Are you worried about the economy?

[Anuba]

Let's hope the action around the world this weekend and today is enough to calm the panic selling going on so these plans have a chance to work and credit becomes available. Markets outside the US responded well today and the US market is looking way up for today.
Stockholm is up 7.9% so far... Frankfurt is up 7.5%... Paris and London around 5.5%... now it's up to Wall Street. Is it enough with over a billion taxpayers coughing up trillions of dollars all across the western world, or does Wall Street still want more, more, MORE?

[rdowns]

Looks like Wall Street doing their part. Dow up 400 points in first 5 minutes of trading.

[rasmasyean]

I think so too.

I was at a party Saturday and a bunch of us were talking about our 401Ks and other financial stuff. Now, I've lost a TON of money in my 401K and other investments but am remaining calm as this is money for my retirement. I'll admit I've called my financial advisor several times in the past 3 weeks to have him talk me off the ledge.

I was shocked that 4 of the 8 people have panicked and sold their 401K holdings and converted it all to cash. Stupid move IMO as you can't recoup those "losses" if you're not in the game. According to my financial advisor, about 40% of his clients are panicking and doing the same thing.

I'm looking forward to a seminar he is having on Thursday to calm people. Misery loves company. :D

That's exactly why they call this a Zero Sum Game.

For all the winners, there will be losers whom they have take from.
And of course financial institutions get their fees from both too...who perhaps are the real winners...unless they bought too much mortgages this time around. ;)

When you look at Warren Buffet as a big winner...think about how many losers he made over the years. :eek:
Hmm...so is this guy really a productive member of society worthy of the history books? One has to wonder what "glamor" really is... :D

[BoyBach]

Could there be more fun and games to come?

A £516 trillion derivatives 'time-bomb'

Not for nothing did US billionaire Warren Buffett call them the real 'weapons of mass destruction'

The market is worth more than $516 trillion, (£303 trillion), roughly 10 times the value of the entire world's output: it's been called the "ticking time-bomb".

It's a market in which the lead protagonists – typically aggressive, highly educated, and now wealthy young men – have flourished in the derivatives boom. But it's a market that is set to come to a crashing halt – the Great Unwind has begun.

Last week the beginning of the end started for many hedge funds with the combination of diving market values and worried investors pulling out their cash for safer climes.

Some of the world's biggest hedge funds – SAC Capital, Lone Pine and Tiger Global – all revealed they were sitting on double-digit losses this year. September's falls wiped out any profits made in the rest of the year. Polygon, once a darling of the London hedge fund circuit, last week said it was capping the basic salaries of its managers to £100,000 each. Not bad for the average punter but some way off the tens of millions plundered by these hotshots during the good times. But few will be shedding any tears.

The complex and opaque derivatives markets in which these hedge funds played has been dubbed the world's biggest black hole because they operate outside of the grasp of governments, tax inspectors and regulators. They operate in a parallel, shadow world to the rest of the banking system. They are private contracts between two companies or institutions which can't be controlled or properly assessed. In themselves derivative contracts are not dangerous, but if one of them should go wrong – the bad 2 per cent as it's been called – then it is the domino effect which could be so enormous and scary.

Most markets have something behind them. Central banks require reserves – something that backs up the transaction. But derivatives don't have anything – because they are not real money, but paper money. It is also impossible to establish their worth – the $516 trillion number is actually only a notional one. In the mid-Nineties, Nick Leeson lost Barings £1.3bn trading in derivatives, and the bank went bust. In 1998 hedge fund LTCM's $5bn loss nearly brought down the entire system. In fragile times like this, another LTCM could have catastrophic results.

That is why everyone is now so frightened, even the traders, who are desperately trying to unwind their positions but finding it impossible because trading is so volatile and it's difficult to find counterparties. Nor have the hedge funds been in the slightest bit interested in succumbing to normal rules: of the world's thousands of hedge funds only 24 have volunteered to sign up to a code of conduct.

Few understand how this world operates. The US Federal Reserve chairman, Ben Bernanke, tapped up some of Wall Street's best for a primer on their workings when he took the job a few years ago. Britain's financial regulator, the Financial Services Authority, has long talked about the problems the markets could face on the back of derivative complexity. Unfortunately it did little to curb the products' growth.

In America the naysayers have been rather more vocal for longer. Famously, Warren Buffett, the billionaire who made his money the old-fashioned way, called them "weapons of mass destruction". In the late 1990s when confidence was roaring in the midst of the dotcom boom, a small band of politicians, uncomfortable with the ease with which banks would be allowed to play in these burgeoning markets, were painted as Luddites failing to move with the times.

Little-known Democratic senator Byron Dorgan from North Dakota was one of the most vociferous refuseniks, telling his supposedly more savvy New York peers of the dangers. "If you want to gamble, go to Las Vegas. If you want to trade in derivatives, God bless you," he said. He was ignored.

What is a Derivative?

Warren Buffett, the American investment guru, dubbed them "financial weapons of mass destruction", but for the once-great-and-good of Wall Street they were the currency that enabled banks, hedge funds and other speculators to make billions.

Anything that carries a price can spawn a derivatives market. They are financial contracts sold to pass on risk to others. The credit or bond derivatives market is one such example. It is thought that speculation in this area alone is worth more than $56 trillion (£33 trillion), although that probably underestimates the true figure since lax regulation has seen the market explode over the past two years.

At the core of this market is the credit derivative swap, effectively an insurance policy against the default in the interest payment on a corporate bond. One doesn't even need to own the bond itself. It is like Joe Public buying an insurance policy on someone else's house and pocketing the full value if it burns down.

As markets slid into crisis, and banks and corporations began to default on bond payments, many of these policies have proved worthless.

Emilio Botin, the chairman of Santander, the Spanish bank that has enjoyed phenomenal success during the credit crunch, once said: "I never invest in something I don't understand." A wise man, you may think.


http://www.independent.co.uk/news/business/news/a-163516-trillion-derivatives-timebomb-958699.html


EDIT:

When you look at Warren Buffet as a big winner...think about how many losers he made over the years. :eek:
Hmm...so is this guy really a productive member of society worthy of the history books? One has to wonder what "glamor" really is... :D


How can you imply Warren Buffett to be a bad man? He's an old fashioned investor, famed for his frugality, who has made a s**tload of money and is now giving most of it away.

[iShater]

Could there be more fun and games to come?



http://www.independent.co.uk/news/business/news/a-163516-trillion-derivatives-timebomb-958699.html


EDIT:




How can you imply Warren Buffett to be a bad man? He's an old fashioned investor who made a s**tload of money and is now giving most of it away.

Just a matter of when it will hit the fan. Less regulation is what we need... yeah ... :rolleyes:

Maybe he is mistaking Buffet for the other guy with the bad hair ... :p

[rasmasyean]

How can you imply Warren Buffett to be a bad man? He's an old fashioned investor, famed for his frugality, who has made a s**tload of money and is now giving most of it away.

You mean like a modern day "legalized" Robin Hood? ;)

[mactastic]

Byron Dorgan has always struck me as a sharp tack... I'm not surprised he's been "vociferous" on this issue.

[rasmasyean]

Just a matter of when it will hit the fan. Less regulation is what we need... yeah ... :rolleyes:

Maybe he is mistaking Buffet for the other guy with the bad hair ... :p

Aha! How typical of this sentiment from a Mac forum...

Actually, that bad hair guy can be credited for much of the digital revolution and bringing the computer to nearly every part of the world (that can afford it at least heh). Incidentally, I was actually in the airport yesterday and saw one of the registration terminals keep rebooting Windows XP! :p

[BoyBach]

The Great Nationalisation of the Banking System continues:

US set to outline banking rescue

The US government is due to unveil a $250bn (£143bn) bank rescue plan later, as world shares rise in anticipation.

Echoing steps taken by the UK and other European countries, the US will buy stakes in its largest banks including Goldman Sachs and Morgan Stanley.

President George W Bush and Treasury Secretary Henry Paulson are due to make statements before US markets open.

The money will come from the $700bn bail-out package approved by US lawmakers earlier this month.

Special meeting

The US plan - effectively part-nationalisation - comes after the bosses of the country's largest banks were summoned to a special meeting at the US Treasury on Monday.

Although exact details have yet to be released, reports say the first purchases will be in the nine largest US banks, which also include Citigroup, Wells Fargo and Bank of America.

The aim - as is the case with similar moves in the UK - is to increase the banks' depleted capital reserves.

The US Treasury hope that this in turn will allow the banks to resume more normal lending patterns and help alleviate the continuing credit crunch.

In addition to the stock purchases, the US Treasury is also expected to announce that the state will temporarily provide insurance for loans between banks.

...

'Too small'

The US government is expected to buy preference shares in the banks.

Preference shares pay a fixed rate of interest instead of a dividend, which has to be paid before other shareholders receive anything, but they do not carry voting rights.

US taxpayers may even end up making a profit from the shares if the rescue packages work and the banks recover, but that is not guaranteed.

Despite the big rises in global shares, some analysts have questioned whether the anticipated US move is bold enough.

"The actual amount [of the plan] is still a little small," said Nagayuki Yamagishi, a strategist at Mitsubishi UFL Securities.

http://news.bbc.co.uk/1/hi/business/7668704.stm


Meanwhile in the UK:

Consumer inflation reaches 5.2% (http://news.bbc.co.uk/1/hi/business/7668608.stm)
House sales hit new 30-year low (http://news.bbc.co.uk/1/hi/business/7668017.stm)


And the good news?

Shares rise as confidence returns

Stock markets in Europe and Asia have forged higher, as investors bet that state action to strengthen the banking system will ease the credit crisis.

London's FTSE 100 index rose 4% in early trade, while Japan's Nikkei stock index posted a record 14% gain.

...

In France the Cac 40 was up 4.55%, or 160.67 points, at 3,692.17, while in Germany the Dax index climbed 3.67%, or 185.7 points, to 5,248.15.

http://news.bbc.co.uk/1/hi/business/7668732.stm

[Unspeaked]

Well, at least we got one up day:

Dow 9,310.99 -76.62 -0.82%

[solvs]

Economic Honor Roll (VIDEO) (http://www.huffingtonpost.com/2008/10/12/economic-honor-roll_n_133928.html)
Economic Dishonor Roll (VIDEO) (http://www.huffingtonpost.com/2008/10/12/economic-dishonor-roll-vi_n_134018.html)

And for those who still want to blame the wrong people, here are a couple of good rundowns:

Private sector loans, not Fannie or Freddie, triggered crisis (http://www.mcclatchydc.com/251/story/53802.html)
Hack Watch: John Stossel (http://www.thedailybanter.com/tdb/2008/10/hack-watch-john.html)

And some other effects we might not think about:

Economic Crisis Likely to Affect AIDS Research Funding (http://www.foxnews.com/story/0,2933,437965,00.html?sPage=fnc/health/infectious)

One of many.

Bush ain't helping either:

Bush Just Makes It Worse (http://www.washingtonpost.com/wp-dyn/content/blog/2008/10/10/BL2008101001785.html?nav%3Drss_opinion/columns&sub=AR)

[rasmasyean]

I think Iraq will play a big role in the recovery.
They are virtually unaffected by the crisis and are stabilizing (their stock market actually soared when the world was collapsing). And if that remains, it will help a lot considering they have some huge amount of oil ready to be eaten.

In addition, in the next year they should be giving the defense industries a boost as well considering this year is just a start.

This year Iraq accounts for $12.5 billion of the $34 billion US weapon sales to foreign countries! ...not including planned F-16's!
http://www.atimes.com/atimes/Middle_East/JI24Ak02.html

Hey, they have to rearm to prepare for "defense" against Iran, ya know. :D

Plus, not sure what kind of oil deals were struck but I'm sure the Pentagon made some deals to get cheap oil out of the "liberation" of the "pro-western government".

[P-Worm]

Looks like another bad day is shaping up on Wall Street. The Dow is currently down 391.31 or 4.5%. It looks like breaking that 8,000 point barrier is inching closer and closer. :eek:

P-Worm

[iShater]

Time to get into the market if you got $$

[Unspeaked]

In the US:

Stocks dive on belief global recession is at hand (http://biz.yahoo.com/ap/081024/wall_street.html)


And in the UK:

UK economy officially on the brink of recession (http://biz.yahoo.com/ap/081024/eu_britain_economy.html)


Time to get into the market if you got $$

Just wanted to note, if someone had bought a share of Apple stock back when this thread was started at the beginning of September (less than two months ago), they'd have seen it fall from $165 to $95.

[iShater]

In the US:

Stocks dive on belief global recession is at hand (http://biz.yahoo.com/ap/081024/wall_street.html)


And in the UK:

UK economy officially on the brink of recession (http://biz.yahoo.com/ap/081024/eu_britain_economy.html)




Just wanted to note, if someone had bought a share of Apple stock back when this thread was started at the beginning of September (less than two months ago), they'd have seen it fall from $165 to $95.


But I think too much emotion goes into Apple stock, and it was regarded as overvalued. But it is a scary thing indeed!

[solvs]

Yeah, still worried about the economy:

Damn ‘Turrists’ Stay Home! (http://crooksandliars.com/nonny-mouse/damn-%E2%80%98turrists%E2%80%99-stay-home)
We can do whatever the hell we want, and snoop into anything you’ve got on your computer. You don’t like it, don’t even apply to come to the United States.

Which is exactly what more and more people around the world are choosing to do.
More on those responsible, who should be helping but don't seem to be:

Despite Turmoil, Wall Street Bonuses Survive (http://abcnews.go.com/Business/IndustryInfo/story?id=6105795&page=1)
Greenspan Shrugged (http://crooksandliars.com/nicole-belle/greenspan-shrugged)
Freddie Mac secretly paid firm to slow regulation 3 years before collapse (http://www.dallasnews.com/sharedcontent/dws/news/nation/stories/DN-housing_20nat.ART.State.Edition2.4a89b72.html)
So When Will Banks Give Loans? (http://www.nytimes.com/2008/10/25/business/25nocera.html?partner=rssuserland&emc=rss)

And if anyone is still wondering why I rag on Bush with this:

Bush: People Will ‘Look Back’ At ‘This Moment In Economic History’ And Say ‘Tax Cuts Work’ (http://thinkprogress.org/2008/03/12/bush-tax-cuts/)

Of course they will. :rolleyes:

Looks like Iraq will be ok though:

Iraq's Oil Problem: How To Spend The Surplus Money (http://business24-7.ae/articles/2008/10/pages/10262008_92c39c04164b4cd68eb8b2660156e3de.aspx)

[rasmasyean]

Yeah, still worried about the economy:

Damn ‘Turrists’ Stay Home! (http://crooksandliars.com/nonny-mouse/damn-%E2%80%98turrists%E2%80%99-stay-home)

More on those responsible, who should be helping but don't seem to be:

Despite Turmoil, Wall Street Bonuses Survive (http://abcnews.go.com/Business/IndustryInfo/story?id=6105795&page=1)
Greenspan Shrugged (http://crooksandliars.com/nicole-belle/greenspan-shrugged)
Freddie Mac secretly paid firm to slow regulation 3 years before collapse (http://www.dallasnews.com/sharedcontent/dws/news/nation/stories/DN-housing_20nat.ART.State.Edition2.4a89b72.html)
So When Will Banks Give Loans? (http://www.nytimes.com/2008/10/25/business/25nocera.html?partner=rssuserland&emc=rss)

And if anyone is still wondering why I rag on Bush with this:

Bush: People Will ‘Look Back’ At ‘This Moment In Economic History’ And Say ‘Tax Cuts Work’ (http://thinkprogress.org/2008/03/12/bush-tax-cuts/)

Of course they will. :rolleyes:

Looks like Iraq will be ok though:

Iraq's Oil Problem: How To Spend The Surplus Money (http://business24-7.ae/articles/2008/10/pages/10262008_92c39c04164b4cd68eb8b2660156e3de.aspx)

At least it looks like the US Tech Giants are OK too.

http://i.l.cnn.net/money/2008/10/28/technology/techbargains_copeland.fortune/fat_wallets_chart.03.jpg
http://money.cnn.com/2008/10/28/technology/techbargains_copeland.fortune/index.htm?postversion=2008102806

Damn, didn't Microsoft just do a $40 billion buyback? And they still got $23.6 billion? :eek: I guess that Yahoo deal might be on the horizon! :D

And of course Apple has $25 billion (probably mostly from the iPhone). :p

Maybe some of these guys should open a branch in Iraq! hehe

[iShater]

Aha! How typical of this sentiment from a Mac forum...

Actually, that bad hair guy can be credited for much of the digital revolution and bringing the computer to nearly every part of the world (that can afford it at least heh). Incidentally, I was actually in the airport yesterday and saw one of the registration terminals keep rebooting Windows XP! :p

I was talking about Donald Trump actually. :o

I think Gate's work with his foundation is a great inspiration, and I have huge admiration for his efforts. :)

[Unspeaked]

Figured I'd pop in and post on the the latest grim news:

Dow 8,695.79 -443.48 -4.85%

U.S. Stocks Tumble in Market's Worst Two-Day Slump Since 1987 (http://www.bloomberg.com/apps/news?pid=20601087&sid=at9k_Q_qEKEM&refer=home)

Oil drops 7 percent on recession concerns (http://biz.yahoo.com/rb/081106/business_us_markets_oil.html)

Longer-term jobless benefits hit 25-year high (http://biz.yahoo.com/ap/081106/economy.html)

Temp Agencies Affected By Economic Downturn (http://www.thebostonchannel.com/news/17923982/detail.html)

Fidelity to cut nearly 1,300 jobs (http://biz.yahoo.com/ap/081106/fidelity_job_cuts.html)

Mattel Will Cut 1,000 Jobs, 3% of Global Workforce (http://www.bloomberg.com/apps/news?pid=20601103&sid=aCWeX8op_AAI&refer=us)

Atlantic City's Borgata lays off 400 workers (http://www.forbes.com/feeds/ap/2008/11/06/ap5660259.html)

[Unspeaked]

Maybe this thread should just be closed since the answer is clearly "Yes!" :(

Just some of the great business stories we start the week off with:

General Motors Stock at All-Time Low, Target $0 (http://biz.yahoo.com/ap/081110/gm_mover.html)

Circuit City Bankrupt (http://biz.yahoo.com/ap/081110/circuit_city_bankruptcy.html)

DHL Stops Domestic Operations, Lays Off 9,500 (http://biz.yahoo.com/ap/081110/eu_germany_deutsche_post.html)

Nortel Plans 1,300 Layoffs (http://biz.yahoo.com/ap/081110/earns_nortel.html)

Fannie Mae Posts $29B Loss, Already Looking to Tap US Funding (http://biz.yahoo.com/ap/081110/earns_fannie_mae.html)

Oil Prices on the Rise (http://biz.yahoo.com/rb/081110/business_us_markets_oil.html)


I shudder to think what will happen tomorrow...

[BoyBach]

Holy thread revival, Batman!

It would appear that the Great Leader™ is preparing to give even more money that doesn't exist to the banks, which includes increasing their - our? - stakes in RBS and Lloyds/HBOS to 70% and over 50%, respectively.

A raft of measures is thought to include a bank insurance scheme to cover banks against future bad loans.

Confidence building

Mr Brown said: "We know that the essential problem that has been held back by what has been happening internationally over the last few months is the resumption of lending and the expansion of lending.

"You will see tomorrow there are measures taken that will ensure that banks and non-bank institutions are able to resume lending or expand lending and in some cases to start lending."

The new state-controlled insurance company would provide cover in the event of bank customers defaulting on their loans.

It would allow banks to pay a fee to have their bad loans underwritten by the taxpayer up to a certain level.

John McFall MP, the Labour chairman of the Commons treasury committee, said the government had little alternative to a new rescue plan.

"We have got to go back again with a bigger sum because, quite frankly, the banks in my opinion haven't been honest enough about the toxic assets on their books."

BBC business editor Robert Peston says the moves are designed to avert a further loss of confidence ahead of gloomy results expected from the big banks.

"It'll be designed to give banks and their investors a bit more certainty about the losses they'd face as the recession undermines the ability of many borrowers to repay their debts.

"We as taxpayers will be insuring some of the bad loans made by our biggest banks, to limit their future losses from their reckless lending," he said.

http://news.bbc.co.uk/1/hi/business/7836259.stm

[skunk]

Am I just being dense, or is it the case that if there is a recession with all the reduction in demand that it entails, businesses and banks will go under simply because of reduced trading? It surely does not make sense for the banks to lend to these businesses if they cannot pay the loans back, and likewise it makes no sense for the taxpayer to give the banks the resources to do so. Meanwhile, with every new loan to a failing business the banks are encouraged to make, the amount of "toxic assets" they are holding simply goes up again. Something doesn't seem to add up.

[rasmasyean]

Am I just being dense, or is it the case that if there is a recession with all the reduction in demand that it entails, businesses and banks will go under simply because of reduced trading? It surely does not make sense for the banks to lend to these businesses if they cannot pay the loans back, and likewise it makes no sense for the taxpayer to give the banks the resources to do so. Meanwhile, with every new loan to a failing business the banks are encouraged to make, the amount of "toxic assets" they are holding simply goes up again. Something doesn't seem to add up.

Well, I think it’s more like giving them a chance to “ride out” the down times until it gets better. There is a difference between a “good business suffering” and a “bad business suffering” (which was never meant to be anyway). Of course it’s sometimes hard to distinguish between them and sometimes future events will make even the “good business” obsolete. However, letting them keep people employed and even hire more people should make money go around more.

And there’s also the psychological aspect of it too. When the news “cools down” and people are less scared of whatever…they will have more confidence in their own assets and start buying things again…hence, theoretically bringing those businesses back up from the rut before it’s too late.

[Desertrat]

Naw, skunk, you're not dense. Marginal-profit businesses will fail when sales decline.

If anybody's dense, it's this bunch in D.C., and unfortunately Obama's not helping matters with his appointment to SecTreas. Why hire a guy who had some amount of insight and oversight going into all this mess, and who by inaction contributed to it? And who's part and parcel of this whole pack which is taking care of the "friends in high places" like BOA, AIG, etc., etc.?

Sure, stimulus packages help some people have some money, and thus their spending will help some businesses. But it's way too little to do any good, while adding way too much to the deficit.

Banks will lend, but not for no money down and low interest. Trouble is, not many people have accumulated savings to enable such terms. You want a $300K house? Fine. Lay $60K on the desk for a down payment and we'll talk. Gonna be the same for cars, although the desperation factor in making sales will hold that off for a while--for GMAC, anyhow, if not for your local banker.

I agree with rasmasyean about the psychology factor, although that's gonna suffer. Had the same deal in 1930/1931, and then the roof fell in.

Again: The only way as a nation that we'll have a healthy economy, over and above just running money around among ourselves, is to produce for export $$$ at a rate greater than what we spend on what we import.

For over thirty years, the U.S. has been like the ancient story of the two farmers who sold a mule back and forth, raising the price each time. Finally, one sold the mule to a third party. "Why'd you do that? We were making a good living off that mule."

'Rat

[mactastic]

Again: The only way as a nation that we'll have a healthy economy, over and above just running money around among ourselves, is to produce for export $$$ at a rate greater than what we spend on what we import.
This seems like a difficult proposition, in that if we're exporting more value than we're importing, someone else's economy is in trouble because they're importing more than they're exporting, and their economy is in trouble.

Everyone cannot export more than they import. It's simply not possible.

[rasmasyean]

Woohoo! Good news for the software sector? Maybe everyone is trying to use software to cut jobs! haha Well...you know where all the jobs will be I guess! :p It seems Microsoft keeps spitting out new things these days no matter how weird they are. But I guess that's where the money still flows a little at least. They even made a Mac software that integrates to Exchange Server...which didn't even seem like a "competitive" thing to do.

IBM Posts 12% Gain In 4Q, Gives Positive Outlook.

On the front of its Marketplace section, the Wall Street Journal (http://links.mkt256.com/ctt?kn=52&m=3867884&r=MzY3Mjc5NDY2OQS2&b=0&j=MTA4NDQ4MjEyS0&mt=1&rt=0) (1/21, B1, Bulkeley) reports, "Bucking the trend of high-tech competitors, International Business Machines Corp. (IBM) posted a 12% gain in fourth-quarter profit and gave an upbeat outlook for 2009." The company said that in spite of facing "an extremely difficult economic environment," it predicts it will "continue to benefit from the increasing profitability of its software and services businesses." IBM asserted that "customers are continuing to sign up for outsourcing and other services contracts."
The New York Times (http://links.mkt256.com/ctt?kn=9&m=3867884&r=MzY3Mjc5NDY2OQS2&b=0&j=MTA4NDQ4MjEyS0&mt=1&rt=0) (1/21, B2, Lohr) adds that the "strong performance in the fourth quarter, analysts say, mainly points to the success of its strategy in recent years of tilting toward higher-profit software and services and reducing its reliance on the computer hardware business, which suffers more in down economic cycles. I.B.M.'s hardware sales did drop 20 percent in the quarter, but that weakness was more than made up by strong results from the company's far-larger services and software groups." While "some analysts had predicted that I.B.M. would announce as many as 10,000 staff cuts, or 3 percent of the work force, to trim costs in a weak economy," CEO Samuel J. Palmisano told IBM employees that trimming was "not the company's current strategy."
Bloomberg News (http://links.mkt256.com/ctt?kn=2&m=3867884&r=MzY3Mjc5NDY2OQS2&b=0&j=MTA4NDQ4MjEyS0&mt=1&rt=0) (1/21, Hoffmann) notes, "IBM bought at least six software companies last year, adding new products to take on larger Microsoft Corp. The biggest of those was the purchase of Cognos Inc. for $4.9 billion, giving IBM programs that track corporate performance. The company spent $6.3 billion on acquisitions in total last year, the most ever," according to Chief Financial Officer Mark Loughridge.
The AP (http://links.mkt256.com/ctt?kn=13&m=3867884&r=MzY3Mjc5NDY2OQS2&b=0&j=MTA4NDQ4MjEyS0&mt=1&rt=0) (1/21, Robertson) points out, "IBM Corp. forecast significantly higher profits for 2009 than Wall Street expected, a surprisingly bullish sign that reflects IBM's belief it can outmaneuver the financial crisis." Notably, "IBM's results show that while the company has seen some sales vaporize, it is still able to wring out better profits because of aggressive cost-cutting and by focusing only on the most profitable deals." Australia's Age (http://links.mkt256.com/ctt?kn=11&m=3867884&r=MzY3Mjc5NDY2OQS2&b=0&j=MTA4NDQ4MjEyS0&mt=1&rt=0) (1/21) and the UK's Register (http://links.mkt256.com/ctt?kn=10&m=3867884&r=MzY3Mjc5NDY2OQS2&b=0&j=MTA4NDQ4MjEyS0&mt=1&rt=0) (1/21, Morgan) also cover the story.

[BoyBach]

Woohoo! Good news for the software sector? ...


Unfortunately, your "Woohoo!" appears to be a tad premature:

Microsoft to cut up to 5,000 jobs.

Microsoft has said it will cut up to 5,000 jobs over the next 18 months, including 1,400 immediately.

The firm also reported a net profit of $4.17bn (£3bn) for the three months to 31 December, down 11% on last year and less than analysts' expectations.

Microsoft added it was "no longer able" to give a profit and revenue outlook for the fiscal year amid current volatile market conditions.

Shares in Microsoft fell 7.9%, dragging Wall Street lower.

...

Microsoft said the announced job cuts would take place in research and development, marketing, sales, finance, legal, human resources and information technology.

...

http://news.bbc.co.uk/1/hi/business/7845237.stm

[sushi]

^ Microsoft makes money when individuals, small business, corporations and DoD upgrade.

Currently with Vista, many of the usual upgrade sources are not upgrading for whatever reason so revenue is down. A far cry from 10 years ago when all seemed to jump at any upgrade.

For Microsoft to change the situation, my guess is that they will need a new business model that creates revenue from different sources. Or that Windows 7 will be so hot that everyone wants it.

[Unspeaked]

And today the UK finally "officially" joined us in recession world:

LINK (http://news.bbc.co.uk/1/hi/business/7846266.stm)


UK in recession as economy slides

Bleak retail sales and accelerating unemployment have hit the UK

The UK is now in recession for the first time since 1991, official government figures have confirmed.

Gross domestic product fell by 1.5% in the last three months of 2008 after a 0.6% drop in the previous quarter.

That means that the widely accepted definition of a recession - two consecutive quarters of falling economic growth - has been met.

It represents the biggest quarter-on-quarter decline since 1980, and a 1.8% fall on the same quarter a year ago.

The worse-than-expected contraction sent sterling to a 24-year low against the dollar, with one pound buying $1.355.

Meanwhile the FTSE 100 index fell almost 2%, below 4,000 points.

[arkitect]

And today the UK finally "officially" joined us in recession world…

And since it looks set for the long haul, the next step will be:
Depression…

[BoyBach]

And today the UK finally "officially" joined us in recession world:

And since it looks set for the long haul, the next step will be:
Depression…


Not long to go before we (the UK) default on our debt. It's going to be long and painful, but I still believe that good can, and hopefully will, come of it.

[arkitect]

I still believe that good can, and hopefully will, come of it.

Oh, I agree. Ultimately the world will be a changed and hopefully better place.
But the next several years are going to be grim.

[Desertrat]

mac, sure you can export more value than you import. China and Japan have been doing it for years. Look: You import products of low value, like raw materials, and by investing capital and labor you process it into items of higher value. Petroleum into plastics, for instance. Bauxite into aluminum into aircraft parts. Or natural gas into ethylene into plastics for cell phones and computers, etc. Or you export ideas in $$$ format, such as music or movies--or software.

Our problem is that we've been importing more value in finished products than we've been exporting.

We used to be the world's supplier of smokestack-industry products. And, in 1962, GM had 53% of the US car market; worldwide, 400,000 employees. The rest of the world began seriously industrializing by the 1960s/1970s, and we couldn't pay our wages and pass our health/safety/enviornmental protections and remain competitive. We didn't recognize the problem, so we didn't search for economic sectors wherein we could be not just competitive but the Big Boy on the Block. Still haven't; still aren't.

[iAthena]

mac, sure you can export more value than you import. China and Japan have been doing it for years. *snip*

I think he meant EVERYONE can't simultaneously export more than they import.

The only way trade works fairly for everyone is that if you are an importer of one type of thing, you should be an exporter of something else.

[rasmasyean]

I think he meant EVERYONE can't simultaneously export more than they import.

The only way trade works fairly for everyone is that if you are an importer of one type of thing, you should be an exporter of something else.

Well one of the major things US "exports" is intellectual property. Unfortunately, this is easily taken advantage of these days. As you can easily copy data and ideas...as well as use data and idea for your own purposes without compensating the creators of that data ot idea. And if a manufacturer uses those ideas to produce products in a close environment, it's even harder to go after them...never mind the length legal process that sometime doesn't even exist accross borders.

[YS2003]

US financial and banking industries are basically insolvent, technically speaking, because its assets are less than their debt loads. With more dollars being printed by the government, they would try to prop up the system. In the long term (like 5 to 10 year horizon), the fundamental economic and financial malaise would remain.

I expect the worst has yet to hit the markets. Job markets would be more competitive as many skilled and unskilled people would be trying to snag a position.

Especially new entrants into the labor force (new graduates) would find the current job markets very difficult, as the companies would like to bring in the workers with proven records of achievements instead of training inexperienced workers on the OJT.

[Desertrat]

Folks talk about "infrastructure" spending in this $800 billion stimulus package. Here's one little datum that illustrates the smoke-and-mirrors aspect. I've no clue as to the accuracy, but the numbers are bound to be available from other sources:

http://newsbusters.org/blogs/jeff-poor/2009/01/23/debunking-stimulus-myth-only-3-allotted-road-bridge-spending

"The recent proposal distributed by congressional Democrats will provide only an additional $15 billion in 2009 and 2010 for road construction and repair. And of that $30 billion total provided, some funds are earmarked for narrow uses such as technology training or construction of roads on Indian reservations and in national parks."

$15 or $30 billion, whatever, ain't much construction, considered on any nationwide basis. The Boston "Big Dig" reference is apropos.

[YS2003]

Folks talk about "infrastructure" spending in this $800 billion stimulus package.
Given the huge size of the questionable asset valuations held by the US financial institutions, the $825 G stimulus over 2 years mayt not be big enough to make a significant difference in the collapsing economy's trajectory. Of course, it is better than nothing.
Folks, this is the time to save up (if you have not yet done so) to weather through the protracted economic downturn.

[miniConvert]

Folks, this is the time to save up (if you have not yet done so) to weather through the protracted economic downturn.
I'd suggest that two years ago was the time to save up. The best thing you can do for the economy now is keep spending.

In the UK, the things I'm most concerned with are:

1) The stability of our banks. The Labour party approach so far has been to throw good money after bad, and steadfastly refuse to influentially nationalise. The govt. has all of Northern Rock and 70% of RBS (which they might as well just bloody nationalise) - they should be using these 'assets' as instruments with which to a) serve the public and b) fix the banking system from the inside (interbank lending etc).

2) Inflation. The media is pumped with stories of deflation and how we must try and fight it off. We've demolished our Bank of England interest rate and borrowed a tonne of money as a country to flood, ahem kick-start, the economy in order to avoid it. But IMHO what Labour are trying to do is cause inflation. They know that inflation is one tool they can use to help reduce debt. Unfortunately they seem hell-bent on doing this at the expense of savers and generally those not in debt, rather than letting unmanagable debts go bad and there be a semi-major adjustment. All they're acheiving is prolonging the inevitable rock bottom, and making recovery longer and more difficult.

IMHO the govt. should be printing (not borrowing) new money and spending it on infrastructure projects, such as improved transport links and green, self-sufficient energy. That way they can inject money into the economy that wont result in rampant inflation, while avoiding the increasingly likely massive increase in taxation and interest rates that will come in a few years time to repay the national debt. Not that they'll be able to 'repay' it at this rate - we'll struggle to meet the interest obligations!

[mactastic]

mac, sure you can export more value than you import. China and Japan have been doing it for years. Look: You import products of low value, like raw materials, and by investing capital and labor you process it into items of higher value. Petroleum into plastics, for instance. Bauxite into aluminum into aircraft parts. Or natural gas into ethylene into plastics for cell phones and computers, etc. Or you export ideas in $$$ format, such as music or movies--or software.

Our problem is that we've been importing more value in finished products than we've been exporting.

We used to be the world's supplier of smokestack-industry products. And, in 1962, GM had 53% of the US car market; worldwide, 400,000 employees. The rest of the world began seriously industrializing by the 1960s/1970s, and we couldn't pay our wages and pass our health/safety/enviornmental protections and remain competitive. We didn't recognize the problem, so we didn't search for economic sectors wherein we could be not just competitive but the Big Boy on the Block. Still haven't; still aren't.
'Rat, you're sidestepping the question. I'm asking how your prescription for economic health can be considered a sustainable model, if in order to have nations that export more than they import, other nations will have to import more than they export?

It's like demanding that all children score above average on standardized testing!

So are you arguing that only some of the world can be economically healthy at a time, and that the others are simply doomed to economic unhealth until such time as they gain the necessary political or military weapons to overthrow one of the "haves"?

Or do you have some other magical means by which everyone can export more than the import? And if so, please pass that information on the the education department, as I'm sure they would love to have all children scoring above average...

[YS2003]

I'd suggest that two years ago was the time to save up. The best thing you can do for the economy now is keep spending.

In the UK, the things I'm most concerned with are:

1) The stability of our banks. The Labour party approach so far has been to throw good money after bad, and steadfastly refuse to influentially nationalise. The govt. has all of Northern Rock and 70% of RBS (which they might as well just bloody nationalise) - they should be using these 'assets' as instruments with which to a) serve the public and b) fix the banking system from the inside (interbank lending etc).

2) Inflation. The media is pumped with stories of deflation and how we must try and fight it off. We've demolished our Bank of England interest rate and borrowed a tonne of money as a country to flood, ahem kick-start, the economy in order to avoid it. But IMHO what Labour are trying to do is cause inflation. They know that inflation is one tool they can use to help reduce debt. Unfortunately they seem hell-bent on doing this at the expense of savers and generally those not in debt, rather than letting unmanagable debts go bad and there be a semi-major adjustment. All they're acheiving is prolonging the inevitable rock bottom, and making recovery longer and more difficult.

IMHO the govt. should be printing (not borrowing) new money and spending it on infrastructure projects, such as improved transport links and green, self-sufficient energy. That way they can inject money into the economy that wont result in rampant inflation, while avoiding the increasingly likely massive increase in taxation and interest rates that will come in a few years time to repay the national debt. Not that they'll be able to 'repay' it at this rate - we'll struggle to meet the interest obligations!
I agree anyone without the guaranteed wealth or payment stream should have started saving much earlier (but, it is a mote point to talking about the thing people did not do).
Printing an excess amount of money by BOE will stoke inflation. All the imported goods in UK will be very expensive because the sterling will lose value against the other hard currencies such as EUR, USD, and JPY. If UK cannot afford purchasing goods from overseas, then, it may need to borrow money from the international financial organization such as World Bank or IMF.
UK is between a rock and a hard place and the standard options such as borrowing (which is tough to do due to the credit crunch) and printing more money (which is also tough to do because it will devalue sterling further) may make matters worse.

[miniConvert]

Printing an excess amount of money by BOE will stoke inflation. All the imported goods in UK will be very expensive because the sterling will lose value against the other hard currencies such as EUR, USD, and JPY. If UK cannot afford purchasing goods from overseas, then, it may need to borrow money from the international financial organization such as World Bank or IMF.
UK is between a rock and a hard place and the standard options such as borrowing (which is tough to do due to the credit crunch) and printing more money (which is also tough to do because it will devalue sterling further) may make matters worse.
There are certain things you can spend money on that don't cause inflation, or at least have a very small impact. Spending on anything that will result in increased trade and productivity, i.e. infrastructure, should keep inflation in check. Using massive borrowing to grossly expand the public sector is going to be much more damaging for the UK IMHO.

[Rodimus Prime]

What I am worried about is with all this money be pumped into the economies and the banks hording money is I worry that it is going to cause pent up inflation. When the banks start leading again and all of a sudden all this money hit them market we are going to have a runaway inflation as things catch up.

We would get hit by stagflation hard.

[Unspeaked]

Not worried no. This downturn has been coming for years. Anyone with any sense has been preparing for it.

No, can't say that I'm worried at all, but then I'm not a worrier.

As for the economy and me being worried. Not so much.

Personally, I am not too worried about the economy.

So just out of curiosity - since these were all opinions posted on the first page of this thread back in early September - have any of you changed your minds...?

[doug in albq]

...you could hear a pin drop...

[kastenbrust]

Reason to be worried: The world is overpopulated, thats why people are loosing their jobs

Reason not to be worried: Capitalism is human nature

[TuffLuffJimmy]

Reason to be worried: The world is overpopulated, thats why people are loosing their jobs

Reason not to be worried: Capitalism is human nature

Does that necessarily mean it's the best choice for an economy? Especially based on your previous sentence?

[Desertrat]

In late 2006/early 2007, I was worried. That worry increased with Soros' comment about a recession beginning in the U.S sometime in the latter part of the year. He was correct.

Then, in 2008 as the word got out about all the dominoes of the world of bad paper and how the investment banks were trapped I went from worry to "Oh, (Bleep)!"

The wrong path taken by Bernanke/Bush/Paulson is now being followed by Bernanke/Obama/Geithner. I'm not as totally a pessimist as Kunstler.com, but I figure we're in for some parallel to the 1930s. I don't believe that continuation of the monetary behavior which got us into this mess will get us out of it.

IOW, if you ain't scared spitless, you ain't been payin' attention.

'Rat

[Unspeaked]

The wrong path taken by Bernanke/Bush/Paulson is now being followed by Bernanke/Obama/Geithner.

Yes... what worries me most is that there doesn't seem to be any horizon line in sight.

I simply cannot see why the situation will change anytime soon; certainly not because of all the money that's being thrown at it.

[rasmasyean]

Reason to be worried: The world is overpopulated, thats why people are loosing their jobs


I wouldn’t say the world is overpopulated. We were doing quite fine until “The Event”…where greedy homebuyers caused the bubble that eventually resulted in a chain reaction. Then the primary reason for why it escalated to this point is because of FEAR. People started hunkering down and spending less for the hypothetical outcome that they lose their jobs etc. What happens is that this mass fear event coupled with media who uses fear all the time to hype things and get more viewer base, caused an even greater chain reaction and increase the chance that they DO get fired!

It’s like this. If there are two people in the world and they make something for each other, they can live happily ever after. But if one decides not to “buy the other’s services”, then that person will no longer be able to “afford the first guy’s services”. So they both cause each other’s unemployment.

As long as people skimp on luxuries and just focus on basic necessities pretty much we'll all suffer. When the fear starts subsiding and people focus more on “improving” their lives by consumption again, then this recession will be over. It’s all in the mind. One thing about capitalism is that for it to work "good" you need a "desire for advancement" from the people. "Greed" is actually one motive that fits in this category, unfortunately. Capitalism results in goods being produced more and more efficiently. What then will you “need” after everything is super efficient? Luxuries.

[mactastic]

We were doing quite fine until “The Event”…where greedy homebuyers caused the bubble that eventually resulted in a chain reaction.
So you are of the opinion that the current economic problems were caused by irresponsible, greedy homebuyers?

[Unspeaked]

So you are of the opinion that the current economic problems were caused by irresponsible, greedy homebuyers?

It proves his later point that greed contributes to a successful capitalist environment.

Er, wait a minute... maybe not...

:rolleyes:

[rasmasyean]

So you are of the opinion that the current economic problems were caused by irresponsible, greedy homebuyers?

That’s a main part of it, yes. But of course you can argue that due to lack of regulation, etc. these poor people were innocently led into their own trap, etc. etc. but hey, that doesn’t change what happened.

As for greed, it doesn’t have to be about money. It could be about power as well. Or other things. If no one had a sense of potential gain, what would be the purpose of proceeding? Perhaps the goodness of your heart you would think. But that’s not how most people think. And you can only give when you have even if you want to give. And how do you get this excess? Greed is good! :D

[rasmasyean]

It proves his later point that greed contributes to a successful capitalist environment.

Er, wait a minute... maybe not...

:rolleyes:

Yeah...like the main purpose of pharmaceutical corporations trying to save your sorry life one day is because of charity. They'll give it to you for free...really. Don't keep a bank account...it's useless.

Er, wait a minute... ;)

[Unspeaked]

Yeah...like the main purpose of pharmaceutical corporations trying to save your sorry life one day is because of charity. They'll give it to you for free...really. Don't keep a bank account...it's useless.

Er, wait a minute... ;)

Hey, I don't disagree with any of that - but you must admit it was a little ironic to end a post that had begun by slamming homebuyers for their greed by playing up the role greed plays in prosperity.

[mactastic]

That’s a main part of it, yes. But of course you can argue that due to lack of regulation, etc. these poor people were innocently led into their own trap, etc. etc. but hey, that doesn’t change what happened.
What do you suppose the total value of all defaulted mortgages currently is?

[hexonxonx]

Today I am now unemployed.

The only job that I have held since graduating high school in 1982 is no more. The Rocky Mountain News published it's last paper today. I still get a paycheck for the next two months but that doesn't help feeling so lost and empty and sad today.

[SactoGuy18]

If we want to fix our economy on a long term basis, we have to do two things:

1) Fix our system on taxation. Since by definition income taxes tend to discourage savings and investment in the long run if implemented improperly, I'm sure many of you have read my suggestions over the last few months on how to fix this. Seriously controlling or slaying that ravenous monster called the Internal Revenue Service would go a LONG way towards meaningful economic recovery, especially considering the mind-boggling costs per year to comply with the Internal Revenue Code.

2) Cut down on the rampant equities speculation that caused much of the mess in the first place. That means increasing the minimum margin requirements to trade in commodities and stock futures from the current 5% to 15%, with as high as 30% on critical commodities such as precious metals, strategic industrial metals, certain foodstuffs and stocks of banks and financial companies. With such high minimum margin requirements, that cuts out the "make a fast buck" speculators and ensures a far more stable up and down price changes. Given the bad experience with crude oil prices going from US$75 per barrel at the beginning of 2008 to US$148 in the middle of 2008 back down to US$40 at the end of 2008, it's all the more imperative we do this.

[Motley]

Today I am now unemployed.

The only job that I have held since graduating high school in 1982 is no more. The Rocky Mountain News published it's last paper today. I still get a paycheck for the next two months but that doesn't help feeling so lost and empty and sad today.

Well, good luck. Hopefully your skills will translate well into a non-newspaper related field.

[mactastic]

Any solution to this problem needs to address the unholy alliances between investment banks and hedge funds and other derivative traders that was enabled by Graham-Leach-Bliley, as well as the complicity of the bond rating agencies. Without those highly inappropriate relationships, it would be much harder to get to where we are today.

[hulugu]

Today I am now unemployed.

The only job that I have held since graduating high school in 1982 is no more. The Rocky Mountain News published it's last paper today. I still get a paycheck for the next two months but that doesn't help feeling so lost and empty and sad today.

Heard about the Rocky Mountain News this morning, that bites.

Wish you the best in finding something.

[SactoGuy18]

Any solution to this problem needs to address the unholy alliances between investment banks and hedge funds and other derivative traders that was enabled by Graham-Leach-Bliley, as well as the complicity of the bond rating agencies. Without those highly inappropriate relationships, it would be much harder to get to where we are today.

Hence my suggestion for setting the minimum margin requirements for such trades to 15%. At this level, hedge fund traders would be a LOT more reluctant to trade commodities and stock futures, and that right there will substantially moderate the type of crazy price jumps and falls like we had with crude oil in 2008.

[mactastic]

Hence my suggestion for setting the minimum margin requirements for such trades to 15%. At this level, hedge fund traders would be a LOT more reluctant to trade commodities and stock futures, and that right there will substantially moderate the type of crazy price jumps and falls like we had with crude oil in 2008.
But that won't address the issue of incentivizing people to value the derivatives at unreasonably high levels while things are going up, and avoiding marking them down to reasonable levels on the way down. And it doesn't address the collaborative problems where an investment band would essentially set up a hedge fund as a way to dispose of the toxic portion of these assets.

Your suggestion would make the wheel turn slower, but it still allows people to be was too closely tied together.

I suppose another way to deal with this would be to remove the incentives, and return these financial wizards to working for a salary, not for an outrageous bonus. But that's not likely to happen.

[Iscariot]

I'm not worried about the economy.

I'm worried that nobody is going to learn from this.

This thread proves my worries to be founded.

[Unspeaked]

I suppose another way to deal with this would be to remove the incentives, and return these financial wizards to working for a salary, not for an outrageous bonus. But that's not likely to happen.

It's laughable that this isn't the case.

This single change would have probably done more in both the short and long term to help this situation than the entire stimulus plan has to this point...


I'm worried that nobody is going to learn from this.

People have very short term memories.

[skunk]

I'm not worried about the economy.

I'm worried that nobody is going to learn from this.It ain't just a river in Africa.

[NT1440]

Has anyone gone back to the beginning of this thread and seen how much peoples views have changed? Its pretty interesting.

[SactoGuy18]

Your suggestion would make the wheel turn slower, but it still allows people to be was too closely tied together.

I suppose another way to deal with this would be to remove the incentives, and return these financial wizards to working for a salary, not for an outrageous bonus. But that's not likely to happen.

I actually agree with you on that! :D I think the "go-go" mentality of the entire financial market needs to be moderated down substantially so we don't get sudden price rises and falls over a short period of time.

I would LOVE to ask author Harry S. Dent (who just released the book The Great Depression Ahead) on how to "break" these ridiculous economic cycles that end up causing no end of grief. I just read his book and I think he hints at some ideas that could end these elevator ride boom and bust cycles in the long run. :)

[Rodimus Prime]

Has anyone gone back to the beginning of this thread and seen how much peoples views have changed? Its pretty interesting.

Yeah my views being one of them. considering now I have to find a new job.

[Ugg]

Has anyone gone back to the beginning of this thread and seen how much peoples views have changed? Its pretty interesting.

I did a couple of days ago and it's amazing how radical the change is.

[mactastic]

Yeah my views being one of them. considering now I have to find a new job.
Sucks man. Construction jobs are dropping like flies all over. I've been looking for about 5 weeks now, and there's precious little out there. Good luck...

[Desertrat]

mac sez, "Any solution to this problem needs to address the unholy alliances between investment banks and hedge funds and other derivative traders that was enabled by Graham-Leach-Bliley, as well as the complicity of the bond rating agencies. Without those highly inappropriate relationships, it would be much harder to get to where we are today."

Seems to me that a lot of the problem stems from crookedness--or at the least, ineptitude--in the bond rating agencies. These CDOs and derivatives would not have grown to such $$$ volumes except for junk paper being rated AAA.

We once invested money to make things for sale and profit thereby. Cars, machine tools, etc. We priced ourselves out of the world market, and began importing lower-cost items instead. We then transitioned into investing money into paper in order to profit. Until this bubble popped, nearly half of all U.S. corporate profits were in the financial investment firms. The remainder was spread out among Big Oil, homebuilders, chain store corporations and service. (For scale, the total of investment bank bonus-pays was greater than Exxon profits, most years.)

I dunno. People with money are gonna keep on figuring ways to make more, and nobody anywhere has a clue as to what the next bubble-like run-up will be. Efforts at state control will always address the last problem, just like generals planning for the last war. The next problem will once again come as a complete surprise.

'Rat

[mactastic]

mac sez, "Any solution to this problem needs to address the unholy alliances between investment banks and hedge funds and other derivative traders that was enabled by Graham-Leach-Bliley, as well as the complicity of the bond rating agencies. Without those highly inappropriate relationships, it would be much harder to get to where we are today."

Seems to me that a lot of the problem stems from crookedness--or at the least, ineptitude--in the bond rating agencies. These CDOs and derivatives would not have grown to such $$$ volumes except for junk paper being rated AAA.

We once invested money to make things for sale and profit thereby. Cars, machine tools, etc. We priced ourselves out of the world market, and began importing lower-cost items instead. We then transitioned into investing money into paper in order to profit. Until this bubble popped, nearly half of all U.S. corporate profits were in the financial investment firms. The remainder was spread out among Big Oil, homebuilders, chain store corporations and service. (For scale, the total of investment bank bonus-pays was greater than Exxon profits, most years.)

I dunno. People with money are gonna keep on figuring ways to make more, and nobody anywhere has a clue as to what the next bubble-like run-up will be. Efforts at state control will always address the last problem, just like generals planning for the last war. The next problem will once again come as a complete surprise.

'Rat
Well, when Glass-Steagal was written way back when, I'm sure there was some smart guy out there who said "they're just fighting the last war, the smarties will find another way to make money". But Graham-Leach-Bliley in 1999 reversed Glass-Steagal, and look what happened...

Sure, there were a lot of "other wars" in between. But if investment banks had been kept from creating these kinds of too-cozy relationships -- as they were under Glass-Steagal -- we wouldn't be fighting this war right now. Or at least would be fighting it on a much smaller scale.

[Desertrat]

But in 1999, just how much prescient opposition to G-L-B was there? And how much happiness came about on the part of so many movers and shakers at the apparent increase in personal wealth that it enabled? G-L-B's effects enabled the enrichment of many of our present leadership, after all.

[mactastic]

But in 1999, just how much prescient opposition to G-L-B was there? And how much happiness came about on the part of so many movers and shakers at the apparent increase in personal wealth that it enabled? G-L-B's effects enabled the enrichment of many of our present leadership, after all.
Enough prescient knowledge that the banking industry has been working on getting Glass-Steagall repealed since it was enacted. It took them a long time to finally get it repealed, but they did. And once again, speculation ran rampant upon removal of that wall.

And of course, let's not forget Phil Gramm's little "Enron loophole" that allowed all this to go on outside the purview of the regulatory agencies.

[solvs]

IOW, if you ain't scared spitless, you ain't been payin' attention.
Hm, I remember saying that and being mocked by a few of you. I gotta say, I hate having been right. Count me among one of the newly unemployed BTW. And worse, they're disputing my unemployment because they're hemorrhaging money and are jerks. Thankfully, I have money saved up (was preparing for the inevitable, helps to put factual evidence over ideology) and some things I can sell. Cashed out what was left of my 401k. The new COBRA discounts help too. I'm sure I'll get my unemployment eventually anyway until I can find something else, but it's going to be a fight.

And my credit card has decided to arbitrarily raise a bunch of the rates on even their responsible card holders. Never been over the limit, or late on a payment, usually pay it off. Thankfully I can just pay it off and have credit protection in case I need it. Maybe even cancel it like I did my other card that tried to do that, as apparently others are doing (real smart banks and lending companies, drive away your good clients... though since they all seem to be doing it, I guess it's not like there's anywhere we can turn to, especially those of us who are now unemployed). For those not so lucky, or if you're just pissed off that we keep bailing these companies out just so they can screw us over, click here and send a message:

https://secure.consumersunion.org/site/Advocacy?cmd=display&page=UserAction&id=2077&s_src=Dem&s_subsrc=ccr

And if anyone has been reading Paul Krugman (who's been pretty on the ball about this almost the whole time) they'll know that Obama hasn't been doing enough. Anyone who knows history can follow that FDR was almost making the same mistakes part of the way in listening to the opposition. Part of why the whole "socialism/communism" bs isn't exactly helping them much. People are struggling and hurting, and I'm still hearing about needing more tax cuts for the rich and how we can't blame Wall Street, and greed is good, and all that. Even heard a few defending AIG and their bonuses. Yeah, that's going to help you guys.

Now if only the "liberal media" and politicians would catch up to what the rest of the country is feeling and stop the rhetoric (and the Dems would grow a pair and get together a cogent plan) maybe we can work together on fixing this instead of the random, panicky scrambling it seems like now (on both sides).

[Rodimus Prime]

That sucks sovs that you lost your job. Welcome to the world of the unemployed that I joined at the end of last month.

I would try to leave your 401k alone unless you absolutely need it. Go with the assumption things will turn around in the long run. I still betting on that and I leaving the little in my 401k alone instead of cashing it out. I am living on my 6 months of savings I had built up. Still sucks though.

[SactoGuy18]

I'll have to say that FINALLY Treasury Secretary Tim Geithner has finally unveiled the plans to clean up the financial system mess and put our economic system back in order.

Mind you, I'd like to see Geithner put back in the Glass-Steagall Act provisions, which will protect banks in the long run by keeping them out of the extreme price changes of the equities market.

[Desertrat]

Trouble is, no matter what Obama/Geithner/Bernanke do, the economy won't turn around until debts are settled. Banks aren't loaning money because with a contracting economy there's no reason to borrow for investment, so folks aren't wanting to borrow to expand a business. Most of the present home-loans are being made to people with good credit ratings who are bottom-feeding--even though in many areas the bottom is yet to come.

For the next year or two, this growing meltdown in commercial real estate is going to lead to more job losses, and the increase in "walkaways" from credit card debt is growing--which means even more problems for such as Bank of America.

To make things worse, we're going to see not just continuation of a rather high rate of consumer price inflation, but a worsening as a result of the "printing paper" on the part of Bernanke/Geithner. It's all well and good to talk about "putting more money in circulation", but it will buy less and less and the federal deficit will grow and grow--worsening the problem.

As near as I can tell, future costs--a year or two--of food and fuel are gonna go way up.

Me, I'm a pessimist about how long all this misery will go on. Too many parallels to 1929-1933, so far, for me to be optimistic, and we didnt have the debt problems then that we have now. Nor the energy problems, nor a population which had basically been living the proverbial "life of Riley".

'Rat

[Rodimus Prime]

'Rat,
I was reading it is not the banks that are not leading. They have increased there leading. Problem is other sources of leading have completely dried up and the banks increase in leading is not enough to off set the other source of leading.

Examples of other sources are mutural fund companies, life insurance companies and so on.

[SpaceKitty]

'Rat,
I was reading it is not the banks that are not leading. They have increased there leading. Problem is other sources of leading have completely dried up and the banks increase in leading is not enough to off set the other source of leading.

Examples of other sources are mutural fund companies, life insurance companies and so on.

Don't you mean loaning money? It doesn't make sense when you say "other source of leading".

[solvs]

That sucks sovs that you lost your job. Welcome to the world of the unemployed that I joined at the end of last month.

Thx. Good luck to you too out there, it is tough. I wish we weren't right, and worse, things are actually even worse than some of us thought they'd be. Now they're raising sales tax here along with the credit card and loan rates hikes mentioned earlier, as well as laying off those like teachers left and right, which seems kinda stupid given the high rates of employment and low rate at which people are already spending. For some reason I don't think that will help much with that.

But raising taxes on rich people 3% is socialism? While taxes on goods while no one is spending money is responsible fiscal conservatism? :confused: K. Didn't that admittedly douchey Gray Davis get kicked out for less?

[Desertrat]

Rodimus, the banks have beaucoup money which could be lent. The problem--or a problem, among many--is that business people aren't interested in borrowing. After all, when sales are falling because of increased personal savings or a pullback in frou-frou spending, you don't try to expand a business. The bailout money is merely transferring the liability for the bad paper to the taxpayer; it's not affecting the actual amounts of money available to loan.

Other than home loans which are now guaranteeed by the taxpayers: Good or even high credit ratings are needed to get a loan. The nationalization of GM might allow GMAC to be charitable in car loans, but your friendly banker is looking to good credit ratings before lending for any purpose.

Many in the home-loan business are avoiding the 100% mortgage deals of the past.

Look: AIG insured Fannie Mae against loss in the no-down-payment home loans, for the 20% that wasn't paid down. After the big Oopsie, we gave AIG $160 billion. Congress, Geithner and Obama were fully aware of the contractual bonus arrangements, the $150 million. Sen. Dodd was also in on the whole deal. After the public outcry, the whole pack began yelling, "Evil! Evil!" even though they were the ones who gave away the taxpayers' monies in full knowledge. Cuomo joined in. It's a diversion to keep the public from realizing just how bad the taxpayer is being screwed by our Fearless Leaders. AIG, of course, was obligated to make insurance payments to others, e.g. the German recipient of either $6 or $8 billion, I've lost track.

'Rat