Category Archives: Economy

Obama: I Inherited This Crisis

Posted on February 11, 2009 | Leave a comment

How many times do we have to hear The Blessed Leader report to the fainting masses that the financial crisis we find ourselves in was given to him by the previous administration?  I have been listening, and so far as I can tell, it’s every time he’s in front of a camera.  Now, I get it.  He wants to separate his time; Pre – Blessed Leader and then, well, you know, just Blessed Leader.

The problem that I have with this is not so much that he says it, after all, they have all said it. Dubya said it when he took over the recession from Bubba.  Bubba from 41 and Reagan from the Peanut Vendor.  They all say it.

However, in this case, Obama has it wrong.  You see, another disadvantage of being a Senator turned President is that you can actually be called on your record.  I mean, Obama was part of the organization that CREATED the mess that his current President self inherited.

And as it concerns Fannie Mae and Freddie Mac, he was warned and woo’d, to the tune of ranking #3 on the Active Leader Board.  Does that register?  Senator Obama, he of 4 short years, ranked 3rd on the currently serving members of the Senate.  John Kerry, who has been serving since forever, has only taken 6 large more than Obama.

And he has the stone to say that he inherited this.  He created it.

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The Recession – How Bad Is It

Posted on February 11, 2009 | Leave a comment

About three weeks ago, I posted a bit on the status of the economy.  I wanna go back to that and review again.

I have a friend who, like  me, is a political news junkie.  I think that we use each other as our own personal foils.  Anyway, the topic of economic indicators came up, and this list came up:

  1. Unemployment
  2. Housing Starts
  3. Consumer Price Index
  4. Inflation
  5. Industrial Production
  6. Bankruptcies
  7. GDP
  8. Broadband Internet Penetration – I don’t agree with this one as a historical reference.
  9. Retail Sales
  10. Stock Market
  11. Money Supply

Let’s review some.

From the top.  Let’s take a look.

Unemployment

Right now, with the January numbers in, we are looking at a 7.6% unemployment rate.  To be sure, that is a historical high; a RECENT historical high.  In fact, you would have to go all the way back to September of 1992 to find a rate higher than where we are now.  And that’s a long way back, really is.  But–it’s no where near, not even close, to as bad as it’s ever been, or even as bad as it’s been since the Great Depression.  Now, the thing about that September 1992 value is that it was in the middle of a run of 21 straight months of 7.0% or higher; 21 MONTHS!  For referance, we are in the middle of, ummm, 2.  Only two!

Way Back MachineIf you dial the Way Back Machine to the year 1980, specifically May of 1980, you will be looking 68 straight months of unemployment higher than 7.0%.  Imagine!  Imagine having to go through the last two months for most of 6 years!  In fact, there were 78 months above 7.0% missing only one which came in at 6.7%  And to make it even worse, at the height of it, the rate stood at 10.8%.  Almost 11%.

Is 7.8 high?  Recent history suggests that it is.  Is it the worst since the Great Depression?  Hardly.  In fact, so far, it’s not even as bad as it was in 1992.  And the run in 1992 really had lasted from 1990 through 1994.  Now, clearly we are not sure where, or how high, we are going with these numbers.  But that’s not the use of this statistic.  These numbers represent what is going on in the nation today.  [Or last month as it were.]

Housing Starts

Without even looking, I think that this one is going to be bad.  In fact, this could be as bad as we have seen it.  And there is a reason for that; the whole reason we are in the place we are in is due to the burst of the housing bubble.  So, while I think that it is worth taking a look at the housing market [if only to act as a guide when we begin to turn], I hesitate to use this as any significant historical model.

And now that I have taken a look, I was right.  This indicator isn’t in good shape.  With data that I have going back to 1969, we are at the lowest level on record.  We reported only 550,000 new homes in December, 2008.  For an annual perspective, from Dec 2007 to Dec 2008, we saw a 45% decline.  This is the highest such decline on record.  To be sure, there have been other periods where we saw declines in the high 30’s, but this level is unprecedented.

Now, as I mentioned above, it is my feeling that it is the housing market that has us in this dilemma to begin with.  That is, there was a housing bubble and we are now contracting that bubble.  I am not surprised to see that we are reducing our output of new homes at just the same time that we are trying to move through our excess supply.  In fact, given our past spending on homes, I would be concerned if housing starts were NOT contracting.  With all of that said, however, we will not truely be able to say that we have come through the other side until this metric turns.

NOTE:

Foreclosure rates, on the rise for some time, have dropped sharply in January, with California rates at their lowest in nearly 14 months.  Further, pre-floreclosure filings also dropped, indicating that the falling rate may be sustainable.  Lastly, one of the most interesting aspect of a liberal media bias is that while rising oil prices are reported as horrible news for consumers, the price of housing is reported exactly opposite.  Why is it bad news when the affordability of housing is trending positive.  Right now, the affordability of housing is about 35-40% below the histroic rate.  All of this points to an ending of the housing correction.

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This Should Suprise No One

Posted on February 7, 2009 | Leave a comment

Word is that the Bush administration overpaid for bank assets as part of their TARP program.

The Bush administration overpaid tens of billions of dollars for stocks and other assets in its massive bailout last year of Wall Street banks and financial institutions, a new study by a government watchdog says.

The Congressional Oversight Panel, in a report released Friday, said last year’s overpayments amounted to a taxpayer-financed $78 billion subsidy of the firms.

While it hurts, and at $78 billion it really really  hurts, this is no small thing.  $78 billion  is enough money to send each man woman and child in America $260 bucks.  Now, don’t get me wrong, sending each person in America $260 is not my idea of a stimulus, but the point has to be taken.

What makes this especially hard to swallow is the fact that this money was mean to prop up our financial institutions.  To be honest, when TARP was first announced, I was a critic and spoke out against it [to be fair, I am still hesitant].  However, after reading and taking a look at the facts I came around.  After all, our economy is based on capital; that is the selling of money from one institution to another.  When that process stops, when people are no longer able to obtain money for investment, that’s when we stop doing what we do best:  PRODUCE.

And so it came to pass that I begrudgingly began to warm to the idea of helping these guys out.  But that was when help was targeted to the very place that was perhaps ground zero; the bad paper caused as a result of number of bankruptcies.  When these loans were bundled by the hundreds and sold off, in essence they were chopped and split and dispersed to every investor who purchased a share.  Because of that it became very difficult to “know” the value of those shares.  nd so the market dried up, you couldn’t sell these things anymore.  This isn’t to say that they weren’t worth anything, clearly a majority of the loans were still, and even to this day are, viable.  But no one knew what their value was, and so they couldn’t be sold.

So the idea was that Paulson would buy up these assets, or bad paper, freeing the banks and lending institutions of them.  See, ya can’t lend money when you are over extended.  And in essence, this paper was worth Zilch and so all banks were forced to freeze lending.  But, Paulson changed his mind, bought up shares in banks and ended up over paying for them.

And this gentle reader, is a lesson in the tender mercies of Government Administration.  The fact is, when the government acts, it is almost ALWAYS for reasons other than for what is good and healthy.  There is always an eye out for the powerful, the political and the electability.  And because of this, decisions are almost always bad.

All government sucks.  The liberal and the conservative.  The answer is to reduce and remove.  Put the power in the hands of the people.

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Posted in Economy, Politics: National

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The Recession – How Bad Is It?

Posted on January 20, 2009 | 1 comment

So, for some time now, we have been in this recession.  And for as long, we have heard, from everybody, that this economic collapse is as bad as it’s ever EVER been.  From the beginning, from the very beginning, I have had my doubts.  Not only as to how long this has actually been going on, but also as to how bad it really is.

First, the beginning.  The classic definition of a recession is two consecutive quarters of negative economic growth.  Contrary to what the think tank responsible for calling recessions says, this did not happen until October of 2008.  As such, it is very reasonable to say that this current economic downturn is only a very recent event.

Now, onto the depth and width of the downturn.  How bad is it?  How bad, really, are we struggling?  To answer that, we are going to have to go look into the many different economic indicators.

[As I type this, I am actually hearing Anderson Cooper say “No one alive has seen conditions as bad as we are seeing right now.]  Dood!

I am going to make this a recurring theme here at TarHeel Red.  I want to come back and visit how bad we have it compared to our recent past and our historical past.

Let’s look at one; Unemployment.

We are currently at 7.2%.  This represents the highest rate we have been at since……the Great Depression?  No, not even close.  Unemploymenet was higher as recently as January 1993.  IN fact, the current trend is that we have only 3—THREE—months of rising unemployment.  If you wanna go a little more negative, we are at 8–EIGHT—months of rising or static unemployment.    This compares with 11 such months as far back as, again, 1992 and 1993. In fact, there have been 81 months of higher unemployment since 1980!

Imagine that.  As recently as 1980, we have had 81 months of unemployment higher than we are seeing right now.

Do you see this in the media?  Are we hearing that, yes, we are seeing a rough patch but things seem to be alright so far?  No.  The main stream media is continuing to regurgitate this mantra of worst ever, worst of our lifetime, worst since……

So tell me.  How bad is it?

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I Can’t Put My Finger On It

Posted on January 19, 2009 | Leave a comment

I am a big big believer in people helping people.  In a community coming together to help their neighbors in need.  In is through thiese efforts that our society is to help each other; not through taxation and government programs.

And so it is that I really admire and respect the work that Habitat for Humanity does.  They gather volunteers from the community, obtain donated money and build homes for people that are unable to afford them in the conventional manner.  These homes are provided in the form of interest free loans.  Further, because the materials and time are often donated, the actual cost of the home is reduced even further; sometimes half.

However, I can’t shake the feeling that organizations like these are just beside themselves at the prospect of an Obama Presidency.  And so it is that I have to chuckle at this:

Paragraphs rendered

To qualify for a Habitat home, a family of two must earn between $28,000 and $30,000 annually. For a family of three, earnings must be between $31,000 and $33,000. A family of five would have to earn between $35,000 and $37,000.

“These people clearly demonstrate a need for having a house built for them,” Hoke County Habitat board member Daphne Graham-Dudley said. “They do not meet the income levels.”

Habitat offers interest-free loans to the homeowners, who in turn make payments back to Habitat. The group relies on homeowners making payments so they can have funds to build other homes.

“Those people have to pay those loans back, because it won’t work if they don’t,” Hoke County Habitat President Bill Evans said.

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Posted in Economy, Politics: North Carolina

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Thoughts on the Bailout

Posted on January 17, 2009 | 1 comment

If instead of taking $850,000,000,000 [that’s a lot of zeros!] to spur the economy in the hopes of fixing things, we could, instead, take that $850,000,000,000 and invest it.  Just invest it.  Let it sit.  Even if we only make 5%, that’s still $42,000,000,000 a year!  In other words, we could literally create 425,000 jobs that pay $100,000 a year and NOT spend a dime!

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Posted in Economics, Economy, Politics: National

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Too Rich for Words

Posted on January 15, 2009 | Leave a comment

So, this morning we had a group of Acorn activists gather at the court house.  Their purpose?  To lobby on behalf of people who are facing foreclosure.  Their desire?  Well, according to this article, they are hoping to raise awareness of Barack Obama’s call for a 90 day moratorium on foreclosure.

This is awesome.

ACORN lobbing to delay home foreclosure proceedings on the very folks that they lobbied to get the loans in the first place.  Only in America.

Michael Delossantos, N.C. ACORN’s legislative director, said this morning that their effort across the country today was to “help save the American Dream of home ownership.”

It was ACORN’s involvement that helped contribute to the situation that we are in today.  Exactly why should anyone pay attention to this organization?

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Posted in Economy, Lobby/PAC, Politics: National, Politics: North Carolina

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The State’s Budget

Posted on January 14, 2009 | Leave a comment

Having been recently sworn in, the Govna is faced with a budget shortfall of nearly 3 billion bucks.  This on a total nut of 21.5 billion.  We are currently budgeted to be just about 10% short.  Now, to be sure, tax revenue is down, how could it not be?  With unemployment at a rate we haven’t seen in quite some time, the state is simply pulling in less money from fewer people.  Understandable.  Same could be said for corporate and sales tax.  I get it, tax revenue is down.

But serious, 3 billion down?  Where else did we go wrong?  Where are we spending the money that we didn’t have.

The News and Observer reported on this here.  They do a fair job showing the loss of revenue, but come up short on the whole “spending side”.  How are we going to manage our way out of this?

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Posted in Economy, Politics: North Carolina

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This Should Actually NOT Surprise You

Posted on January 13, 2009 | Leave a comment

This should not surprise you.  Make you mad?  Sure.  Surprise you?  No.  And if it does, then you haven’t been paying attention to how the whole thing works.

Quoting in pieces:

General Motors Corp.’s chief operating officer said Monday that the automaker has presented a worst-case scenario to Congress in which it would need more money than the $13.4 billion already allocated by the Treasury Department

UAW President Ron Gettelfinger has said the union will approach President-elect Barack Obama’s administration to end what he called unfair requirements in the loan terms for concessions from the union.

U.S. Rep. Barney Frank, D-Mass., has proposed getting rid of a requirement that GM and Chrysler negotiate labor cost parity with foreign-owned automakers that have U.S. factories.

First, our Government gave these companies money out of the TARP fund.  Still not sure how in the hell that works.  I thought the TARP money was meant to be lended to banks and financial institutions; not private car companies.

Before you ask, the reason banks and financial institutions get money and not car companies is that our economy is a Capitalist one, not a Automobilist one.

Then,  when we began to consider giving these failed companies money, everyone knew, just KNEW, that their model was not going to support business as usual, even with all of this money.  But, in the end, we gave it to ’em anyway.  And now looks what has happened.  We are into them for all these billions of dollars and now we have to keep going; keep doublin’ down.  Why?  Cause we are suckers.

So now, this is not surprising.  Sure makes me mad though!

Oh, and for a good read on the most maddening of those that are maddening, read this.

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Posted in Economics, Economy, Politics: National

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Quid Pro [Not] Quo

Posted on January 12, 2009 | Leave a comment

Serious!  Stones the size of cookie jars!

This from the American Bankers Association:

As part of an agreement reached Thursday with key Senate and House Democrats, Citigroup has agreed not to oppose legislation that would allow bankruptcy judges the authority to modify mortgages that were set up prior to the enactment of the bill. “The ABA has consistently opposed proposals that would give bankruptcy judges broad authority to unilaterally modify the terms of mortgages,” the bank lobby wrote in a statement. The majority of ABA’s members are banks with less than $125 million in assets.

Now for the quiz.  Who should be ashamed here?

pssst…..key sponsors, Sen. Richard Durbin, D-Ill., and Rep. Brad Miller, D-N.C., are hopeful the measure will be included as part of President Elect Barack Obama’s stimulus bill

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Posted in Economy, Politics: National, Politics: North Carolina

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