5 posts tagged “economy”

What is going on in the presidential race?  Democratic Senator Barack Obama went at republican Senator John McCain with both guns blazing in discussing the economy and I began to think:  “Finally, we will get to the real issues.” 

Boy oh boy was I mistaken.  I was all ready for Senator McCain (who is now known for being weak on matters of the economy at the worst time ever for that to be the case) to get with his advisors and start devising strong solutions for our economic woes.  Then I pictured this huge back and forth campaigning where two different plans that would both make some sense would be brought before the American people and we would all be thinking; “Wow, what great candidates.”

This however, was not what happened.  Senator McCain went back to that absolutely stupid “Gas Tax Holiday” idiocy that helped us all understand economy was not his strength.  Then Senator Hillary Clinton supported it also and some of the cooties of being economically illiterate seemed to get on her and her campaign.

I thought; “That’s it?  All of those campaign strategists and speechwriters and whoever else in his political entourage and that is it?”

But, no it was not.  Then he went back to this town hall meeting idea.  I admit it is a pretty cool idea, but seriously, one candidate is just going to dictate how another candidate is going to campaign for the entire summer and this other candidate is expected to just agree and go along with this?  (Is this one of those places where people on the internet us the letters “LOL?”

I personally believe that both candidates that are left from the two major parties have these gaping holes in their qualifications for president (particularly saying lots of things that neither of their voting records support), but if this is the best Senator McCain can come up with against a person with a gift for speaking and a charisma that attracts so many, Senator McCain will be reduced to a straw man for Senator Obama to knock over.

If there are any advisors to Senator McCain reading this, please gather some experts on the economy and draw up something substantial that will appeal to the public. Then spend some time educating Senator McCain on this plan.  Once that is done release him on the public with these fresh new ideas and a solution to a real problem in the here and now.  That will make him a solid candidate and definitely make the race more interesting.

I suppose Senator McCain may have such plans and be keeping them hidden is his grand plan to unleash this weapon of mass destruction on Senator Obama during these town hall meetings, but let’s face it, that is not going to happen.  An I am not sure if it were to happen that the results would be what Senator McCain expects.  I remember a debate between the Republicans that was televised on CNN that had an approval meter that was on the screen the whole time.  The relevant fact here is that almost every time Senator McCain spoke the meter shot down.  That went double when he got excited or agitated.

I think to win, Senator McCain better come up with more than the stuff he has put out there so far.

If Senator McCain does not retool his message, this will be one of those really boring elections where one candidate just sinks fast as soon as the votes start to be cast.  Today I was aghast at his lack of anything to say and found his whole message just plain boring.  

Reports are starting to flood in today that banks are starting to take the losses and cut the prices they will accept for foreclosed homes.  Is this a good thing or a bad thing?

For the moment this is a good thing. 

Well, the housing market is stalled and although the price of homes has fallen, the fact that banks have become far more cautious about lending for home purchases has cancelled any cuts in prices out.  This trend seems to have the ability to create a bottom to the falling housing prices, give hope to those who are looking for loans as the lower price makes it easier to get a loan, and as the homes move into the realm of extremely cheap, home sales will again begin to flow and everything will gradually drift back to normal.  Or, so we are being told.

If you are an investor looking for Good investments, what a deal a highly discounted house can be.  Hold on to it for a while and watch the money pile up.

The other side of this coin is that if you own your house, that value has not only dropped, but as this begins to take place, the value is about to go through the floor.  What was considered the best investment a person or family could make in many circles is about to become the worst mistake much of the American population has ever made financially.

Anyone who was already looking to sell their home is in real trouble.  The price is beginning to drop faster than your realtor can take a person through for a tour. And God help the poor soul who has something considered to be a “sub-prime” loan.  For that large segment of the population, financial ruin seems inevitable.

So weather it is the Joe Shmoe family from next door, up to the Ed McMahons and Evander Hollifields of our nation, this trend threatens to take us from bad to worse.

The thing I find to be astonishing is that there is a family who is in a home.  The economy is going through the toilet.  This family falls a few months behind in their mortgage because their family cannot afford all of the increases in prices, layoffs, etc.  rather than negotiate a temporary or even permanent alteration to the loan that is in place (probably at an inflated price) these banks would rather spend all of the money ant time to foreclose on the house only to sell it for less than half of the price this same bank was trying to get out of the family that was living in it to begin with.

Or in several of the cases this family has a loan payment that is a struggle but can barely be made until this sub-prime loan suddenly starts to change in interest regularly increasing the payments and forcing the payments of the family out of the reach of their budget.  Would it not make sense to freeze these increases in rate to stop all of the foreclosures that all of these banks seem to have such a fear of. 

If this were all there was to this, this would be a philosophy similar to chopping off your legs so that you can run faster.

The plan is clearly to write off the losses and to get our tax money to pay for it.  That means they get the house away from the family who is struggling to pay, get to sell the house to someone that can afford the new extremely low price (low price means lower payment), and by taking the losses, they can use the economy as an excuse to not only get the normal government breaks but to ask for more.  In other words the entire country foots the rest of the bill.

This seems to be the only reasoning for banks to accept such bad deals without putting a serious attempt at solving the problem.  I know that this is just the musing of a casual observer (and homeowner) but it seems to be the only explanation I can come up with for allowing the housing market to disintegrate as much as it has while taking so much of the losses. 

The problem with this (if it is in fact the case) is not with the banks.  Banks are business that exists to make money.  The problem lies with the lack of regulation to protect the American people from business practice that will hurt the American people and the world economy.  I think less legislation is okay if an industry is able to keep itself from hurting large numbers of American people.  Once an industry demonstrates it is not capable of governing itself in a manner safe for the American public that is where the government not only has the right to step in, but the obligation.

It is not the banks responsibility to protect the American people, it is the government.  It is our government that is letting us all get burned in the process.

If you are an investor, this is great.  If you are a bank this is a breakeven point and a slight improvement, if however,  you are a homeowner currently, this is the destruction of what you have spent your whole life working up to.  For that last group, I guess the hope is that you have enough income and a stable enough job to hold out until the prices come back up (if they do).

Our government is caught up in elections, partisan politics, and all other kinds of political blah, blah, blah.  The problem is that there are no plans to help American Citizens with the troubles we are having now and our government on all sides is caught up in ridiculous distractions that do absolutely nothing for what is going on with American citizens here and now.

President George Bush did his best with the stimulus package, but by the time the checks are getting to people gas is well over four dollars a gallon and the massive amount of people that are unemployed or in fear of soon being unemployed cannot afford to spend their stimulus checks shopping on frivolous knick-knacks simply to stimulate our economy.  This stimulus package was not a great idea and many of us knew it wouldn’t work the way that was planned, but at least it was some attempt at doing something.

President Bush today placed the blame for no other plans squarely on the shoulders of the “Democratic Congress” for not passing his other ideas such as making his tax cuts permanent.

The problem is that the parties are too busy with, ending primaries, preparing for presidential elections, global warming, fuel alternatives that will not be feasible for the average American citizen for five or six years, and so to be worried about such trivial matters as all of us loosing our jobs, spending every dime we have buying gasoline, and loosing our healthcare benefits.

This week we discovered that wealthy people who had good loans (as opposed to a sub-prime loan) were loosing their homes now also (the poster child for this is Ed McMahon of Publishers Sweepstakes and Tonight Show fame), unemployment is again breaking records (at 5.5% according to the Labor Department), the Dow Jones dropped over four-hundred points today, the NASDAQ dropped more than seventy-five points, oil prices broke the one hundred and thirty-seven dollar barrier but is now expected to go over one hundred and fifty dollars a barrel by the Fourth of July, houses are being foreclosed at record levels, the U.S. dollar is hardly worth the paper it is printed on and on and on.

I think I have figured it out, if everybody looses their houses and cannot afford to drive their cars, global warming will be reduced at record levels.  The American Public as a whole will be homeless and angry but at least Al Gore’s Nobel Peace Prize will not have gone to waste.

Our government officials don’t have time to be worrying about what “drama-queen” Hillary Clinton is going to do.  We are all eagerly awaiting the moment that she informs us that she has lost a race that we all know she has already lost (all except her and her advisors). 

There is endless partisan bickering and finger pointing.

The Democrats are spending all of their time on global warming and trying to prove that the Bush regime did all kinds of secret evils.  If he did or didn’t how is that going to help the economy or price of gasoline.  The guy is in his last few months, the country is going to a place very close to hell (I suppose partially due to global warming) and more than half of our government is focused on being a lynch mob.

The Republicans are busy having President Bush blame the rest of the government for not pushing through his half-baked ideas (but I have to admit, at least there are some ideas) and the rest of the party is busy separating themselves from the President to try to get Senator John McCain elected. 

Senator McCain first said that we should do nothing to help anyone, then he said to do mostly the same stuff that we are doing.  Then his party comes out and says; “Well, the economy is not his strength.”

It is beginning to cost more to go to work than people are making, and after these people loose their homes and file bankruptcy, there will really be no need to spend more getting to work than you make when you get there and these people are going to start quitting and looking for government assistance (and unemployment that will be charges to the people they were working for).  What then. 

I don’t care for or about the parties.  I do not care which one of these lackluster candidates becomes president.  I don’t care quite as much about what is going to happen five or ten years from now when I have to be concerned if my family and I will survive this year. 

I guess in Washington we are simply numbers and statistics unless you are a person running for office.  When that is the case we get attention (in the form of lip service) for a few months and then we are again reduced to pawns in a huge game of numbers.

Both of the main candidates are Senators.  I think the real race is to see which one can come up with something that can be done now (before that person is elected president or not) to help the American people.

Iraq is a war and clearly is not going anywhere in the next few months.  Global warming is the evil to end all evils; I get it!  But, it is going to be much more evil for me and my family if as the planet warms I am homeless.  I understand that we want to preserve the wilderness and the beautiful places and protect these places from all of the evils of drilling.  What is going to happen as the state and federal governments begin to loose funding to protect and maintain these areas because the gasoline is to expensive for their vehicles and they lay off the employees that didn’t already quit because it cost too much to get to work. 

All of the stuff they are worrying about are lower on the priority scale and both the Democrats and the Republicans area doing nothing.  The Democrats keep saying the Republicans are doing nothing about the economy, while they are doing nothing also.  The Republicans are finger pointing because their harebrained ideas are being held up by the Democrats. 

It doesn’t matter who is to blame, the question is who is going to actually do something sensible about what is going on here and now.

Imagine a person on a treadmill in workout clothes with a towel around his or her neck.  That person has on fancy designer running shoes and has a fancy pants MP3 player.  The only problem noticeable when the person is about to turn the treadmill on is that the person is facing the wrong direction reaching backwards to turn the thing on.  What is going to happen?

Today several respected economists came out publicly in opposition to the Gas Tax holiday proposed By Senator John McCain and later used by Senator Hillary Clinton to boost her campaign against Senator Barack Obama who opposes the idea.

Presidential hopefuls Senator John McCain and Senator Hillary Clinton have been pushing this Gas Tax Holiday in theory giving the American public a few month reprise from the High gasoline prices.  The plan involves eliminating the approximately nineteen cent federal gas tax and the approximately twenty-five cent diesel tax beginning Memorial Day all the way to Labor Day.

You may remember that when this idea was first proposed I posted a blog where I stated it was a bad idea.  I mention this because my view was not based on being an economist (because I am not one) but on simple common sense.  The truth is that if we come up with any idea that takes millions, billions, or trillions of dollars out of the national budget, the money has to come from somewhere to replace it (in this case we are talking about somewhere in the area of ten-billion dollars).  Nineteen cents is not worth some huge debt that shows up later to be paid for by taxing us.  The two dollars I would personally save a week is not enough for me to be willing to create a ten-billion dollar hole in the budget.

Today two-hundred top economists, four of which are Nobel prize winners, signed a letter completely rejecting this ridiculous idea.  This is the kiss of death for this stupid idea. 

Hillary Clinton has been trying to say she was the candidate most likely to turn the economy around and the polls have been growing in her favor in this area.  When I first heard her endorsement of this idea, I immediately knew she was not the economist she has been trying to sell herself as.  When she decided to put her stamp of approval on an idea about the economy that came from a candidate that states clearly that the economy is his weak point I realized she was capable of being just as ignorant as Senator Barack Obama was in associating with a certain Mr. Wright. 

Senator McCain has stated repeatedly that he is terrible with the economy (How can we take you seriously as a candidate at this point in history if this is the case?) so this is no surprise.  The surprise for me is that Sen. McCain and his campaign would decide that the place for him to come out of hiding and make his big stand was going to be on the battlefield of the economy.  I have to ask myself:  “Who though this would turn out well?”

Sen. McCain seems to end up in trouble every time he speaks publicly and the Republican party is sinking fast because of how unpopular the current presidency is.  If McCain is the current captain of the sinking Titanic why would Sen. Clinton jump on board the sinking ship. 

I do not give Sen. Obama as much credit as it would seem he should get for opposing the idea.  It would normally give us the idea that he is better in touch with the economy, but that is not the case. 

The truth is, the reason for his knowing this was a bad idea was because in the state that he represents currently, Illinois, they tried a similar idea and it failed miserably.  He simply knew it would fail because he was there the last time it failed. 

Again I say that I think that none of the three of these candidates is in fact a “good” choice.  I feel it is simply a matter of which one is the lesser of the evils.  In the case of the “Gas Tax Holiday” I score it this way:

Senator John McCain  -  Minus one-half point (only a half because I already knew he was terrible in terms of the economy)

Senator Hillary Clinton – Minus two points (this was such a stupid move on her part for so many reasons I think only taking two points away is being generous in trying to be fair)

Senator Barack Obama – Plus a half point - (he didn’t have any knowledge either way about the economy, he just got lucky)

As a side note, the Democrats, as a party, are working on drafting a proposal to help individual American’s at the pump without being such a stupid idea.

During the first quarter of this year the economy grew a whopping .6% (of course I am being facetious and that is incredibly small growth) which means that technically we are not in a “recession” as a nation. Wow! What great news! What is the word that describes a state where that is true and the economy is still miserable?

As far as economists are concerned a “recession” is when the GDP (Gross Domestic Profit) or economic growth decline for two consecutive months. If this is sustained for a long period of time then this is considered a “depression.”

As far as the general populous is concerned, a “recession” is when the overall economy is bad for any period of time and a “depression” is when this is the case for a prolonged period of time.

The real issue at hand here is that because the general public and the government are speaking in different languages (really just using the same words but differing definitions) the fact that government officials are insisting on making it clear that there is not a recession serves only to aggravate the situation. The impression that the general populous receives is that the government has no idea what the people are going through.

By design, the indicators used to determine if the nation is in a recession or not are can only make that determination after the problem has been sustained for a quarter of the year. If you look at this in terms of the current “downturn” or whatever it is properly designated, this indicator could say there is no real problem and common sense would say otherwise.

This indicator is a good indicator for government insiders and economists but is a terrible indicator for the general public. Also the word “downturn” is almost an offensive term as it seems to minimize the challenges of the people of the nation. It sounds so much like “this is a bump in the road,” which is a terrible irritant if you have just paid for dollars a gallon for gas, you are about to loose your home and join several of those who have lost their homes in your neighborhood, and your local grocery store is rationing rice etc.

To me, this terminology says: “We understand that large percentage of you are suffering terribly, but overall at least half of the population will be able to bounce back sooner or later.”

This is a great outlook if you look only at numbers and what the end result is, but as soon as one looks at the people involved with any level of compassion this is not okay.

I personally did not vote for politicians to simply balance books, I vote because I want people in office that care about my family and that American people. Using the existing indicators that are used by our government to determine if and when a response is necessary to save our economy creates a situation where our government is terribly late in being reactive and not at all proactive.

The current system takes a bad situation, and tells the world that the government is out of touch with the American People which can only serve to lose the consumer confidence and make the situation go from bad to worse. Then, months and possibly years later, when the current indicators finally determine that the problem has been sustained long enough to warrant a response, the sudden response and media blitz creates a certain sense of panic and again aggravates the situation.

Clearly the current indicators only work in a limited capacity and something else is needed. Maybe there should be an indicator that tells us when an indicator is not helpful or does not do enough. What happens when an indicator repeatedly indicates too late?

For example, imagine a jet that had radar and electronics that could only sense other aircraft in the air after they had collided and could not show you the other aircraft prior to contact. Wouldn’t the pilot be better off looking out the windows of the plane rather than relying upon this indicator? This is basically how the current system works. Our government would be better off just looking out of their windows and ignoring these indicators.

What can we do to change this?

I propose that there should be some kind of “Economic Pain and Suffering Index” that measures how much of the population is actually having a tough time making ends meet.

Something of this nature would indicate trends and possible turns in the economy early enough that preventative measures could be taken prior to there being undue stress upon the people and the nation as a whole and would clearly show that the government is not as out of touch with the American People.