OT: Makin' Money?

First, I apologize for another OT post. I did put "OT: " in the subject for all who do not wish to read OT posts.
Some time back I stated that I expected the Dow to reach about $7500. Today it dropped $444.99 (5.56%) on top of its previous losses - to $7552.29, just $52.29 above that expected point. Of course, some nay sayer came right back and told everyone how stupid I was, etc. etc. etc.
I am not proud of this and sincerely wish I were wrong. I revise my estimate to about $7000.00, possibly even lower!
America is being taken over by degrees, but the burner has been turned up a bit, so we're going to see things accelerate.
The Amero is supposedly waiting in the wings ready to be introduced. The USD, Canadian Dollar and Mexican Peso will probably have to be traded in for Amero's at some preset ratio.
A globalist government is in the process of being set up right now. There's a process called creeping gradualism. It has been "creeping" up on Americans at least since 1913.
The globalist government will be established - and actually already exists as a "shadow government." This has to be. But it will be short lived and probably not last over one decade after it's official acknowledgment and installation.
Hang tough and keep looking up.
Some in the market will wish they'd sold all their stocks and invested in something a bit more tangible, even bolts and nuts. The way ammo has gone up over the last few years it would have been a far better investment than the market, except for the fact it would have to be warehoused and protected from the elements and thieves!
Let's still hope I'm wrong, but don't believe the nay sayers are all right!
Al
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wrote:

<snip>
-------------- If it was all a plot that would be the good news, because it would mean somebody was in charge.
The bad news is it appears that the no-loads, d**k weeds, f**kwits, and just plain crooks "screwed the pooch" and, like cockroaches, spoiled far more than they ate or carried off.
The news media puts the best possible spin on things, but the comparison of a 7,500 Dow in October 2008 to a 7,500 Dow in March 2003 is meaningless because the critical item is the actual value of the stocks, i.e. what you can buy with their cash equivalent.
Thus these index values should be adjusted for inflation. The most widely used and accepted inflation index is the CPI-U, and you can look-up and download in text or xls format at ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt {Be reminded the CPI-U understates the actual inflation rates/effects, so what follows is a best-case.}
October 2008 CPI-U index 216.5 [actually 2.165] March 2003 CPI-U index 184.2
a 7,500 Dow in Nov 2008 is 7,500 / 216.5 = 3,464 in 1982-840 dollars and 3,464 X 184.2 = 6,381 in March 2003 dollars of equivalent purchasing power.
While a 7,500 Dow in March 2003 would be 7,500 * 215.5/184.2 or 8,815 in Nov 2008 dollars of equivalent purchasing power.
==>The further back in time that you go for the comparison, the worse it gets, thus the inflation-adjusted "value" of GM and Ford stock is *BELOW* what it was in the depression.<== Given the wage levels then prevailing, an individual would need to work several hours on a GM or Ford assembly line to buy a single share, while currently even a hours work at minimum wage will buy several shares.
When this is pointed out to the "stock floggers" their usual reply is "you didn't include the dividends" to which I reply "so what?" [I didn't include capital gains tax effect either.]
What we are comparing is the value of a bundle of stocks today with an equivalent bundle in the past, in an attempt to gage the amount of capital created or destroyed.
One of the high points of the automotive "rescue" hearings was when Pelosi told the Detroit CEOs "you show us your business plans, and we'll show you the money." The hearings have been recessed until December, but the lack of immediate availability of a finished restructuring/reorganizations plan [like out of their pocket or briefcase, possibly on a CD, with a copy for each Congress person] by any of the three executives tells me all I need to know.
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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F. George McDuffee wrote:

NOTE 1

NOTE 2

Note 1: True. I mentioned before there was one way to avoid the 7500 bottom and we would not like it. Just go into hyper-inflation where you get a wheelbarrow full of money on Friday to get a bag of groceries at the store.
Note 2: Also true on the high point. Talk radio has made a big deal, and rightfully so, about the "big three" going to the meetings in their private jets and $5000 suits with cup in hand to beg poor, almost already strangled taxpayers for a handout then getting back into their private jets to attend their daughter's recital that night hundreds of miles away....
If it weren't so serious I'd say it was really funny the way these big wheels have tried to manipulate the system. I realize they were often hamstrung by greedy union bosses who basically said, "You give us what we want or we'll walk off the job and cost you millions of dollars for every day you wait to make up your mind to see things our way!" The unions are probably as guilty as the board of directors who voted multi-million dollar bonuses to their bosses each year - and should share in the debacle.
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wrote: <snip>

------ This sounds good and has been repeated so often that it is approaching big lie status. [Repeat it often enough and it becomes "true."]
The problem is that Enron, Global Crossing, Lehman, AIG, WaMu, Countrywide, etc. etc. not only did not have a UAW local, they had no union involvement at all. Where a union didn't exist an alternative scape goat has to be found. The "mark to market" provisions of SarBox requiring honest accounting is a favorite. "If you would just let me cook the books like I used to" is a favorite excuse.
Unions are just the capitalist system in action. I buy as cheap as possible, you sell for as much as possible. The Union negotiators out foxed the corporate ones, and the company had to share. None of the "its my bat and its my ball, and if you don't play nice like I want you to, I'll take 'em and go home" BS. Same thing as the IAM and Boeing.
Why would you want to do anyone any favors that had hired goons to beat the c**p out of your father when he worked there, is currently in the process of stiffing you every way they can on contractual and customary benefits, and has a long history of making promises they can't or won't keep? [FWIW, to the extent possible, it appears the Detroit auto makers also treat their vendors and dealers the same way, e.g. the thread about Ford's diesel engine supplier. http://www.detroitnews.com/apps/pbcs.dll/article?AID=/20070227/AUTO01/702270347/1148 ]
Their employees reasonably enough see no reason their wages/benefits should or must be cut to "save the company" when the management compensation, benefits and "perks" stay the same, or even increase [such as a huge up front signing bonus] for another "suit" parachuting into the corner office.
In GMs case they have sold the union a "bill of goods" about turning over a new leaf at least three times in the last few years in return for "flexibility," specifically the Fiero program, the establishment of the GEO division to make compact cars and learn the Japanese methods, and the Saturn program to apply these lessons. In the case of their largely non-union white collar employees, they have replaced the defined benefit pension plan with a 401k, and have now welshed on the 401k contributions, and are unilaterally revising the retirement benefits, and in the process shifting much of their retiree health care costs to the taxpayers via Medicare, and cheating the retirees out of the rest through higher co-pays and reduced coverage.
It is a truism but never-the-less true that a company almost always gets the union they deserve. The reason the labor relations between the Detroit auto makers and their unions are so poisonous is the long history of management abuse, physical violence, exploitation, and lies.
If the transplant auto makers start to get "cute," they will face the same problems, however it appears they are more enlightened and do not have the long history/reputation in this country of worker exploitation/confrontation that the Detroit auto makers do. Indeed, the wage/hour laws and work place safety/OSHA regulations now in place will most likely save these companies from themselves in this regard.
One final thought, if the Detroit auto workers get paid twice as much as the transplant workers, it means they are paying twice the income taxes, making twice the social security payments, and spending twice as much in their local economies.
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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On Thu, 20 Nov 2008 22:58:05 -0600, F. George McDuffee

------------- More on this critical topic: ------------ Fed Pledges Top $7.4 Trillion to Ease Frozen Credit (Update1) By Mark Pittman and Bob Ivry Nov. 24 (Bloomberg) -- The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago.
The unprecedented pledge of funds includes $2.8 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the only plan approved by lawmakers, the Treasury Departments $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.
When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, some Congress members are calling for the Fed to be reined in. <snip> ------------ for complete article click on http://www.bloomberg.com/apps/news?pid 601109&sid=arEE1iClqDrk&refer=home
One of the major current recipiants of the taxpayer largess is Citi Bank. ----------- Citigroup Gets U.S. Rescue From Toxic Losses, Capital Infusion
By Bradley Keoun
Nov. 24 (Bloomberg) -- Citigroup Inc. received a U.S. government rescue package that shields the bank from losses on toxic assets and injects $20 billion of capital, bolstering the stock after its 60 percent plunge last week.
The second-biggest U.S. bank by assets surged as much as 64 percent in New York trading after the Treasury, Federal Reserve and Federal Deposit Insurance Corp. announced the aid plan in a joint statement. In return for the cash and guarantees, the government will get $27 billion of preferred shares paying an 8 percent dividend.
The regulators stepped in to protect Citigroup from losses on a $306 billion pile of troubled U.S. home loans, commercial mortgages, subprime bonds and corporate loans when the firms tumbling share price sparked concern that depositors might pull their money and destabilize the company, which has $2 trillion of assets and operations in more than 100 countries. The $20 billion of new cash comes on top of a $25 billion infusion the bank received last month under the Troubled Asset Relief Program, passed by Congress to shore up the financial industry. <snip> ----- for complete article click on http://www.bloomberg.com/apps/news?pid 601087&sid.2gApqozI8&refer=home
No one knows or even says they know how many more of these "pillars of capitalism" are tottering houses of [credit] cards. ----- Citigroups Capital Was All Casing, No Meat: Jonathan Weil
Commentary by Jonathan Weil
Enlarge Image/Details
Nov. 24 (Bloomberg) -- Over and over, as its stock price plunged last week, Citigroup Inc. repeated the same tired line. Citigroup has very strong capital, the bank kept saying.
Its capital was so strong that the New York-based lender yesterday was ironing out yet another federal bailout. One lesson here is: Theres something very wrong with the way Citigroup and the government measure capital.
To see why, lets dig into just one portion of Citigroups capital that has been soaring in value this year. Its called deferred-tax assets, or DTAs, which now make up a big part of Citigroups book value and Tier 1 regulatory capital. <snip> Little Capital
-- The Tier 1 measure excluded $10.8 billion of paper losses on various securities and derivatives, even though these reduced GAAP equity. It also included $12.7 billion of intangibles.
==>So, in truth, Citigroup had little, if any, real capital, even if the values for all its toxic loans and mortgage-related investments had been accurate.<== {emphasis added} Most of the above-listed items wont help the bank absorb losses. Rather, they are the kinds of things that cry out for more capital.
What we need from Americas banks is for their leaders and regulators to start speaking with credibility. <snip> --------- for complete article click on http://www.bloomberg.com/apps/news?pid 601039&sid=az2Y5BBLNYj8&refer=home {Where is "mark to market" when we need it?"
What is clear is that there is no more "free market" in action [if there ever was] and winners and losers are now being chosen by Washington.
On "investing" ------ Goldman, GE, GM Invite Us to Play a Rigged Game: Jonathan Weil
Commentary by Jonathan Weil Enlarge Image/Details
Nov. 20 (Bloomberg) -- The fleecing knows no end.
Take a look at GM's 8.375 percent bond due in July 2033, and feast your eyes on the new world of American capitalism. Yesterday's price, at about 15 cents on the dollar, tells you the market believes GM will last long enough to make a little less than two years' worth of interest payments.
Were it not for the chance of a government bailout, in lieu of an imminent Chapter 11 bankruptcy filing, the bonds would trade for much less. And there lies the truth about what America's capital markets have become: a rigged game.
You can see it all over. Nobody who knows anything about General Electric Co. actually believes it's a AAA credit. And yet the raters at Moody's Investors Service and Standard & Poor's continue to give GE their highest mark. Meanwhile, the company just landed government insurance for as much as $139 billion of debt for its lending arm, GE Capital Corp., which also is rated AAA. If GE were really that strong, it wouldn't need the help. <snip> ************************************************ Advance Knowledge
So, for the time being, the clearest path to making money in the public markets is to know in advance what the government plans to do next with which companies, and when -- and then trade on it. Let there be no doubt: Plenty of people with access to such inside information are enriching themselves this way now. *********************************************** <snip> for complete article click on http://www.bloomberg.com/apps/news?pid=newsarchive&sid=at5FqZ7Gr0nw
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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<snip>
Before we get carried away with numbers, what do they mean "pledge of funds"? So far, the guarantees and loans have only resulted in a very small fraction of the big numbers winding up as "costs," according to several sources. This "pledge" sounds like some kind of insurance guarantee, which one would expect is intended to ease liquidity and credit because it reduces risk for the various players. Whether the insurance is likely ever to be invoked is an entirely different matter.
Do you know what these "pledges" amount to?
-- Ed Huntress
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On Mon, 24 Nov 2008 11:11:55 -0500, "Ed Huntress"
<snip>

----------- No, and no one else does either.
What is clear is this is the rationale that took down Lehman and AIG, and appears to be taking down many of the other banks, brokerages, private capital, and hedge funds.
Their mathmatical risk analyis models appear to be masterpieces of econometrics, with one fatal flaw, namily the assumption that financial/fiscal events are distributed according to a normal/Gaussian distribution, when in fact these appear to be much more closely modeled by the Cauchy/Lorenz distribution, which has much "fatter" tails, and much higher probability of extreme values/events.
What is puzling is why all these people thought they were smarter than the Noble laureates, Merton and Scholes [the Black, Merton, and Scholes option pricing model, later extended to derivatives] http://en.wikipedia.org/wiki/Black-Scholes http://en.wikipedia.org/wiki/Long-Term_Capital_Management Their hedge fund "Long Term Capital Management" [which was anything but] was the first to "crash and burn" as a result of this "small" error.
The other institutions that followed their model are now in the process of following them over the cliff.
For additional information on the application of the Cauchy/Lorenz distribution to finance and other social behaviors see (Amazon.com product link shortened) http://www.bearcave.com/bookrev/misbehavior_of_markets.html http://books.google.com/books?id=DPwBTj99a7UC&dq=%22The +(Mis)behavior+of+Markets%22&pg=PP1&ots=UxXVTZ1yar&source=bn&sig=uhX4GYszTSi2sXn4Xw8Wa_THj3M&hl=en&sa=X&oi=book_result&resnum=4&ct=result
I have already posted my view that while a lack of liquidity is indeed a major symptom of the current economic situation, it does not appear to be the cause, but rather the most obvious and immediate symptom of the underlying problem of insolvency of large numbers of organizations and individuals, who are discovering that their assortment of IOUs, hot checks, and "collectables" such as "Beanie Babies" are in fact worthless.
http://seattletimes.nwsource.com/html/businesstechnology/2002020751_beaniebabybubble31.html
http://traceysmarketupdate.com/2007/09/25/anatomy-of-a-bubble-the-beanie-baby-mania /
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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On Mon, 24 Nov 2008 11:11:55 -0500, "Ed Huntress"

--------------- Whatever the amount it just went up another 800 Billion. ------------ Fed Commits $800 Billion More to Unfreeze Lending (Update3)
By Scott Lanman and Dawn Kopecki
Nov. 25 (Bloomberg) -- The Federal Reserve took two new steps to unfreeze credit for homebuyers, consumers and small businesses, committing up to $800 billion.
The central bank will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. ==>It will also set up a program of $200 billion to support consumer and small-business loans, the Fed said in statements today in Washington.<=={emphasis added <snip> ----- for complete article click on http://www.bloomberg.com/apps/news?pid 601087&sid=agGWOuloIFxw&refer=home
IMNSHO a major cause of the current economic dislocation was [and is] the over reliance on [abuse of] credit. The Fed solution -- "more hair of the dog that bit you."
Why not some direct relief to the consumers such as the re-imposition of the usuary laws [capped at 1% per month / 12% apr for the least creditworthy, with 8% for the average], with strict limits on the amount that can be charged for late fees, overlimits, etc.
The American citizens are taking big "cramdowns" in their 401ks, mutual funds, and home equity, so why not spread the pain around a little and "cramdown" at least the terms and conditions if not the actual debt. If the banks and credit card companies can borrow at 1-1/2% from the taxpayers, they can afford to lend to the taxpayers at less than 18-22%.
The only thing these huge "injections" of capital [c. 300-800 billion] appear to be producing is a one day surge in the stockmarkets, and this may be just allowing the "insiders" to unload their "crap" securities on the public.
This is real money. Just think how much "health care," "infrastructure improvement," or "energy independence" this could have purchased, instead of bailing out the pigs at the top that caused the problems in the first place.
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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F. George McDuffee wrote:

Let me see now...
Wasn't it CitiBank that moved out to South Dakota...
* bought the state government and had the laws changed so they could
* increase interest rates
* increase fees,
* do business across state lines,
* reduce the minumum payments on credit cards
* started the "global default" plan to run interest rates sky high.
I simply will not do any business with them - ever again.
I'll stick with my credit union - as long as I can...
http://en.wikipedia.org/wiki/Citibank
and
http://www.mcn.org/e/iii/citilord.htm
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On Tue, 25 Nov 2008 11:26:25 -0600, cavelamb himself
<snip>

<snip> ----------------------- Indeed, but the problem is that almost all [I can't think of any that didn't] of the major credit card issuers did the same thing.
This is what the "race to the bottom" is all about. The state/nation that has the least or most "flexible" regulations will always be the one to "get the business" [in several senses]. In many cases, the "nominal" business presence is a mail drop, while then actual business domicile remains where it always was, e.g. Citi corp headquarters remained in NYC.
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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Let me try again, George.
Newsweek says the average American family has about $9,000 in credit card debt.
Home forclosures are up because people bought houses that were more expensive than they could afford.
Now comes the federal government which wants to get the economy going by making more credit available.
Which for some obscure reason in not working.
Well, gee, Mister Wizard....
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That's not quite it. The primary idea is to make more credit available to credit-worthy borrowers, and to "unfreeze" purchasing by some of those less worthy borrowers, so we don't wind up with an unemployment spiral. Going further into debt is better than having everyone out of a job and declaring bankruptcy, if you can get the economy moving by doing so.
It's a real moral-hazard situation on one hand, and a certain deflationary spiral on the other. The moral hazard is worth it. It's like the good news and bad news of collapsing oil prices.
It takes a lot of guts for the administration. I hope Obama's team will stay the course.
-- Ed Huntress
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Ed Huntress wrote:

Ed, when the situation changes, the model needs to change too.
I suspect none of the previous economic models are valid in this situation.
I have no problem getting all the credit money I want from my credit union.
They will still give me more than _I_want_to_repay_.
I (as John Q Public) don't want to buy stuff (especially expensive
stuff! especially with borrowed money!) at today's prices -
which I know to be inflated beyond any hope of reason.
Especially if I had any debt already. (Personally I don't - but that's just me).
Why risk losing everything by over estending yourself again?????
As we all watch in horror, the feds are pouring good money after bad.
We know there are only two possible options to this action.
The Feds will have to increase taxes.
Or, Print more paper and devalue what's in my pocket.
Probably both.
You watch the economic reports for the "Christmas Shopping Season" (tm).
The little people will drive this recovery - or lack thereof...
--
(remove the X to email)

"If you torture statistics long enough
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"This situation" is kind of complex. As for the recessionary part of it, the plan that Obama's advisors have come up with is pretty much Keynesian.

Good for you. Where are they getting the money they're lending to you?
Unless things have changed, credit unions operate like small, old-time banks. They're using individual deposits as reserves, and loaning out money to individuals. There are a lot of small banks around the country that are doing relatively well right now, using that old-time model.
But they're not in the mortgage business in a big way, and they aren't a real source of capital formation for business. They can thrive in this economy because there is another layer -- actually several layers -- above them, that are doing the real capital formation and business lending. Credit unions and small banks depend on a healthy level of economic growth going on around them.

Most things are pretty cheap. Food is not, but look around at clothing, residential building materials, etc.
As someone who doesn't want to buy stuff, you're part of what's causing the downturn. <g> I say that tongue-in-cheek, but I think you recognize the irony: This is an economy that depends heavily, something like 70%, on consumer purchasing. Without it, there is nothing for anyone to do. Unemployment ran up to 25% or so in the '30s because no one was buying, company's laid workers off, and then nobody had a pot to pee in.

Who is it you're talking about here?

There's really no choice. The question is where to pour it. Nothing is certain there. And it isn't certain how much will have to be poured.
What *is* certain is that we're on a deflationary sleighride downhill, and we know where that goes if we don't stop it: Depression.

Unless you know where to cut out enough spending to do the trick. (The answer is, nowhere.)

There may be some devaluation. But when our economy starts moving upward again, the value will return.

If you think about what you're saying, you mean that the consumers will start consuming, or we'll be up a creek.
-- Ed Huntress
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Ed Huntress wrote:

That's the bottom line.
But it's not happening.
And if it stays that was, which I expect it's going to for a while, well, then what?
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You stimulate the economy by tossing a hundreds of billions of dollars into it. If people are out of work, you create jobs -- with infrastructure projects, if you have to. If they're just short of cash, you give them tax rebates or tax cuts, and interest cuts. Whatever it takes.
When you look at the history of stimulus programs intended to overcome recessions, there are two things that most economists agree upon: they've always been too little, too late. Mostly too late. That's why Obama is gearing up for this "jolt," as he calls it. If pragmatic, non-ideological economists were running the program, it would have happened three to six months ago. And it would have taken a lot less than a trillion dollars worth of deficits to do it if it had been caught early enough.
There are three things that need to be done: People have to be employed. They need to have access to credit, whether it's mortgages or consumer credit. And they need to have confidence that the economy will be OK. More than anything, it's confidence that counts.
Then they're off and running. At that point you start watching out for inflation, and you raise interest rates as necessary to control it. It's mostly fiscal policy for stimulus, monetary policy to cool it off.
That's the basic program for consumption stimulus. There is no supply-side issue in the present situation; supply-side stimulus now would just throw money after a nonexistent problem. The problem is all on the consumption side, and confidence is the main part of it. As the economy warms up again, you have to keep an eye on the supply side as well. Stimulus may eventually have to be switched to the supply side. But not now.
And deficits, for the moment, are all but irrelevant. They have nothing to do with what's happening to the economy now. As soon as you can, you knock off the deficits, because they make it harder to apply fiscal stimulus when you have to. But don't even think about deficits when you're in a recession and deflation is setting in. Compared to the economic losses resulting from a deep recession, they're trivial.
-- Ed Huntress
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On Wed, 26 Nov 2008 08:20:35 -0600, cavelamb himself

Maybe because I dont own a credit card?
Gunner
"They couldn't hit an elephant at this dist..." Maj. Gen. John Sedgewick, killed by a sniper in 1864 at the battle of Spotsylvania
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wrote:

Because every lender will immediately stop lending. That will dry up consumer spending. Which will lead to a self-feeding series of layoffs. Which will plunge us deep into a deflationary spiral. From which we probably won't recover until you and I are dead and gone.
Other than that, it's a fine idea. d8-)
-- Ed Huntress
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On Tue, 25 Nov 2008 13:12:17 -0500, "Ed Huntress"

----------------------------- That's the old "its my bat and my ball, and if you don't play nice like I want you to, I'll take them and go home" threat.
Given that banks can't make any money if they don't lend it out, I seriously doubt that all lending would stop if the usuary laws were reintroduced and enforced. After all, the banks and other lending institutions made billions under these laws before they got greedy (and were enabled by the politicians).
If this is indeed the case, it is another reason to bypass these existing dinosaur institutions and channel the money/credit though new innovative institutions and processes, or existing channels such as reputable local banks and credit unions, with much lower overhead, lower or no bonuses/perks, and much less "baggage"/legacy costs.
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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wrote:

That's pretty much it.
Merchant fees (interchange fees) are now down to 1 - 2%. Annual user fees are no longer applied to most types of cards. Unless you limit all kinds of credit issuers across the board, the interest spread will eat up the credit card companies, especially if their business becomes marginal and creditors have other attractive options.
Add in operating costs (which could be reduced somewhat) and charge-offs, and customers at the lower end of the credit-worthiness scale quickly become a loss unless you can charge them a premium rate. But those customers buy goods. So if you knock off, say, 20% of the cardholders at the low end, you're looking at reduced consumer spending probably close to the double-digit range. That's enough to start or maintain a serious economic recession.

It doesn't take a stop to "all" lending to send us down the tubes.

The credit-card business is highly competitive. Given today's operating conditions, competition and cost issues would force them to cut services (such as those telephone operators who answer when you call to complain about a mistake on your bill), but that would be manageable. Then they'd probably start cherry-picking customers. Scrape off those low-end customers, and you've just knocked the hell out of retail sales.

The market now determines how the business works. If you want to avoid the fees and interest, pay your bill before the end of the month. But if too many of us do that, we'll start paying annual fees again. And most people won't or can't do it. So, again, there goes your retail sales.
When my parents had their store, 30 years ago, the merchant fee for AmEx was 6%; for MasterCard, it was 3-1/2%. Those are much higher than they are today. Of course, those costs showed up as higher retail prices. If you squeeze the balloon by cutting interest rates to credit card users, the air will just move over to merchant fees or to other customer fees.
And the final knife in the beast is this: Given today's global movement of capital, if you squeeze the credit card companies, they'll just move their capital overseas to a better market. Anyway you cut it, the US market isn't going to be very attractive for a long time to come. Unless everyone else tanks along with us -- a possibility -- capital is going to be looking for happier hunting grounds.
The point is, we already have a mechanism to cut consumer costs. Several of them, in fact. One is, pay off your credit cards in the same month. Two is to use your credit cards less. Three is to not use credit cards at all. The one that won't work is to have credit card companies carry your debt at tightly regulated interest rates. They'll just raise other fees, or, if you try to cut those off, they'll put their capital somewhere else.
That's the free market for you.
-- Ed Huntress
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