME, and Ben Nelson, D-NE, introduced the new compromise to the Senate, Republicans objected before even having read the bill. Why? Because they want tax cuts only – tax cuts for everyone, including the wealthy and big business. They continue to insist that tax cuts trickle down and create jobs regardless of the fact that the Bush cuts did no such thing over the last eight years.
What is most amazing is that after not saying one word against the budget-busting $12 billion per month spending on the Iraq War, often insisting that heavy military spending helps the economy, Republicans are now screaming about how much the $830 billion stimulus will add to the deficit. These hypocrites will spend us into a chasm when it comes to military spending, but insist that government stimulus spending will put the deficit into unmanageable territory. In fact, Former Treasury Secretary Paul O'Neill was told "deficits don't matter" when he warned of a looming fiscal crisis. O'Neill, fired in a shakeup of Bush's economic team in December 2002, raised objections to a new round of tax cuts and said the president balked at his more aggressive plan to combat corporate crime after a string of accounting scandals because of opposition from "the corporate crowd," a key Bush constituency. O'Neill said he tried to warn Vice President Dick Cheney that growing budget deficits topping $500 billion that year posed a threat to the economy, but Cheney told him, "You know, Paul, Reagan proved deficits don't matter," he said, according to excerpts. Cheney continued: "We won the midterms (congressional elections). This is our due." A month later, Cheney told the Treasury secretary he was fired.
That being said, now is not the time for our government to pull back from deficit spending. According to most economists, government spending is what is needed because for every dollar directly spent by government, we will get $1.50 in stimulus — this is not the case with tax cuts. Once things stabilize, Congress can work on reducing the deficit. But for now, they absolutely must spend on goods to increase “demand” and fill the void left by consumers who have cut back.
While many Republicans appear to be blind, deaf, and dumb as to the causes of this terrible economic mess, the victims within the middle and working classes are seeing their livelihoods ruined, jobs taken away, pensions eroded, and homes foreclosed on. They are struggling with gas and food price inflation, saddled with ever-increasing debt, and forced to work under more and more stress due to fear of layoffs. The Iraq war notwithstanding, this is the reason why the GOP no longer has a single House member from any of the six New England states and no Senators from the Pacific Coast states.
Not all Republicans are against the Recovery (stimulus) bill. Republican governors and mayors around the nation have called on the Republicans in Congress to get out of the way. The Republicans Governors around this country need this stimulus money to get their folk back to work. They are backing Barack Obama, as Governor Charlie Crist of Florida stated on Hardball with Chris Matthews this past Tuesday:
“Here in Florida, we just came through a special session where we had to cut over a billion dollars more as it relates to making sure that we stay in balance. This program (the stimulus bill) will help us with education, with health care, Medicaid specifically, infrastructure. These are the kinds of things that produce jobs. It could mean $13 billion to the Sunshine State. It comes at a time when we need it. People need jobs. It‘s about jobs, jobs, jobs. This will help us produce that, and I think it‘s important to move forward. …And I think that‘s what this (bill) can offer to people. I don‘t think it‘s perfect, but I think we need to do something in order to help our country.”
Van Jones, author of The Green Economy, spoke of what will happen if the stimulus is not big enough: “You can't jump halfway across a chasm — you just end up falling into the abyss.” Jones explained further: “… when I look at it (the stimulus bill) in its entirety, I fear that we may soon look back and say that we missed a huge chance to go bigger and bolder. After all, there were three flaws with the old economy that has crashed: it favored consumption over production; debt over smart savings; and environmental damage over environmental renewal."
Many economists, including Nobel Prize winning Paul Krugman, say that in the absence of bold and timely Congressional action, we’re headed for a deep, prolonged slump with unemployment in the double-digits. We are talking about white collar workers, not just blue collar, in soup lines.
So far, my husband and I are doing okay because for at least this year our state is managing to keep the school system afloat, continuing to pay teacher salaries. But the next school year may be a different story altogether with layoffs and IOUs instead of paychecks (as they did during the Great Depression). We have been putting off buying big ticket items, spending only on necessities, and saving every penny we can — just in case.
I hope you all have lifeboats.
The dominoes are falling. Here is what is happening now:
· Consumers, their wealth decimated and their optimism shattered by collapsing home prices and a sliding stock market, have cut back their spending and sharply increased their saving which is a huge blow to the economy right now. Savings are good in the long run, but a sudden turning off of the shopping spigot worsened the economic downturn. This has caused massive job loss worldwide in retail and manufacturing.
· Credit is still tight while some banks continue to fail. Not only are those who worked in the financial sector losing their jobs, but people are losing their savings, including retirement savings. Others cannot get loans to purchase houses, cars, appliances, etc, regardless of credit rating.
· Real estate developers, watching rents fall and financing costs soar, have stopped building, with many completely shutting the doors of their businesses, causing major job losses in the construction and real estate sectors.
· Manufacturing and retailers are canceling plans to expand capacity, since they aren’t selling enough to use the capacity they have. There is no demand for their products.
· Exports (goods sold to other countries), which were one of the U.S. economy’s few areas of strength over the last couple of years, are now plunging.
By decreasing interest rates, the Federal Reserve has always been our main line of defense against recessions, but they have already cut the prime lending rate (the rate for banks lending to each other) to near zero and can do nothing more to stop or even slow down the economic free fall.
This country is moving closer to an extremely deep, catastrophic recession, if not a depression, as Congressional Republicans stubbornly spout their worn out clichés about wasteful government spending and the wonders of tax cuts — as if the economic failure of the last eight years never happened. Republicans seem to have no sense of reality. Because their ideology gets in the way, they lack the ability to understand that the U.S. is falling into an abyss, and once we do, it will be very hard to get out again. These old disciples of Reaganomics are clueless that allowing the market to “work through” this problem will likely send us into a depression. In fact, Gordon Brown, the British Prime Minister, said this past Tuesday that the world economy was already heading for a 1930s-style depression.
Republicans seem to be confused about the nature of bipartisanship. Since President Obama spent time inviting Republicans to the Whitehouse and visiting them on the Hill in the spirit of bipartisanship, Republicans act as if they have a free pass to rewrite the entire legislative package and its intent. But that is not what bipartisanship is. Bipartisanship is the willingness to compromise and incorporate ideas that Republicans and Democrats alike agree are good for the country. Yet, even though Democrats, at the insistence of the President, removed some spending items from the stimulus bill and put in tax cuts to please Republicans, Congressional Republicans formed a locked-step barricade to a Recovery and Relief bill that is our best chance to try to stop an impending catastrophe. They proudly point to sticking together to vote against the Democrats’ economic stimulus plan, and to how the Senate Republicans, except for about three moderates, are doing the same.
There is no true willingness on the part of Republicans to compromise, even though they say they are willing. There seems to be only a desire to beat the Democrats, weaken the President, and have things their way. This is not bipartisanship. They should listen to Republican Governor Charlie Crist who said, “My guy didn't win but President Obama is my man now and he's my president. I want him to succeed because that means my country succeeds. That's the only way a true American should feel.”
After the stimulus bill left the House last week, a small bipartisan group of moderates from the Senate worked around the clock over the past few days to hammer out a better compromise that they felt both sides of the aisle could approve. They added more tax cuts and cut spending further, including cutting out aid to the states, to where the bill is now about 45% tax cuts and 55% spending. As Susan Collins, R-ME, and Ben Nelson, D-NE, introduced the new compromise to the Senate, Republicans objected before even having read the bill. Why? Because they want tax cuts only – tax cuts for everyone, including the wealthy and big business. They continue to insist that tax cuts trickle down and create jobs regardless of the fact that the Bush cuts did no such thing over the last eight years.
What is most amazing is that after not saying one word against the budget-busting $12 billion per month spending on the Iraq War, often insisting that heavy military spending helps the economy, Republicans are now screaming about how much the $830 billion stimulus will add to the deficit. These hypocrites will spend us into a chasm when it comes to military spending, but insist that government stimulus spending will put the deficit into unmanageable territory. In fact, Former Treasury Secretary Paul O'Neill was told "deficits don't matter" when he warned of a looming fiscal crisis. O'Neill, fired in a shakeup of Bush's economic team in December 2002, raised objections to a new round of tax cuts and said the president balked at his more aggressive plan to combat corporate crime after a string of accounting scandals because of opposition from "the corporate crowd," a key Bush constituency. O'Neill said he tried to warn Vice President Dick Cheney that growing budget deficits topping $500 billion that year posed a threat to the economy, but Cheney told him, "You know, Paul, Reagan proved deficits don't matter," he said, according to excerpts. Cheney continued: "We won the midterms (congressional elections). This is our due." A month later, Cheney told the Treasury secretary he was fired.
That being said, now is not the time for our government to pull back from deficit spending. According to most economists, government spending is what is needed because for every dollar directly spent by government, we will get $1.50 in stimulus — this is not the case with tax cuts. Once things stabilize, Congress can work on reducing the deficit. But for now, they absolutely must spend on goods to increase “demand” and fill the void left by consumers who have cut back.
While many Republicans appear to be blind, deaf, and dumb as to the causes of this terrible economic mess, the victims within the middle and working classes are seeing their livelihoods ruined, jobs taken away, pensions eroded, and homes foreclosed on. They are struggling with gas and food price inflation, saddled with ever-increasing debt, and forced to work under more and more stress due to fear of layoffs. The Iraq war notwithstanding, this is the reason why the GOP no longer has a single House member from any of the six New England states and no Senators from the Pacific Coast states.
Not all Republicans are against the Recovery (stimulus) bill. Republican governors and mayors around the nation have called on the Republicans in Congress to get out of the way. The Republicans Governors around this country need this stimulus money to get their folk back to work. They are backing Barack Obama, as Governor Charlie Crist of Florida stated on Hardball with Chris Matthews this past Tuesday:
“Here in Florida, we just came through a special session where we had to cut over a billion dollars more as it relates to making sure that we stay in balance. This program (the stimulus bill) will help us with education, with health care, Medicaid specifically, infrastructure. These are the kinds of things that produce jobs. It could mean $13 billion to the Sunshine State. It comes at a time when we need it. People need jobs. It‘s about jobs, jobs, jobs. This will help us produce that, and I think it‘s important to move forward. …And I think that‘s what this (bill) can offer to people. I don‘t think it‘s perfect, but I think we need to do something in order to help our country.”
Van Jones, author of The Green Economy, spoke of what will happen if the stimulus is not big enough: “You can't jump halfway across a chasm — you just end up falling into the abyss.” Jones explained further: “… when I look at it (the stimulus bill) in its entirety, I fear that we may soon look back and say that we missed a huge chance to go bigger and bolder. After all, there were three flaws with the old economy that has crashed: it favored consumption over production; debt over smart savings; and environmental damage over environmental renewal."
Many economists, including Nobel Prize winning Paul Krugman, say that in the absence of bold and timely Congressional action, we’re headed for a deep, prolonged slump with unemployment in the double-digits. We are talking about white collar workers, not just blue collar, in soup lines.
So far, my husband and I are doing okay because for at least this year our state is managing to keep the school system afloat, continuing to pay teacher salaries. But the next school year may be a different story altogether with layoffs and IOUs instead of paychecks (as they did during the Great Depression). We have been putting off buying big ticket items, spending only on necessities, and saving every penny we can — just in case.
I hope you all have lifeboats.
Tuesday, January 27, 2009
Why the economy is getting worse
As if to underscore the daunting financial mess confronting President Obama, on January 20, a new plunge in banking stocks dragged the market to just 400 points above its November 20 close. The index of 24 bank stocks tumbled 20% causing the Dow to fall 332.13 points, or 4%, to 7,949.09, its worst performance ever on the day of an inauguration. So far, November 20 marked the bottom of the bear market that began more than a year ago.
Although the sell-off was triggered by anxiety about the depth of the banking crisis and its effect on the economy, I have read and heard some far-right-wing dunderheads try to blame the most recent stock market decline on President Obama’s Inaugural speech in which he warned that the economic recovery would be difficult and that the nation must choose "hope over fear, unity of purpose over conflict and discord" to overcome the worst economic crisis since the Great Depression.
It’s the banking crisis, stupid: Disillusioned investors fled financial companies as fresh evidence mounted that the industry's problems are larger than previously understood, larger than the response so far mustered by the government and perhaps larger than the resources remaining in its rescue program. This latest phase of bank stock sell-off began after New Year's Day and intensified when Citigroup and Bank of America reported huge fourth-quarter losses and the government invested an additional $20 billion in Bank of America.
Britain has just officially announced that it is in a deep recession. The possibility of bank nationalizations, in which governments take direct control of financial institutions, is happening in Britain and elsewhere, as some of the world's biggest banks report surprisingly dire results. The industry's plight, intertwined with the ongoing recession, is the greatest challenge presently confronting not only our President but many leaders of the world.
The news that's coming out is staggering:
Shares of State Street Corp., a Boston-based financial giant that had been viewed as a relatively safe harbor amid the industry pandemic, plunged 59% after the institutional money manager disclosed sizable fixed-income trading losses. Bank of America tumbled 29% after analyst Paul Miller at Friedman, Billings, Ramsey & Co. predicted the bank would have to raise at least $80 billion in new capital. Wells Fargo slid 24% after Miller said the company might slash its dividend. PNC Financial Services, a major regional banking company based in Pittsburgh, nose-dived 41%. Citigroup fell 20%, and JP Morgan Chase lost 21%. Shares in the sector have been crushed by fears that spiraling loan losses could force the industry to seek billions of dollars in additional capital. That could lead in effect to a nationalization of the industry because, with private investors afraid to step in, the government has been the only supplier of funds. The government now controls these banks in a “de facto” nationalization.
Britain on Monday undertook a second round in its bank bailout and said it would boost its stake in Royal Bank of Scotland to more than two-thirds. The company's American shares, which didn't trade Monday because of Martin Luther King Day, plunged 70% on Tuesday. Ireland has moved closer to nationalizing its third-largest bank, which has suffered from scandal as well as losses, but the government said it wouldn't take control of its two largest financial institutions.
Don’t blame the little guy
Those who blame the little guy must realize that although some borrowers knowingly bought more house than they could afford with the idea they would flip it in two years, unscrupulous lenders steered the majority of mortgage holders into these loans. These unsophisticated, fiscally uneducated borrowers did not understand the small print, but instead, listened to and trusted the lenders. Evidence shows that many who would have qualified for fixed-interest loans were steered into sub-prime mortgages such as adjustable rate mortgages where the interest increases every few years with resulting astronomical house payments or ARMs where the entire mortgage is due in full in five years (called a balloon). These dishonest lenders refused to re-negotiate the loans and foreclosed on hundreds of thousands of homes nationwide because they thought they could resell them at a profit. The market became flooded with homes, the housing bubble burst, home prices plummeted, and down the economic house of cards went.
The global banking industry, which has written off more than $1 trillion of mostly mortgage-related holdings, now is being crushed by losses in areas such as credit cards and commercial real estate that are tied to the faltering economy. For the past decade, lenders offered credit cards, at low teaser rates, to everyone, even to those who had little to no income. Fiscally unsophisticated borrowers ran up huge balances because the “monthly payment” was “affordable”. Then using the borrowers lowered credit score, sometimes even their health records, as an excuse, banks pushed the interest rates as high as 35%, locking these people into a cycle of increasing debt.
Not to be outdone, the check cashing, title loan, and quick loan industry preyed on seniors who faced unbudgeted bills they could not pay (extra large utility bill, medical bill, etc) and whose Social Security checks barely cover the basics. These businesses make short term, one month loans to these seniors for a large fee. Once the elderly person cannot pay off the loan at the end of the month, the balance owed starts to climb exponentially. The state of South Carolina has one of the worst records in this area with thousands of seniors losing everything they have due to the state not regulating these predatory loan sharks.
So, although some far-right-wingers are already blaming the latest downturn on President Obama, the root of our economic dilemma is a too long unregulated banking, investment, and mortgage industry. This deregulation was a fundamental part of the trickle-down, laissez-faire economic policies pushed by the Republicans over the last 35 years. Then, fourteen months ago on Bush’s watch, while he was telling us that the fundamentals of the economy were strong, the house of deregulated cards began to fall, taking many other countries with it because these countries invested heavily in American stocks and bonds. Already, Iceland has become insolvent as its banks crashed and the government dissolved.
I hope I am wrong on this prediction: Obama can gather together as many highly intelligent, experienced experts as he wants and put their suggestions into policy, but the train left the station long ago. Already having gathered much speed as it feeds on itself in a downward spiral, I do not think it can be stopped. This is going to get much, much worse. I think we are looking at several years of deep world-wide recession, and if not actually sinking into a depression, it will at least border on one.
Although the sell-off was triggered by anxiety about the depth of the banking crisis and its effect on the economy, I have read and heard some far-right-wing dunderheads try to blame the most recent stock market decline on President Obama’s Inaugural speech in which he warned that the economic recovery would be difficult and that the nation must choose "hope over fear, unity of purpose over conflict and discord" to overcome the worst economic crisis since the Great Depression.
It’s the banking crisis, stupid: Disillusioned investors fled financial companies as fresh evidence mounted that the industry's problems are larger than previously understood, larger than the response so far mustered by the government and perhaps larger than the resources remaining in its rescue program. This latest phase of bank stock sell-off began after New Year's Day and intensified when Citigroup and Bank of America reported huge fourth-quarter losses and the government invested an additional $20 billion in Bank of America.
Britain has just officially announced that it is in a deep recession. The possibility of bank nationalizations, in which governments take direct control of financial institutions, is happening in Britain and elsewhere, as some of the world's biggest banks report surprisingly dire results. The industry's plight, intertwined with the ongoing recession, is the greatest challenge presently confronting not only our President but many leaders of the world.
The news that's coming out is staggering:
Shares of State Street Corp., a Boston-based financial giant that had been viewed as a relatively safe harbor amid the industry pandemic, plunged 59% after the institutional money manager disclosed sizable fixed-income trading losses. Bank of America tumbled 29% after analyst Paul Miller at Friedman, Billings, Ramsey & Co. predicted the bank would have to raise at least $80 billion in new capital. Wells Fargo slid 24% after Miller said the company might slash its dividend. PNC Financial Services, a major regional banking company based in Pittsburgh, nose-dived 41%. Citigroup fell 20%, and JP Morgan Chase lost 21%. Shares in the sector have been crushed by fears that spiraling loan losses could force the industry to seek billions of dollars in additional capital. That could lead in effect to a nationalization of the industry because, with private investors afraid to step in, the government has been the only supplier of funds. The government now controls these banks in a “de facto” nationalization.
Britain on Monday undertook a second round in its bank bailout and said it would boost its stake in Royal Bank of Scotland to more than two-thirds. The company's American shares, which didn't trade Monday because of Martin Luther King Day, plunged 70% on Tuesday. Ireland has moved closer to nationalizing its third-largest bank, which has suffered from scandal as well as losses, but the government said it wouldn't take control of its two largest financial institutions.
Don’t blame the little guy
Those who blame the little guy must realize that although some borrowers knowingly bought more house than they could afford with the idea they would flip it in two years, unscrupulous lenders steered the majority of mortgage holders into these loans. These unsophisticated, fiscally uneducated borrowers did not understand the small print, but instead, listened to and trusted the lenders. Evidence shows that many who would have qualified for fixed-interest loans were steered into sub-prime mortgages such as adjustable rate mortgages where the interest increases every few years with resulting astronomical house payments or ARMs where the entire mortgage is due in full in five years (called a balloon). These dishonest lenders refused to re-negotiate the loans and foreclosed on hundreds of thousands of homes nationwide because they thought they could resell them at a profit. The market became flooded with homes, the housing bubble burst, home prices plummeted, and down the economic house of cards went.
The global banking industry, which has written off more than $1 trillion of mostly mortgage-related holdings, now is being crushed by losses in areas such as credit cards and commercial real estate that are tied to the faltering economy. For the past decade, lenders offered credit cards, at low teaser rates, to everyone, even to those who had little to no income. Fiscally unsophisticated borrowers ran up huge balances because the “monthly payment” was “affordable”. Then using the borrowers lowered credit score, sometimes even their health records, as an excuse, banks pushed the interest rates as high as 35%, locking these people into a cycle of increasing debt.
Not to be outdone, the check cashing, title loan, and quick loan industry preyed on seniors who faced unbudgeted bills they could not pay (extra large utility bill, medical bill, etc) and whose Social Security checks barely cover the basics. These businesses make short term, one month loans to these seniors for a large fee. Once the elderly person cannot pay off the loan at the end of the month, the balance owed starts to climb exponentially. The state of South Carolina has one of the worst records in this area with thousands of seniors losing everything they have due to the state not regulating these predatory loan sharks.
So, although some far-right-wingers are already blaming the latest downturn on President Obama, the root of our economic dilemma is a too long unregulated banking, investment, and mortgage industry. This deregulation was a fundamental part of the trickle-down, laissez-faire economic policies pushed by the Republicans over the last 35 years. Then, fourteen months ago on Bush’s watch, while he was telling us that the fundamentals of the economy were strong, the house of deregulated cards began to fall, taking many other countries with it because these countries invested heavily in American stocks and bonds. Already, Iceland has become insolvent as its banks crashed and the government dissolved.
I hope I am wrong on this prediction: Obama can gather together as many highly intelligent, experienced experts as he wants and put their suggestions into policy, but the train left the station long ago. Already having gathered much speed as it feeds on itself in a downward spiral, I do not think it can be stopped. This is going to get much, much worse. I think we are looking at several years of deep world-wide recession, and if not actually sinking into a depression, it will at least border on one.
Thursday, January 22, 2009
I couldn’t walk in his shoes
America, after eight years under the weight of a horribly inept and corrupt Bush presidency, celebrated for three days in a flood of optimism and hope. It is as if the nation is undergoing a rebirth, believing the American Dream of the Founding Fathers, ignored by the Bush-Cheney administration, is once again reality.
“We reject as false the choice between our safety and our ideals ... Those ideals still light the world, and we will not give them up for expedience's sake. And so to all other peoples and governments who are watching today, from the grandest capitals to the small village where my father was born: know that America is a friend of each nation and every man, woman, and child who seeks a future of peace and dignity, and we are ready to lead once more.”
~President Barack Obama, Inaugural Address
Whatever President Obama achieves or does not achieve in the next four years, he has already changed the tone in America. People of all races are smiling more toward each other, are being more pleasant toward one another. There is joyfulness floating through the air, not just in this country, but all over the world.
America, and the world, living without an imaginative political leadership for too long, desperately wants Obama to succeed. We want him to lead the world out of the worst financial crisis and recession since the 1930s, to bring the troops home from Iraq, and to commit more troops to Afghanistan in order to defeat Al-Qaeda and the Taliban insurgency. Above all, we want President Obama to restore the United States in the eyes of the world as a beacon of democracy and liberty and justice for all.
So, I will say what many of you may be thinking: I wouldn’t want his job – couldn’t walk in his shoes – and I am fervently praying for God to guide him in his endeavor to make a world turned upside down and inside out, upright again. I pray for his success.
Here are the enormous problems he is facing:
Recession
The Bush administration finally admitted in December that the U.S. recession began a year earlier (in December 2007) and will probably extend well beyond 2009. Obama takes over a country in the midst of an ever deepening recession, with the Treasury Department and Fed still trying to repair an historic financial meltdown. For some people, 2008 was a year of financial ruin due to banks that failed, stock markets that crashed worldwide, property prices that fell, and jobs that disappeared with the resulting increase of the uninsured.
These economic woes have forced consumers to cut back. Consumers aren't spending, banks aren't lending, and factories are closing. The huge job losses are sure to continue. Many forecasters expect unemployment to hit 8.5% by midyear and over 10% by the end of the year. These numbers do not include the unemployed who once they no longer receive unemployment compensation are purged from the rolls. They also do not include the millions of underemployed workers. Long after the recession and credit crunch fade, consumers may remain more conservative in saving more and spending less – which will actually make it harder for the government to get the economy out of the hole since our economy is driven by consumerism.
The recession is too deep and has run too long for there to be a quick fix. The Obama team is planning sweeping steps to curb foreclosures and save the financial sector. If carried out quickly, such moves could give the economy a boost by late 2009. Then again, it might not, due to banks and investment firms being in much worse shape than originally stated. The recession is feeding on itself, spiraling downward, possibly too entrenched now for anyone to stop it. And this stimulus package of up to $850 billion will cause the 2009 budget deficit to balloon to $1.2 trillion. So, once the economy is stabilized, we will all have to tighten our belts and be willing to pay higher taxes to pay off the deficit now instead of passing it on to our children and grandchildren.
Health Care
In 2007, 45.7 million people in the U.S. (15.3% of the population) were without health insurance for at least part of the year. In 2000, our health care system was ranked by the World Health Organization as the first in responsiveness, but highest in cost, 37th in overall performance, and 72nd by overall level of health of its citizens among 191 nations. The U.S. is the only wealthy, industrialized nation that does not have universal health care for all citizens. Seniors must spend a much higher percentage of their income for healthcare than in any other industrialized nation.
President Obama believes that people have a fundamental right to have health care. Hopefully he can get the insurance companies and the Republicans onboard and put together a national healthcare plan that will satisfy the majority while covering everyone and bring cost down – a tall order indeed.
Global Issues
Terrorists: Obama becomes commander in chief of U.S. forces as America wages war in Iraq and Afghanistan, continues its pursuit of Al-Quaida and other terror groups, and tries to convince Iran to end its pursuit of a nuclear weapon.
“As for our common defense, we reject as false the choice between our safety and our ideals. Our Founding Fathers, faced with perils we can scarcely imagine, drafted a charter to assure the rule of law and the rights of man, a charter expanded by the blood of generations. Those ideals still light the world, and we will not give them up for expedience’s sake.”
~President Barack Obama, Inaugural Address
Russia: Under Vladimir Putin, Russia remains eager to use its energy supplies as a weapon — as its New Year's Eve natural gas cutoff to Ukraine shows. Putin has also talked of creating an OPEC-like natural gas cartel. Meanwhile, he's using Russia's energy wealth to sharply boost defense spending, including building 70 new-generation nuclear missiles. Putin's attempt to restore Russia as a major player in world affairs will test Obama's skills.
China: Not only will Obama have to deal with a China that holds title to some $1.6 trillion in U.S. bonds, but a China that is set on becoming a great global power. As China builds a navy that someday may challenge U.S. supremacy on the high seas, Obama might find his diplomatic talents sorely tried.
Losing demand for its products as the global growth engine sputters, China’s industrial production has dropped, with thousands of toy factories shut down last year. Officially, China expects 8% GDP growth in 2009, but some economists say China may only grow 5% this year, with rising unemployment that could lead to social unrest.
China is now the largest holder of U.S. Treasuries, helping to finance America's soaring federal deficit. If China cut its Treasury holdings to pay for its own domestic programs, U.S. borrowing rates could surge and the dollar could tumble, sending the global financial system spiraling downward once again.
Other parts of the world: We also have had recent reminders that the world has many long-term festering problems that desperately need visionary changes to American foreign policy. The new administration will have to juggle its ties to two nuclear-armed rivals — Pakistan and India — and seek to end the ongoing genocide in the horn of Africa and Zimbabwe. The centuries old Israeli-Palestinian conflict can explode at any time, as recent events have shown, exacerbating tensions throughout the Middle East. The rogue nation of Iran is building up its nuclear capabilities – endangering the entire world.
“We will not apologize for our way of life, nor will we waver in its defense, and for those who seek to advance their aims by inducing terror and slaughtering innocents, we say to you now that our spirit is stronger, and cannot be broken. You cannot outlast us, and we will defeat you... To those leaders around the globe who seek to sow conflict, or blame their society's ills on the west – know that your people will judge you on what you can build, not what you destroy. To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history, but that we will extend a hand if you are willing to unclench your fist.”
~President Barack Obama, Inaugural Address
Energy
President Obama has pledged to develop alternative energy and fuel-efficient vehicles, creating millions of "green jobs." He also favors a cap-and-trade policy for greenhouse gases, which could have a major impact on industrial activity. Oil and natural gas production are falling and, by all accounts, will fall more sharply in the coming year. With energy futures well off their highs, and the economy in a deep recession, Obama’s plans may not be possible, at least for the near future.
Trade
During the Democratic primary, Obama promised to renegotiate the North American Free Trade Agreement. Even if he doesn't actively push for trade barriers, many in Congress will. There has been strong support for tariffs on Chinese goods because of the undervalued yuan.
Even if Congress largely refrains from protectionist moves, the same may not be true of other nations. Already, Russia is hiking tariffs on imported cars and poultry. Argentina and Brazil are pushing to raise tariffs on textiles, wine and leather goods, while Indonesia is increasing import restrictions on over 500 products. The global downturn will likely cause other governments to adopt similar measures which will actually slow economies even more.
A patient public
According to the latest New York Times/CBS News Poll, though, Americans are confident he can turn the economy around but are prepared to give him years to deal with the aggregation of problems he faces. While hopes for the new president are extraordinarily high, the poll found expectations for what Obama will actually be able to accomplish have been tempered by the enormity of the nation’s problems. Even though the campaign generated wonderful enthusiasm and high hopes for change, most Americans now say they expect progress to be slow in improving the economy, reforming the health care system, and ending the war in Iraq. Most citizens realize that it will take years to undo the mess that the previous administration created.
President Obama is facing an extraordinarily difficult four years. Although his stature with the American public appears to be high, this optimism brings great expectations. The danger is that the burden of great expectations could be the very undoing of the Obama presidency. The public has placed him on a very high pedestal from which he could take a nasty tumble.
I would not want to, could not ever, walk in his shoes.
“We reject as false the choice between our safety and our ideals ... Those ideals still light the world, and we will not give them up for expedience's sake. And so to all other peoples and governments who are watching today, from the grandest capitals to the small village where my father was born: know that America is a friend of each nation and every man, woman, and child who seeks a future of peace and dignity, and we are ready to lead once more.”
~President Barack Obama, Inaugural Address
Whatever President Obama achieves or does not achieve in the next four years, he has already changed the tone in America. People of all races are smiling more toward each other, are being more pleasant toward one another. There is joyfulness floating through the air, not just in this country, but all over the world.
America, and the world, living without an imaginative political leadership for too long, desperately wants Obama to succeed. We want him to lead the world out of the worst financial crisis and recession since the 1930s, to bring the troops home from Iraq, and to commit more troops to Afghanistan in order to defeat Al-Qaeda and the Taliban insurgency. Above all, we want President Obama to restore the United States in the eyes of the world as a beacon of democracy and liberty and justice for all.
So, I will say what many of you may be thinking: I wouldn’t want his job – couldn’t walk in his shoes – and I am fervently praying for God to guide him in his endeavor to make a world turned upside down and inside out, upright again. I pray for his success.
Here are the enormous problems he is facing:
Recession
The Bush administration finally admitted in December that the U.S. recession began a year earlier (in December 2007) and will probably extend well beyond 2009. Obama takes over a country in the midst of an ever deepening recession, with the Treasury Department and Fed still trying to repair an historic financial meltdown. For some people, 2008 was a year of financial ruin due to banks that failed, stock markets that crashed worldwide, property prices that fell, and jobs that disappeared with the resulting increase of the uninsured.
These economic woes have forced consumers to cut back. Consumers aren't spending, banks aren't lending, and factories are closing. The huge job losses are sure to continue. Many forecasters expect unemployment to hit 8.5% by midyear and over 10% by the end of the year. These numbers do not include the unemployed who once they no longer receive unemployment compensation are purged from the rolls. They also do not include the millions of underemployed workers. Long after the recession and credit crunch fade, consumers may remain more conservative in saving more and spending less – which will actually make it harder for the government to get the economy out of the hole since our economy is driven by consumerism.
The recession is too deep and has run too long for there to be a quick fix. The Obama team is planning sweeping steps to curb foreclosures and save the financial sector. If carried out quickly, such moves could give the economy a boost by late 2009. Then again, it might not, due to banks and investment firms being in much worse shape than originally stated. The recession is feeding on itself, spiraling downward, possibly too entrenched now for anyone to stop it. And this stimulus package of up to $850 billion will cause the 2009 budget deficit to balloon to $1.2 trillion. So, once the economy is stabilized, we will all have to tighten our belts and be willing to pay higher taxes to pay off the deficit now instead of passing it on to our children and grandchildren.
Health Care
In 2007, 45.7 million people in the U.S. (15.3% of the population) were without health insurance for at least part of the year. In 2000, our health care system was ranked by the World Health Organization as the first in responsiveness, but highest in cost, 37th in overall performance, and 72nd by overall level of health of its citizens among 191 nations. The U.S. is the only wealthy, industrialized nation that does not have universal health care for all citizens. Seniors must spend a much higher percentage of their income for healthcare than in any other industrialized nation.
President Obama believes that people have a fundamental right to have health care. Hopefully he can get the insurance companies and the Republicans onboard and put together a national healthcare plan that will satisfy the majority while covering everyone and bring cost down – a tall order indeed.
Global Issues
Terrorists: Obama becomes commander in chief of U.S. forces as America wages war in Iraq and Afghanistan, continues its pursuit of Al-Quaida and other terror groups, and tries to convince Iran to end its pursuit of a nuclear weapon.
“As for our common defense, we reject as false the choice between our safety and our ideals. Our Founding Fathers, faced with perils we can scarcely imagine, drafted a charter to assure the rule of law and the rights of man, a charter expanded by the blood of generations. Those ideals still light the world, and we will not give them up for expedience’s sake.”
~President Barack Obama, Inaugural Address
Russia: Under Vladimir Putin, Russia remains eager to use its energy supplies as a weapon — as its New Year's Eve natural gas cutoff to Ukraine shows. Putin has also talked of creating an OPEC-like natural gas cartel. Meanwhile, he's using Russia's energy wealth to sharply boost defense spending, including building 70 new-generation nuclear missiles. Putin's attempt to restore Russia as a major player in world affairs will test Obama's skills.
China: Not only will Obama have to deal with a China that holds title to some $1.6 trillion in U.S. bonds, but a China that is set on becoming a great global power. As China builds a navy that someday may challenge U.S. supremacy on the high seas, Obama might find his diplomatic talents sorely tried.
Losing demand for its products as the global growth engine sputters, China’s industrial production has dropped, with thousands of toy factories shut down last year. Officially, China expects 8% GDP growth in 2009, but some economists say China may only grow 5% this year, with rising unemployment that could lead to social unrest.
China is now the largest holder of U.S. Treasuries, helping to finance America's soaring federal deficit. If China cut its Treasury holdings to pay for its own domestic programs, U.S. borrowing rates could surge and the dollar could tumble, sending the global financial system spiraling downward once again.
Other parts of the world: We also have had recent reminders that the world has many long-term festering problems that desperately need visionary changes to American foreign policy. The new administration will have to juggle its ties to two nuclear-armed rivals — Pakistan and India — and seek to end the ongoing genocide in the horn of Africa and Zimbabwe. The centuries old Israeli-Palestinian conflict can explode at any time, as recent events have shown, exacerbating tensions throughout the Middle East. The rogue nation of Iran is building up its nuclear capabilities – endangering the entire world.
“We will not apologize for our way of life, nor will we waver in its defense, and for those who seek to advance their aims by inducing terror and slaughtering innocents, we say to you now that our spirit is stronger, and cannot be broken. You cannot outlast us, and we will defeat you... To those leaders around the globe who seek to sow conflict, or blame their society's ills on the west – know that your people will judge you on what you can build, not what you destroy. To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history, but that we will extend a hand if you are willing to unclench your fist.”
~President Barack Obama, Inaugural Address
Energy
President Obama has pledged to develop alternative energy and fuel-efficient vehicles, creating millions of "green jobs." He also favors a cap-and-trade policy for greenhouse gases, which could have a major impact on industrial activity. Oil and natural gas production are falling and, by all accounts, will fall more sharply in the coming year. With energy futures well off their highs, and the economy in a deep recession, Obama’s plans may not be possible, at least for the near future.
Trade
During the Democratic primary, Obama promised to renegotiate the North American Free Trade Agreement. Even if he doesn't actively push for trade barriers, many in Congress will. There has been strong support for tariffs on Chinese goods because of the undervalued yuan.
Even if Congress largely refrains from protectionist moves, the same may not be true of other nations. Already, Russia is hiking tariffs on imported cars and poultry. Argentina and Brazil are pushing to raise tariffs on textiles, wine and leather goods, while Indonesia is increasing import restrictions on over 500 products. The global downturn will likely cause other governments to adopt similar measures which will actually slow economies even more.
A patient public
According to the latest New York Times/CBS News Poll, though, Americans are confident he can turn the economy around but are prepared to give him years to deal with the aggregation of problems he faces. While hopes for the new president are extraordinarily high, the poll found expectations for what Obama will actually be able to accomplish have been tempered by the enormity of the nation’s problems. Even though the campaign generated wonderful enthusiasm and high hopes for change, most Americans now say they expect progress to be slow in improving the economy, reforming the health care system, and ending the war in Iraq. Most citizens realize that it will take years to undo the mess that the previous administration created.
President Obama is facing an extraordinarily difficult four years. Although his stature with the American public appears to be high, this optimism brings great expectations. The danger is that the burden of great expectations could be the very undoing of the Obama presidency. The public has placed him on a very high pedestal from which he could take a nasty tumble.
I would not want to, could not ever, walk in his shoes.
Saturday, November 15, 2008
The ebbing tide
Economic inequality is growing in the United States, jeopardizing the American Dream of social mobility just as the world enters a recession, said a 30-nation report by the Organization for Economic Cooperation and Development released on October 21, 2008. The United States has the third highest inequality and poverty rates in the OECD, after Mexico and Turkey, and the gap has increased rapidly since 2000, the report said. Coincidentally, that is the year that the Bush administration began to govern.
George Bush and the ultra-conservative wing of the Republican party have a unyielding belief in trickle-down economics and therefore did all they could to remove taxes and regulations for the wealthy corporations, including the financial sector. At the same time, they did very little for all other citizens, except for a couple of "stimulus" packages which gave the average family around $600 to $1200 – a tiny drop in the bucket compared to the billions raked in by the CEOs of oil, financial, and pharmaceutical companies. Indeed, the “rising tide” did not lift all boats as promised by Presidents Reagan and George W. Bush. Remember: although the wealthy love trickle-down economics, President George H.W. Bush called it “voodoo economics.”
And just how well did “voodoo economics” work? Rich households in America have become much richer, leaving both middle and poorer income groups behind. This has happened in many countries, but nowhere has this trend been so stark as in the United States. The average income of the richest 10% is $93,000 in purchasing power, the highest level in the OECD. However, the poorest 10% of U.S. citizens have a purchasing power of $5,800 per year – about 20% lower than the average for OECD countries.
The main reason for widening inequality in America is that the distribution of earnings between rich and poor in the United States has widened by 20% since the mid-1980s, more than in most other OECD countries. This is partly because the level of spending on social benefits, such as unemployment benefits, and family benefits, like Medicare, is very low – equivalent to just 9% of household incomes, while the OECD average is 22% of household incomes.
This widening inequality causes a low level of social mobility in the United States. Children of poor parents to be less likely to become rich, much less middle class, than children of rich parents. Wealth is distributed much more unequally than income: the top 1% control some about 33% of total money in the U.S. The top 10% hold 71% of the wealth. This is just the opposite in countries such as Denmark, Sweden and Australia where social mobility is high due to a low inequality level.
In nearly all countries studied, the gap between rich and everyone else has widened over the last 20 years, even as trade and technological advances have spurred rapid growth in their economies. In a 20-year study of its member countries, the OECD found inequality had increased in 27 of its 30 members as top earners' incomes soared while others' stagnated. Rising inequality threatens social mobility: Children will have great difficulty doing better than their parents; the poor will no longer improve their lot through hard work – in fact, hard work will barely keep their heads above water, if at all.
Why is the gap between rich and poor growing? Wages have been improving for those people who were already well paid, while employment rates have been dropping among less educated people. Also, there are more single-adult and single-family households than ever before.
Who is most affected? Statisticians and economists assess poverty in relation to average incomes. Poverty among young adults and families with children has increased. On average, one child out of every eight living in an OECD country in 2005 was living in poverty. In the U.S., the trend is exactly the opposite: Child poverty – that is, children in a household with less than half the median income – has fallen since 1985, from 25% to 20% but poverty rates among the elderly increased from 20 to 23%.
What can be done? In some cases, government policies of taxation and redistribution of income through programs such as Medicare and Social Security have helped to counteract widening inequalities, but this cannot be their only response. Governments must also improve their policies in other areas. Active employment policies are needed to help unemployed people find work. Access to paid employment is key to reducing the risk of poverty, but getting a job does not necessarily mean you are in the clear. The OECD found that over half of all households in poverty have income from work. Therefore, education policies should aim to equip people with the skills they need to find better paying jobs in today’s labor market.
What will happen if the next decade is not one of world growth but of world recession? The widening gap between wealthy households and all other income earners in countries such as the U.S., Canada, and Germany, has potentially ominous consequences if the global financial crisis sparks a long recession. With job losses and home foreclosures skyrocketing, many of these countries now face a deep recession that could last as long as five to ten years.
Oxford University economist Anthony Atkinson said it well:
"If a rising tide didn't lift all boats, how will they be affected by an ebbing tide?"
George Bush and the ultra-conservative wing of the Republican party have a unyielding belief in trickle-down economics and therefore did all they could to remove taxes and regulations for the wealthy corporations, including the financial sector. At the same time, they did very little for all other citizens, except for a couple of "stimulus" packages which gave the average family around $600 to $1200 – a tiny drop in the bucket compared to the billions raked in by the CEOs of oil, financial, and pharmaceutical companies. Indeed, the “rising tide” did not lift all boats as promised by Presidents Reagan and George W. Bush. Remember: although the wealthy love trickle-down economics, President George H.W. Bush called it “voodoo economics.”
And just how well did “voodoo economics” work? Rich households in America have become much richer, leaving both middle and poorer income groups behind. This has happened in many countries, but nowhere has this trend been so stark as in the United States. The average income of the richest 10% is $93,000 in purchasing power, the highest level in the OECD. However, the poorest 10% of U.S. citizens have a purchasing power of $5,800 per year – about 20% lower than the average for OECD countries.
The main reason for widening inequality in America is that the distribution of earnings between rich and poor in the United States has widened by 20% since the mid-1980s, more than in most other OECD countries. This is partly because the level of spending on social benefits, such as unemployment benefits, and family benefits, like Medicare, is very low – equivalent to just 9% of household incomes, while the OECD average is 22% of household incomes.
This widening inequality causes a low level of social mobility in the United States. Children of poor parents to be less likely to become rich, much less middle class, than children of rich parents. Wealth is distributed much more unequally than income: the top 1% control some about 33% of total money in the U.S. The top 10% hold 71% of the wealth. This is just the opposite in countries such as Denmark, Sweden and Australia where social mobility is high due to a low inequality level.
In nearly all countries studied, the gap between rich and everyone else has widened over the last 20 years, even as trade and technological advances have spurred rapid growth in their economies. In a 20-year study of its member countries, the OECD found inequality had increased in 27 of its 30 members as top earners' incomes soared while others' stagnated. Rising inequality threatens social mobility: Children will have great difficulty doing better than their parents; the poor will no longer improve their lot through hard work – in fact, hard work will barely keep their heads above water, if at all.
Why is the gap between rich and poor growing? Wages have been improving for those people who were already well paid, while employment rates have been dropping among less educated people. Also, there are more single-adult and single-family households than ever before.
Who is most affected? Statisticians and economists assess poverty in relation to average incomes. Poverty among young adults and families with children has increased. On average, one child out of every eight living in an OECD country in 2005 was living in poverty. In the U.S., the trend is exactly the opposite: Child poverty – that is, children in a household with less than half the median income – has fallen since 1985, from 25% to 20% but poverty rates among the elderly increased from 20 to 23%.
What can be done? In some cases, government policies of taxation and redistribution of income through programs such as Medicare and Social Security have helped to counteract widening inequalities, but this cannot be their only response. Governments must also improve their policies in other areas. Active employment policies are needed to help unemployed people find work. Access to paid employment is key to reducing the risk of poverty, but getting a job does not necessarily mean you are in the clear. The OECD found that over half of all households in poverty have income from work. Therefore, education policies should aim to equip people with the skills they need to find better paying jobs in today’s labor market.
What will happen if the next decade is not one of world growth but of world recession? The widening gap between wealthy households and all other income earners in countries such as the U.S., Canada, and Germany, has potentially ominous consequences if the global financial crisis sparks a long recession. With job losses and home foreclosures skyrocketing, many of these countries now face a deep recession that could last as long as five to ten years.
Oxford University economist Anthony Atkinson said it well:
"If a rising tide didn't lift all boats, how will they be affected by an ebbing tide?"
Monday, October 6, 2008
Worldwide Crash!
Today a worldwide major sell off of stocks and bonds was triggered due to fears of slower global economic growth – despite a $700 billion US bank bailout being passed by legislators and efforts by several European countries, including Germany and Denmark, to rescue their banks.
“In our country, the ‘Fundamentals are Sound’ group at Treasury, and the ‘Whip Inflation Now’ group at the Federal Reserve couldn't switch fast enough from ‘fighting inflation’ to ‘fighting recession,’ ” says Jim Cramer, economic guru, host of CNBC’s Mad Money and co-founder of TheStreet.com.
Fed Chairman Ben Bernanke studied the Depression, or so they say, and supposedly knew more about how to stop it than anyone. It appears he knew less than anyone as he and his minions presided over the deflationary destruction of worldwide finance.
• Starting in Asia, the sell off spread to Europe and Wall Street, where the Dow Jones fell by more than 6.7% to end below 10,000 points for the first time since 2004.
• The London stock market lost 7.85% – its biggest percentage fall since 1987. Germany's market lost 7.39% while France's Cac-40 index dropped 9.04% - its biggest one-day fall ever.
• Share trading was temporarily suspended in the markets of Brazil and Russia after prices plummeted by 10% and 15% respectively. Russia's market ended 19.1% down.
• Japan's market closed down 4.3%, or 465 points, at 10,473.1 – its lowest close since February 2004. Hong Kong's Hang Seng index slid 5%.
• Markets in India, China, Australia, New Zealand and Singapore also lost ground, while the Indonesian market lost 10% – the biggest one-day fall on record.
• Iceland suspended trading in shares of six major financial institutions bank shares and the government offered unlimited guarantees on savers' deposits. It had earlier agreed measures for the country's banks to sell off some foreign assets. The currency last week plummeted 20% against the dollar and the government was forced to bail out the country's third-largest bank.
• Sweden massively increased the level of protection it offered bank depositors while Denmark moved to offer full protection. Austria said it would also boost protection but did not decide on how much.
• In Italy, the board of banking announced a €3 billion emergency capital increase.
This is just the beginning! We will probably see the stock markets drop much more. Due to the extreme deregulation of the U.S. financial markets, which allowed them free reign to do whatever they wanted, we now have a severe recession in the making, possibly a Depression. The $700 billion bailout will take one to two years to work its way through our economy. In the meantime, we are going to hurt, from Wall Street to Retirement Pension Funds to Main Street to the farm (because farmers won’t be able to get loans to start next year’s crop due to very tight credit markets).
And McCain thinks the bailout means his campaign can turn the page on the economy! He does not understand how the economy works.
McCain does not understand!
“In our country, the ‘Fundamentals are Sound’ group at Treasury, and the ‘Whip Inflation Now’ group at the Federal Reserve couldn't switch fast enough from ‘fighting inflation’ to ‘fighting recession,’ ” says Jim Cramer, economic guru, host of CNBC’s Mad Money and co-founder of TheStreet.com.
Fed Chairman Ben Bernanke studied the Depression, or so they say, and supposedly knew more about how to stop it than anyone. It appears he knew less than anyone as he and his minions presided over the deflationary destruction of worldwide finance.
• Starting in Asia, the sell off spread to Europe and Wall Street, where the Dow Jones fell by more than 6.7% to end below 10,000 points for the first time since 2004.
• The London stock market lost 7.85% – its biggest percentage fall since 1987. Germany's market lost 7.39% while France's Cac-40 index dropped 9.04% - its biggest one-day fall ever.
• Share trading was temporarily suspended in the markets of Brazil and Russia after prices plummeted by 10% and 15% respectively. Russia's market ended 19.1% down.
• Japan's market closed down 4.3%, or 465 points, at 10,473.1 – its lowest close since February 2004. Hong Kong's Hang Seng index slid 5%.
• Markets in India, China, Australia, New Zealand and Singapore also lost ground, while the Indonesian market lost 10% – the biggest one-day fall on record.
• Iceland suspended trading in shares of six major financial institutions bank shares and the government offered unlimited guarantees on savers' deposits. It had earlier agreed measures for the country's banks to sell off some foreign assets. The currency last week plummeted 20% against the dollar and the government was forced to bail out the country's third-largest bank.
• Sweden massively increased the level of protection it offered bank depositors while Denmark moved to offer full protection. Austria said it would also boost protection but did not decide on how much.
• In Italy, the board of banking announced a €3 billion emergency capital increase.
This is just the beginning! We will probably see the stock markets drop much more. Due to the extreme deregulation of the U.S. financial markets, which allowed them free reign to do whatever they wanted, we now have a severe recession in the making, possibly a Depression. The $700 billion bailout will take one to two years to work its way through our economy. In the meantime, we are going to hurt, from Wall Street to Retirement Pension Funds to Main Street to the farm (because farmers won’t be able to get loans to start next year’s crop due to very tight credit markets).
And McCain thinks the bailout means his campaign can turn the page on the economy! He does not understand how the economy works.
McCain does not understand!
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