With each day I read the tea leaves in the bottom of my teacup and instantaneously I have a panic attack. I don’t know about you, but this is not looking good at all. The Stock Market is not my barometer as to what the economy is doing, but it is never far from wrong. I check the reports from Wal-Mart to get an indications of where the country is going – don’t laugh! Think about it, if Joe the Plummer isn’t buying the best that he can purchase for the lowest price that he can find, Wal-Mart is where he will be for the best price.
When the Republicans decided to give away the money in the bank, where did it show up in the realm of economical statistics – within the stats put out for Sachs-Fifth Avenue that Christmas. Sachs had a seasonal increase of five percent in sales while Wal-Mart had a decrease of one point five percent. Clearly those that have the money will spend it, and predictably so in the places where it is indicative of who is spending of the money. Rich guys don’t go to Wal-Mart!
Secretary Paulson and the SEC guy – Christopher Cox have said with emphatics that they need ‘Bailout’ money to buy the bad debt from the banks and make the world start to go around again. Noticing that the world has not started to go around as predicted since we gave those two ‘hamburglers’ the money, I have to wonder if they really intend to give banks any money. On yesterday, Henry Paulson said as much. With seven hundred billion dollars of our money that he promised that he would spend a certain way that we all thought would be the right plan as stated by them, this guy is suppose to be doing what he said he was going to do. But he isn’t and he is telling us that he isn’t going to do what he said he was going to do – to boot.
Hank Paulson and his department are blowing the money and we are all watching as these guys do it. No money is getting to Main Street. No money is being used to take the toxic debt away from the banks. No money is going to people that want to make loans. Money is going to all the wrong people… shareholders, to finance the buying of other banks, to banks that don’t even want the money, and to, of all people, AIG. Why is the Bush administration allowing this BS to continue without complaint? Why isn’t Congress lamenting this gross misuse of government funds for frivolous crap?
Well, you have been placed on ‘Red Alert’ regarding this issue and as usual no one will shout out to their Congressman about this until it is too late. When Congress comes back to ask for another trillion to rescue the banks, you will know that you have been robbed by a sly slick criminal while you watched daily!
Showing posts with label banking. Show all posts
Showing posts with label banking. Show all posts
Thursday, November 13, 2008
Wednesday, October 1, 2008
I Failed Economics 101
The first time that I enrolled in Economics I failed because first of all, I wasn’t interested in economics, and secondly; I didn’t think that it applied to me. I actually didn’t know then what I know now – it does apply to me. Trying to make ends meet in your household requires that you get involved with economics, or you will not be living in your own house much longer. Knowing just the basics is enough to tell me that Congress is the last place that I would go to looking for help if I were in trouble financially.
In my house I pay the mortgage, the light bill, the telephone bill… you know the drill. I also have incidentals that I must pay – stuff that comes up suddenly. In a given month, after paying what I must pay, I try to save a few dollars for that emergency that comes up. Emergencies are – the water heater failing, the muffler fell off the car, or I had to have an operation. You have to have a few bucks saved to carry you through until you are better. When you are living from paycheck to paycheck you can’t respond favorably to a crisis, in fact, situations just as I have described are what take most of us out of our comfort zone.
The government is in the same situation and you have but to look under that rug to see that I am not wrong. All of the telltale signs are there. They can’t balance the budget because they are spending a gross amount of money fighting two wars. The tax base is shrinking every month as more and more workers are losing their jobs, so they don’t have any money. China and the Arabs own us because we have borrowed so much money to finance the war and all the other things that emerge as a result of those wars. If you don’t believe me, ask your Congressman to give you a list of all the programs that are being shorted support in the National Budget. Check with the GAO… they are the people that keep track of where we are spending the money.
Borrowing seventy billion dollars is not bad if you have a plan to get yourself out of debt with the money. Ideally, you want to pay off your debts and have a little left over so that you don’t go back in the hole. Is that the case with the bailout… oops buyout? No! It is not the case. I tell you that the real problem with our economy is that we don’t have cash flow. Others are telling you that we have a problem because we don’t have liquidity. What is the difference between liquidity and cash flow?
Liquidity, in economic terms, is: capable of covering current liabilities quickly with current assets. That would be the savings thingy… okay. If you don’t have cash, you can’t do anything without having to put everything else in a strain. The recovery strategy must take into consideration how to maintain cash flow. In the bailout/buyout scheme we are led to believe that if we give the cash to the people that flubbed the cash flow thing to begin with everything will be alright. In other words, the bank will have more money to loan to the people who will in turn default on the loan because they and their neighbors are losing their jobs and there is no cash flow.
Get my drift? You can’t absorb all of the delinquent loans by giving the banks more money and taking away the bad debt. That is not how you solve the liquidity problem.
Cash Flow – 1: a measure of an organization's liquidity that usually consists of net income after taxes plus noncash charges against income. 2: a flow of cash; especially: one that provides solvency
In this economy, it now works from the bottom up. ‘Joe Six Pack’ gets paid on Friday. He buys a case of beer from the liquor store, dip and potato chips from the 711, fills up his gas tank and heads home. His buddies got paid and they stop by the Meat Market for hamburger, the cleaners for their dry cleaning and what have you before continuing on over to have a cookout with their friends.
That ladies and gentlemen was a small example of cash flow. It is miniscule, but represents my point. Cash flow originates with ‘Joe Six Pack’ getting paid on Friday. He pays his mortgage – the bank gets cash! He pays his car note – the bank gets cash! He buys a case of beer – the retailer gets cash! The name of the game is ‘trickle up’ economics because the money is no longer flowing down as it did before big business out-sourced all of the jobs. Take a good look at the ISM Index and you will know without a doubt that we are in deep, er!!! you know what I mean!
The ISM Index is, for those of us that have never heard of it, the government’s pulse indicator for gauging the output of our manufacturers – the goods they are producing/manufacturing. It is also a good indicator as to whether the manufacturing community will be hiring. It does not lie! I am sorry, but I have to tell you that it is about to flat line. Yeah! We are not producing a darn thing that will make a difference when it comes to generating enough jobs to support the economy. You see, all of those fifty to sixty thousand dollar jobs went overseas to people willing to work for a fraction of that amount. You know - the sweat factories in places like in Myanmar.
I wish that I was wrong about this one, but I don’t think so! I jumped through hoops trying to tell everybody to say no to the 'big tax cut’. Everybody laughed at me as they went to the bank. Some of those same people have moved on to smaller, less pretentious dwellings because they don’t have that fat income tax refund anymore, nor do they have a job.
In my house I pay the mortgage, the light bill, the telephone bill… you know the drill. I also have incidentals that I must pay – stuff that comes up suddenly. In a given month, after paying what I must pay, I try to save a few dollars for that emergency that comes up. Emergencies are – the water heater failing, the muffler fell off the car, or I had to have an operation. You have to have a few bucks saved to carry you through until you are better. When you are living from paycheck to paycheck you can’t respond favorably to a crisis, in fact, situations just as I have described are what take most of us out of our comfort zone.
The government is in the same situation and you have but to look under that rug to see that I am not wrong. All of the telltale signs are there. They can’t balance the budget because they are spending a gross amount of money fighting two wars. The tax base is shrinking every month as more and more workers are losing their jobs, so they don’t have any money. China and the Arabs own us because we have borrowed so much money to finance the war and all the other things that emerge as a result of those wars. If you don’t believe me, ask your Congressman to give you a list of all the programs that are being shorted support in the National Budget. Check with the GAO… they are the people that keep track of where we are spending the money.
Borrowing seventy billion dollars is not bad if you have a plan to get yourself out of debt with the money. Ideally, you want to pay off your debts and have a little left over so that you don’t go back in the hole. Is that the case with the bailout… oops buyout? No! It is not the case. I tell you that the real problem with our economy is that we don’t have cash flow. Others are telling you that we have a problem because we don’t have liquidity. What is the difference between liquidity and cash flow?
Liquidity, in economic terms, is: capable of covering current liabilities quickly with current assets. That would be the savings thingy… okay. If you don’t have cash, you can’t do anything without having to put everything else in a strain. The recovery strategy must take into consideration how to maintain cash flow. In the bailout/buyout scheme we are led to believe that if we give the cash to the people that flubbed the cash flow thing to begin with everything will be alright. In other words, the bank will have more money to loan to the people who will in turn default on the loan because they and their neighbors are losing their jobs and there is no cash flow.
Get my drift? You can’t absorb all of the delinquent loans by giving the banks more money and taking away the bad debt. That is not how you solve the liquidity problem.
Cash Flow – 1: a measure of an organization's liquidity that usually consists of net income after taxes plus noncash charges against income. 2: a flow of cash; especially: one that provides solvency
In this economy, it now works from the bottom up. ‘Joe Six Pack’ gets paid on Friday. He buys a case of beer from the liquor store, dip and potato chips from the 711, fills up his gas tank and heads home. His buddies got paid and they stop by the Meat Market for hamburger, the cleaners for their dry cleaning and what have you before continuing on over to have a cookout with their friends.
That ladies and gentlemen was a small example of cash flow. It is miniscule, but represents my point. Cash flow originates with ‘Joe Six Pack’ getting paid on Friday. He pays his mortgage – the bank gets cash! He pays his car note – the bank gets cash! He buys a case of beer – the retailer gets cash! The name of the game is ‘trickle up’ economics because the money is no longer flowing down as it did before big business out-sourced all of the jobs. Take a good look at the ISM Index and you will know without a doubt that we are in deep, er!!! you know what I mean!
The ISM Index is, for those of us that have never heard of it, the government’s pulse indicator for gauging the output of our manufacturers – the goods they are producing/manufacturing. It is also a good indicator as to whether the manufacturing community will be hiring. It does not lie! I am sorry, but I have to tell you that it is about to flat line. Yeah! We are not producing a darn thing that will make a difference when it comes to generating enough jobs to support the economy. You see, all of those fifty to sixty thousand dollar jobs went overseas to people willing to work for a fraction of that amount. You know - the sweat factories in places like in Myanmar.
I wish that I was wrong about this one, but I don’t think so! I jumped through hoops trying to tell everybody to say no to the 'big tax cut’. Everybody laughed at me as they went to the bank. Some of those same people have moved on to smaller, less pretentious dwellings because they don’t have that fat income tax refund anymore, nor do they have a job.
Saturday, September 20, 2008
Will Bailing Out the Banking Industry Really Help?
The Bush administration continues to put forth a policy that will, in the end, bring down the house of cards surrounding Wall Street. As has been the case before now, Bush continues to protect big business and the rich at the expense of the consumer. Taxpayers are being asked to foot the bill once again; the same taxpayers whose jobs have been out-sourced overseas. Where is the logic in trickledown economics in a global economy?
Previously, I suggested that the way to recover from this dilemma is to simply renegotiate the loans of delinquent customers in such a manner that each of the delinquent consumers will again be able to make the payments on their respective loans. Notice that I didn’t make one reference to shelling out money to achieve this goal. This would improve the liquidity, to some degree, for local loan agencies. If every delinquent homeowner were allowed to keep his home, and if these marginal loans could be bungled for purchase by investors willing to take the risk, then we could see a two pronged attack to resolve the issues facing the banking industry overall.
The Secretary of the Treasury has this brilliant idea to immediately throw billions of dollars onto a fire that can only be put out over time with what I call ‘trickle up’ economics. If the money used to shore up the economy was done by printing more paper money as part of the buyout that will signal the devaluing of the dollar. Once the dollar, used by most of the free world as the currency of choice in trading loses its value, we will began to see the dollar swirl within the confines of the toilet bowl and disappear forever as the currency of choice in trading. China, the Pacific Rim investors, and the Arabs will have a terrific choice to make, one that we will have no say in the makeup of.
Instead of letting investors take the cream off of the top, the policy should be to allow the cream to rise to the top by supporting the consumer base. One can only hope that these educated individuals will began to realize that it has been the consumer that supported the American economy in the past, and only the consumer can return this economy to where it was previous to the mass deregulation instituted by the Bush administration. Yes, I do blame Bush and the Republican dominated Congress because none of the deregulation was done with Democrats in agreement of these new regulations, and you can point your finger at Phil Gramm – thanks for nothing Phil.
This writer and others with no measure of discipline in economics predicted that the Bush doctrine on economics would destroy the delicate balance held by the United States in the global economic arena. I complained to everyone that I could write to that we are about to, with this grand tax cut program that rewards the rich at the expense of the poor deal a death stroke to the United States economy. You simply cannot spend every dime that you have (surplus – from the Clinton administration), ring-up deficits by charging where possible (the selling of bonds) and mismanage your house (taxes received) the way that the Bush administration has done and survive.
I continue to warn that if the Bush administration continues to try to bring this problem under control by buying out every failed bank that we will be involved in the most volatile non-recoverable situation ever. It will surpass the 1929 crash of Wall Street in comparison like an anthill next to Mt. Everest.
Previously, I suggested that the way to recover from this dilemma is to simply renegotiate the loans of delinquent customers in such a manner that each of the delinquent consumers will again be able to make the payments on their respective loans. Notice that I didn’t make one reference to shelling out money to achieve this goal. This would improve the liquidity, to some degree, for local loan agencies. If every delinquent homeowner were allowed to keep his home, and if these marginal loans could be bungled for purchase by investors willing to take the risk, then we could see a two pronged attack to resolve the issues facing the banking industry overall.
The Secretary of the Treasury has this brilliant idea to immediately throw billions of dollars onto a fire that can only be put out over time with what I call ‘trickle up’ economics. If the money used to shore up the economy was done by printing more paper money as part of the buyout that will signal the devaluing of the dollar. Once the dollar, used by most of the free world as the currency of choice in trading loses its value, we will began to see the dollar swirl within the confines of the toilet bowl and disappear forever as the currency of choice in trading. China, the Pacific Rim investors, and the Arabs will have a terrific choice to make, one that we will have no say in the makeup of.
Instead of letting investors take the cream off of the top, the policy should be to allow the cream to rise to the top by supporting the consumer base. One can only hope that these educated individuals will began to realize that it has been the consumer that supported the American economy in the past, and only the consumer can return this economy to where it was previous to the mass deregulation instituted by the Bush administration. Yes, I do blame Bush and the Republican dominated Congress because none of the deregulation was done with Democrats in agreement of these new regulations, and you can point your finger at Phil Gramm – thanks for nothing Phil.
This writer and others with no measure of discipline in economics predicted that the Bush doctrine on economics would destroy the delicate balance held by the United States in the global economic arena. I complained to everyone that I could write to that we are about to, with this grand tax cut program that rewards the rich at the expense of the poor deal a death stroke to the United States economy. You simply cannot spend every dime that you have (surplus – from the Clinton administration), ring-up deficits by charging where possible (the selling of bonds) and mismanage your house (taxes received) the way that the Bush administration has done and survive.
I continue to warn that if the Bush administration continues to try to bring this problem under control by buying out every failed bank that we will be involved in the most volatile non-recoverable situation ever. It will surpass the 1929 crash of Wall Street in comparison like an anthill next to Mt. Everest.
Friday, September 12, 2008
What is the difference in rescuing homeowners...
What is the difference in rescuing homeowners from foreclosure as oppose to bailing out the banking institutions that made the bad loans to those who are losing their homes? How do we justify using taxpayers money to prop up financial institutions that are going under because of bad choices made by their CEOs? Why is not Congress investigating the Officers of these institutions with an eye toward prosecution? I have been asking myself these questions and more and here are my thoughts.
It would seem to me that if everybody was able to make his or her mortgage payments that we would not have this situation to began with – think about it! What if we retool every loan that was an ARM and automatically re-financed it for a fixed rate loan? And suppose we also re-negotiated the terms of the loan so that the loan payments could be reduced by extending the length of the loan – a thirty year now becomes a forty-five year loan. Suppose we instructed all banking institutions to exercise flexibility with each of its customers that are delinquent in terms of making it possible for that customer to keep his home. Of course, the person that has lost his job is without hope of being able to pay his mortgage, and as such, would not be a candidate for recovery.
If we did all of these supposed actions, or some of the supposed actions, then banks would continue to get money from their marginal loans and the banking institutions would gain time to bring this situation under control without the help of the government. What is causing the problem for everyone is the number of people that are not paying because the loan payment has escalated beyond the amount of money that they are making per month.
Bailing out the financial institutions is hopelessly impossible to fathom when you began to realize that these institutions will still have a list of properties that they will need to dump at less than value. How will the Treasury Department regain the money that was extended to these banking institutions in a vain attempt to rescue them? Why not let the owner keep the property and pay you something rather than repossessing the property with no further recourse to the shareholders of the bank/financial institutions?
For sure, the culprits in this grand scam are the banking institutions themselves. I am not so old as to not be able to recall this same situation occurring in the real estate industry of Japan. How did the Japanese get a grip on the disaster that they erected for themselves – they realized that saving the institutions was not the problem? They refinanced all of the loans of these over-appraised homes so that the responsibility for repaying the loan extended into the second, third, and in some instances, the fourth generations of families. That simple solution stopped the hemorrhaging of their banking institutions.
Congress, are you listening?
It would seem to me that if everybody was able to make his or her mortgage payments that we would not have this situation to began with – think about it! What if we retool every loan that was an ARM and automatically re-financed it for a fixed rate loan? And suppose we also re-negotiated the terms of the loan so that the loan payments could be reduced by extending the length of the loan – a thirty year now becomes a forty-five year loan. Suppose we instructed all banking institutions to exercise flexibility with each of its customers that are delinquent in terms of making it possible for that customer to keep his home. Of course, the person that has lost his job is without hope of being able to pay his mortgage, and as such, would not be a candidate for recovery.
If we did all of these supposed actions, or some of the supposed actions, then banks would continue to get money from their marginal loans and the banking institutions would gain time to bring this situation under control without the help of the government. What is causing the problem for everyone is the number of people that are not paying because the loan payment has escalated beyond the amount of money that they are making per month.
Bailing out the financial institutions is hopelessly impossible to fathom when you began to realize that these institutions will still have a list of properties that they will need to dump at less than value. How will the Treasury Department regain the money that was extended to these banking institutions in a vain attempt to rescue them? Why not let the owner keep the property and pay you something rather than repossessing the property with no further recourse to the shareholders of the bank/financial institutions?
For sure, the culprits in this grand scam are the banking institutions themselves. I am not so old as to not be able to recall this same situation occurring in the real estate industry of Japan. How did the Japanese get a grip on the disaster that they erected for themselves – they realized that saving the institutions was not the problem? They refinanced all of the loans of these over-appraised homes so that the responsibility for repaying the loan extended into the second, third, and in some instances, the fourth generations of families. That simple solution stopped the hemorrhaging of their banking institutions.
Congress, are you listening?
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