As the Economy Worsens, Experts Call for Obama to Focus on the Fundamentals
By William Patalon III
Executive Editor
Money Morning/The Money Map Report
In sports, championship-caliber teams all have at least one characteristic in common: They’re able to focus on the fundamentals. With the U.S. unemployment rate jumping to its highest level in a quarter century in February, it’s become abundantly clear that that the U.S. recession is much deeper than President Barack Obama anticipated, meaning it’s likely that additional measures will be undertaken to arrest the slide and restart growth.
Many experts are now calling for the Obama administration to focus on the fundamentals – fundamental economics, that is. They want him to drop some of its ancillary pet projects – such as healthcare reform – and are telling President Obama to focus all his time and the government’s resources on three things:
- Arresting the economy’s slide.
- Hastening its subsequent rebound.
- And fixing the U.S. banking system.
A focus on anything else is just a diversion and is a waste of time – especially because there are questions about just how bad the economy actually is, says John Ryding, chief economist for RDQ Economics LLC in New York.
The Obama administration “should be focused on stabilization [of financial firms] and stimulus – and that should not only be ‘Job One,’ that should be the only job right now,” Ryding told Bloomberg Television. “The question is: Is it (a) recession or is it something worse than (a) recession” – like a depression?”
There’s definitely a cause for concern: The U.S. unemployment rate jumped to a higher-than-expected 8.1% percent in February, as employers reduced payrolls by 651,000, the U.S. Labor Department said Friday. Job losses have exceeded 600,000 for each of the last three straight months – something that hasn’t happened since the government started collecting jobless data all the way back in 1939.
As if that weren’t bad enough, consider this: Unemployment has already reached the average rate the White House had projected for the entire year, Bloomberg News reported.
Economists and other experts were already calling for the recession to last longer than had been expected; some are even calling for four more years of pain: a longer recession, followed by slow recovery that could have the malaise afflicting Americans until 2013. [For a related report on these revised views that appears elsewhere in today’s issue of Money Morning, please click here].
Experts don’t want the already dire situation to get even worse. But now there’s a growing concern that the Obama administration may be trying to do too much, and focus on too much – when the economy and its related ills should be – as Ryding said – “Job One.”
Market Matters
Just imagine what President Obama’s approval ratings would be if the country weren’t mired in the worst recession since the Great Depression?
With unemployment soaring to its worst level since 1983 and the U.S. Federal Reserve having declared that every sector of the economy is in the doldrums, President Obama moved into the 2nd month of his presidency with 41% of the American people believing that the country “is generally headed in the right direction.” By comparison, 26% of those surveyed in January (and 12% in November before the election) expressed similar sentiment.
Though the economic data reveals more “challenges” ahead and the markets continue to move to much lower levels, two-thirds of Americans feel “hopeful” about Obama’s leadership. In a small way, these results may be more telling than any earnings or economic report. Consumer and business confidence will prove keys in moving the country back in the right direction. Perhaps, these poll results indicate that such “optimism” may be returning to the American mindset (though ever so slowly)?
Although the administration’s $787 billion stimulus plan is designed to save or create a total of 3.5 million jobs, the American economy has already shed 4.4 million jobs since the recession “officially” began in December 2007. And experts say that more declines are coming.
Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. (DB) in New York, is one such expert. In a research note to clients, LaVorgna says he now sees the U.S. jobless rate reaching the 10% level by the end of this year. And he’s now abandoned his expectation that growth will emerge in the second half.
“Without any engines of growth, the labor market and the economy are likely to remain depressed for some time,” LaVorgna wrote.
Plunging domestic and overseas demand is inducing such firms as Sears Holdings Corp. (SHLD) and General Motors Corp. (GM) are stepping up their job cuts.
U.S. stocks posted their biggest weekly decline in three months last week after American International Group Inc. (AIG) reported a $61.7 billion loss – the biggest in history – and iconic billionaire investor Warren Buffett said the economy is in a “shambles.”
The Standard & Poor’s 500 Stock Index slumped 7% last week, meaning that broad index has plunged 20% since President Obama took office on Jan. 20. The Dow Jones Industrial Average tumbled below 7,000 and never looked back, hitting levels not seen since May 1997. Other major indexes followed, with the Nasdaq Composite Index plummeting to a six-year low.
The Obama Administration and the Federal Reserve have rolled out two more measures designed to stabilize the credit markets and provide some much needed relief for struggling borrowers. The Term Asset-Backed Securities Loan Facility is a $200 billion program that will stimulate lending activity for small businesses and consumers. The $75 billion “Making Home Affordable” program is supposed to assist 9 million homeowners with financial hardships to avoid foreclosure by modifying terms of their mortgages.
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How long until Citigroup Inc. (C) is listed as a penny stock on the Pink Sheets? With nationalization talks becoming more prevalent, the one-time banking giant fell below $1 a share last week and its market cap plunged to $5.4 billion (from $270 billion just two years ago). Speaking of penny stocks, American International Group Inc. (AIG) posted a $60+ billion quarterly loss, the largest in history, and stands prepared to accept another $30 billion in government funds.
US Bancorp (USB) and Wells Fargo & Co. (WFC) each took measures to shore up their financial positions as both cut their respective dividends by about 85% to a nominal nickel a share. Meanwhile, Wells’ management announced an additional $2 billion in expenditure reductions and claimed that the financial institution experienced “strong operating results” in early 2009. The news outside of financials was not much better. Computer shipments are projected to decrease by almost 12% in 2009, the worst level of activity ever reported. Auto sales in February plummeted again and no one escaped the negativity: GM (-53%), Ford Motor Co. (F) (-48%), Toyota Motor Corp. (ADR: TM) (-40%). GM also seemed to move a few steps closer to bankruptcy reorganization (and penny stock status).
Volatile oil prices settled above $45 a barrel as traders weighed the dire economic picture against inventory reports that showed an unexpected decline in crude supplies. Prospects for a new stimulus plan from China brought short-lived optimism, though ultimately the pessimists won out as news about Citi and GM ruled the day.
| Market/ Index |
Year Close (2008) |
Qtr Close (12/31/08) |
Previous Week |
Current Week |
YTD Change |
|
Dow Jones Industrial |
8,776.39 |
8,776.39 |
7,062.93 |
6,626.94 |
-24.49% |
|
NASDAQ |
1,577.03 |
1,577.03 |
1,377.84 |
1,293.85 |
-17.96% |
|
S&P 500 |
903.25 |
903.25 |
735.09 |
683.38 |
-24.34% |
|
Russell 2000 |
499.45 |
499.45 |
389.02 |
351.05 |
-29.71% |
|
Fed Funds |
0.25% |
0.25% |
0.25% |
0.25% |
0 bps |
|
10 yr Treasury (Yield) |
2.24% |
2.24% |
3.04% |
2.83% |
+59 bps |
Economically Speaking
With many countries mired in a global recession, China proclaimed that its $585 billion stimulus plan should produce about 8% annual growth for the world’s third largest economy. Outsiders had hoped that China’s premier would announce a more robust package, but instead the government has adopted a “wait-and-see” attitude before determining if any further measures are needed.
Both the European Central Bank (1.5%) and the Bank of England (0.5%) reduced their key lending rates by 50 basis points, dropping those benchmarks to their lowest levels in their respective histories.
The Federal Reserve’s Beige Book reported that the prospects for recovery continue to look bleak for the short-term with any “pickup not expected before late 2009 or early 2010.” Meanwhile, Fed Chairman Ben S. Bernanke confirmed that the recession is worsening as the labor market weakens; he also appeared to support the Obama administration’s stimulus package as the best hope to revive the domestic economy.
This week’s economic calendar is highlighted by the February retail sales report and some analysts are “cautiously” optimistic (which is really saying something in this environment). The January report depicted the first monthly increase in seven months and the best showing for retailers in over a year. After a dismal holiday season, perhaps folks are simply antsy to partake in the “Great American Pastime” of shopping again.
Remember, gift cards purchased for the holidays are still being redeemed and may have contributed to some additional activity last month.
And with equities facing their lowest valuations in 12 years, some investors may be becoming just as antsy to jump off the sidelines and take advantage of bargain-basement prices. Could this be the week? Unfortunately, up to this point, there’s been far more talk than action.
Weekly Economic Calendar
| Date |
Release |
Comments |
|
March 2 |
Personal Income/Spending (01/09) |
Better than expected increases in both |
|
|
Construction Spending (01/09) |
4th consecutive monthly decline in activity |
|
|
ISM Index – Manu (02/09) |
13th straight monthly contraction, though at slower pace |
|
March 4 |
ISM Index – Services (02/09) |
5th straight month of contraction |
|
|
Fed Beige Book |
Prospects for near-term improvement deemed poor |
|
March 5 |
Initial Jobless Claims (02/28/09) |
Surprising drop in benefits claims |
|
|
Factory Orders (01/09) |
Record 6th consecutive monthly decline |
|
March 6 |
Unemployment Rate (02/09) |
Highest rate since 1983 |
|
|
Nonfarm Payroll (02/09) |
Another 651k jobs lost from economy |
|
|
Consumer Credit (01/09) |
Rose following three straight monthly declines |
|
The Week Ahead |
|
|
|
March 12 |
Initial Jobless Claims (03/07/09) |
|
|
|
Retail Sales (02/09) |
|
|
March 13 |
Balance of Trade (01/09) |
|
News and Related Story Links:
- Bloomberg.com:
Surging U.S. Unemployment Rate Puts Pressure on Obama. - RDQ Economics LLC:
Corporate Web Site. - Money Morning News Analysis:
Obama’s Housing Plan May Leave Many Homeowners Out in the Cold. - Money Morning News Analysis:
AIG Gets Third Government Bailout After Posting Record Loss. - Money Morning News Analysis:
Chinese Premier Jiabao Outlines Spending, but No New Stimulus. - Money Morning News:
Historic Rate Cuts for Europe and England.
Comment by Gouranga on 9 March 2009:
Stop spreading panic as this is not your job. We all knew that things will get worse before it will get better. President Obama is not using the traditional way and the old generation will never understand his policy as they expects him to do things the old ways they are used too.
Comment by sunshine on 9 March 2009:
“Let me be clear on this”, President Obama inherited the biggest mess in the history of our country. He has only been in office a couple of months; and he is expected to fix 20 years of greed and no accountability of the wealthy in this country selling it out and riding off into the sunset! Think about this and think hard. Pro-immigration for cheap wages and hiring overseas personnel for cheaper wages – foundations for failure. The President is doing a great job of positioning American for restructure. Of course, the cry babies like Kudlow don’t want to give up their bonuses – but we need to do what is best for America, not Kudlow and Co.
There is no such thing as dropping pet projects and focusing on three tasks. You have to look at the big picture. The Obama administration is vast and we need to put everyone on the administration to work immediately on all of the nations’ problems – including healthcare. That should be no distraction from Obama’s “multitasking” because he has great minds at work on all problems at the same time. This is exactly what we need. “Nuf said!!!!!”
Comment by david galie on 9 March 2009:
President Obama cannot drop health care reform from the top of the agenda. Caroline and Ted Kennedy won’t allow it.And there is Hillary as well.They were instrumental in getting him elected. He is trapped by politics,and by popular sentiment. Kennedy is not long for this world, sad to say.He wants health care reform as his legacy; the cap stone of his career, and to go out in a blaze of glory.The president can get past Ms.Clinton, but not Senator Kennedy.
For these reasons,President Obama would alienate many key constituents in the democratic party were he to drop this issue,even temporarily,and thus risk his chances for re election.
Comment by Andrea on 9 March 2009:
I was watching a Harvard Grad. speak about his new book on the market over TV tonight and he said this has been coming since 2007. The world has been in denial and depressions do not just last overnight. Maybe 20 to 30 years! He also mentioned that Pres. Obama is living in a fairy tale and is trying hard to sell it to the public.
Comment by Barbara on 9 March 2009:
The writer of this article is correct. President Obama needs to forget about re-election and focus on getting this problem fixed. He won’t get re-elected if things continue as they are anyway. Most presidents pick a few things to focus on at the beginning of their administration and then move to others as they GET DONE!!!!! Health care reform and alternative energy is all well and good as long as the whole banking system and economy is NOT BEING DESTROYED in the process while you are too busy focusing on other things. Otherwise it seems to me that this author is correct and Obama’s priorities are TOTALLY SCREWED up. Where is the money going to come from for healthcare and alternative energy if the economy goes into the tank. Most of the people I know are hurting big time and the wealthy that Obama expects to pay for all this are a lot LESS WEALTHY (most of my friends never fit that category anyway but have seen their retirements destroyed ever since Obama took office). Not everyone who invests in the stock market is a CRIMINAL or RICH. Many are ordinary people who put money away for retirement (after decades of working hard) – to live on as they age. It is obvious Obama does not recognize this fact or care about these people. He seems determined to destroy the investor class. It is obvious by his comments. Where is he going to get the money from for all his pet projects if the economy is destroyed. For those who say he inherited it – my response is SO WHAT!!!!! HE ASKED YOU TO VOTE FOR HIM. HE SAID HE HAD THE ANSWERS. HE WANTED TO BE PRESIDENT SO HE NEEDS TO CUT THE CRAP ABOUT INHERITING THE PROBLEM AND SUCK IT UP AND FIX THE MAIN PROBLEMS MENTIONED IN THIS ARTICLE BEFORE IT IS TOO LATE. THE REST CAN WAIT!
Comment by John Lounsbury on 9 March 2009:
William Patalon – - -
You wrote that three things need to be the only focus:
” * Arresting the economy’s slide.
* Hastening its subsequent rebound.
* And fixing the U.S. banking system.”
I would take the position that this is exactly what he is trying to do. Your three bullets are generalities. Obama is dealing with specifics. The specifics are the four areas that are central to our economic future. If we work on arresting the slide and hastening the rebound by addressing basic fundamental economic needs. These are:
1. Recapitalizing the financial system.
2. Creating an efficient health care system. The biggest load on American business today is health care, either direct costs for an inefficient insurance system and care delivery system, or indirect cost from lost work due to improperly addressed health issues with employees.
3. Infrastructure repair. This has been ignored in favor of unproductive expenditures overseas. Transportation, schools and energy efficiency in public buildings are three expenditures that will stimulate now and pay dividends for years ro come.
4. New domestic energy production. This includes alternative energy (solar, geothermal, wind, tidal flow and wave hydro and bio fuel) and traditional (nuclear, non-polluting use of coal, natural gas and heavy hydrocarbons). No other activity will simultaneously impact our balance of trade and domestic employment as much as this.
I disagree with your premise that Obama is not focussed. He is focussed on specifics rather than the generalities you stated. When you analyze the specifics, your generalities are covered.
That said, now we could have a debate on whether Obama is spending enough or spending too much to be effective in each of these areas.
Comment by Clay Conway on 9 March 2009:
Obama has made a career giving speeches and since he became president his campaign-style speech-giving continues unabated while he is very big into issuring directives and delegating (e.g. giving democatic congress the job of writing legislation – full of pork). His lack of leadership (administrative) experience is coming home to haunt him and the country as we face the most difficult challenge to America in many decades. He should indeed drop his scatter-gun approach and carefully heed the advice of the great financial minds of the country. This must absolutely include minds in the financial industry – not just those in the government and academia.
Comment by Sherry on 9 March 2009:
There could be no better investment in America than to invest in America becoming energy independent! We need to utilize everything in out power to reduce our dependence on foreign oil including using our own natural resources.Create cheap clean energy, new badly needed green jobs and reduce our dependence on foreign oil.The high cost of fuel this past year seriously damaged our economy and society. The cost of fuel effects every facet of consumer goods from production to shipping costs. After a brief reprieve gas is inching back up.OPEC will continue to cut production until they achieve their desired 80-100. per barrel.If all gasoline cars, trucks, and SUV’s instead had plug-in electric drive trainsthe amount of electricity needed to replace gasoline is about equal to the estimated wind energy potential of the state of North Dakota.We have so much avzilable to us such as wind and solar. Let’s spend some of those bail out billions and get busy harnessing this energy. Create cheap clean energy, badly needed new jobs and reduce our dependence on foreign oil. What a win-win situation that would be for our nation at large! There is a really good new book out by Jeff Wilson called The Manhattan Project of 2009 Energy Independence Now. http://www.themanhattanprojectof2009.com
Comment by R on 9 March 2009:
I see the article got around.
You are right on. It’s more than selfish to focus on issues that are unrelated to recovery of the United States, and which may even have a negative effect on it. Obama is taking advantage of the situation, plain and simple. As Hillary said over the weekend, he’s not letting a good crises go to waste.
Comment by Mary Diane Dolan on 9 March 2009:
Since 1971 (and arguably since well before 1971), the $US has not been a fit thing to use as a currency. It is unfit because of the alterations that have been made in its nature and that few people even paid any attention to or understood. Unless and until someone–whether it be Obama or the general public or someone else–recognizes this fact, any entities or individuals that depend upon the $US will continue to deteriorate.
Comment by frankeieio on 9 March 2009:
Unless something unforeseen happens, this whole economic catastrophe begins and ends with the U.S. housing market. When this sector of the economy properly revalues, and buying a affordable home on U.S. soil is once again is the primary object of living the American dream, then all aspects of the economy will fall in line.
Comment by Don Fishgrab on 9 March 2009:
A basic premise of science is that the same conditions will always produce the same results. If it were not true, no consistent progress could be made. History is the story of what caused certain events. Too often in recent times, the focus has been on the events, without considering the causes. As a result, history is often considered a waste of time, and is forgotten. Thus, the same procedures are followed and history repeats itself. The older generation has forgotten, and the younger never knew,
Many of the programs being proposed today were first proposed in the United States by Alexander Hamilton in the 1790’s. They have been used repeatedly since that time and have always broduced the same results. Recessions have occurred on a regular basis, with predictable consequences.
The most recent usage was in 2002. and led to the current crisis. Most of the current proposals are simply larger versions of the same things, under a new name. Unfortunately, this is true for the proposals by both parties. Obama’s largest problem is that Congress has the ultimate say on what he can accomplish, and their ideas are merely repeats on a larger scale. The result can only be a larger version of the same disaster.
Comment by super dog on 15 March 2009:
Those people cited in your article that are optimistic about the economy are probably either unemployed or work for ACORN. It can’t get better because there is too much pork that will destroy any rebound. It is like a patient having a heart attack. Sooner or later they slip away because the diet they have been on for years and years and years finally kills them.
Comment by Richard Geisland on 15 March 2009:
Obama & Co. must be stopped! We must stop the giving away of money we do not even have. We must look stupid to the world for borrowing from them then giving it away. Obama and the congress must focus on our current economic problems and should wait until the national debt is paid down before moving on Health Care etc.. People without insurance are covered by going to any county hospital emergency room. They will not be turned away and tax payers will pay. Job outsourcing and imports need to be corrected. “Stimulus give-aways” are not the answer. They move us to the end.
Comment by DHS on 15 March 2009:
President Obama cannot drop health care reform from the agenda. What do you think got GM and other businesses in trouble to begin with? Health insurance costs…period. He’s doing it the hard way but the best way possible under the circumstances that have been building for years. The richest 5% have had their day. It’s our turn now.
Comment by James S on 15 March 2009:
I suggest everyone read meltdown by Thomas Woods amd Peter Schiffs work Crash Proof. The less stimulus money we pump into the economy the faster the recovery will return. The free markey system will correct itself. It will be painful now but less so down the road. Understand the History of interference from The fed reserve and how it is destroying our economy. Get rid of the fed reserve let the economy contract it is a natural correction from artificial stimulus and cheap money caused by the fed reserve. Educate yourselves and call your senators to hold off the stimulus plan. JAMEs
Comment by James Cuff on 15 March 2009:
Our economy has been built two on things: consumer spending and housing. I agree with the three things above and I’ll simplify it by borrowing an election slogan ‘ It’s the economy,stupid”" .
The government can spur business spending and investment by re- instituting the investment tax credit and accelerated capital depreciation.
The government can spur housing and consumer spending by establishing a, let’s say 4% ,floor motgage rate that would allow the 90% of good mortgages to refiance at the lower rate. That would spur new home buying and free up monthly mortgage money to be spent or saved thus adding more liquidity to the credit system.
Let’s forget about saving the 10% deadbeat mortgages, they will only be in the same trouble a couple of years downstream from now.
It is the hard working citizens and savers that made this country great and the entrepeneurs who provided the jobs that fueled our progress.
Let them have the means, encouragement, and government support to lead again. You do not get ahead hanging with the cellar dwelllers and funding the deadbeats. You must feed the champions of free enterprise the ‘breakfast’ that will let them rise to the top again.
Comment by A.J. Amin, AIA on 15 March 2009:
Financial and economic experts may agree or disagree about the administration priorities or order of challenges it is facing, but all seem to agree to ignore to not even touch on the top fundmental most influential factors /challenges which make a difference as to how America position itself on the right tracks to economic recovery, in my opinion those factors are:
1. Talking about restoring confidence; globally!
Prove, quantifiably, the US economy is capable of getting out of recession/depression without the “war industry” coming to the rescue.
2. Address the “greed factor” by setting and posting numerical indexes to:
a. Identify realities and ratios of risks facing all financial transactions.
b. Document financial institutions executives’ compensation margins.
In both cases investors remain to have the go OR no-go decision power.
3. Enforce laws and regulations. Can’t be more constitutionally correct.
4.
Commitment to fully address and enforce the above will give a strong message that the administration is talking bussiness not just business as usual.
Comment by Eugene A. Cerko on 15 March 2009:
These commentors have to get out more. It was basically the Democraps that started this economic problem from Jimmy Carter on. Remember Pelosi pounding that gavel years ago declaring that we (Democraps) are in charge now??? This is what we have to show for them being in charge. They constantly blocked banking reform one bill after another because they believed in “the free maarket”. Well, a free market is O.K., just not an uncontrolled run away market. Good old Hussein Obama will just enforce the philisophy from his side of the isle and bring further economic stress to the nation. Fixing roads comes under maintenance, not economic reform. How many nonconstruction people will be involved in all of these construction projects???
Gene Cerko
Comment by Truthpeeler on 15 March 2009:
“Experts call for…” “Experts? Surely you jest.
Comment by MSSA on 15 March 2009:
I TOLD YOU THAT IN 03
Comment by Dean Holligher on 15 March 2009:
Since a President is a manager and not a ‘doer’, multi-tasking is normal at executive levels.
So yes, there are three major problems to work on:
1) remedy or progress on the economy
2) Health care reform
3) Social Security viability
Health Care reform (2) is easy in principle. Revoke the monopoly on health care held by Big Pharma and Medicine.
Costs of health care are sky high for one reason only. Price gouging and monopoly by the above two culprits.
The top 10 Pharma companies in the Fortune 500 made more more money than the other 490 companies COMBINED!!!
The Fortune 500 includes some very big firms – like GE. Think about that.
That is where the ‘costs’ of health care are going .. to the bottom line of Big Pharma and Medicine! The solution is NOT to confiscate more taxpayer funds to transfer to them under any kind of Medicare scheme.
One solution is to allow competition to replace the monopoly. Scrap the FDA and revise it’s enabling Act. It disables health and enables Pharma profits.
Clinical nutritionists, chiropractors, and naturopaths are discriminated against by the AMA and legislation, yet they provide real health care, not ‘medicine’.
What might be expedient mid term – why not nationalize Big Pharma and Medicine until the necessary changes can be made? If socialized medicine is going to happen, then it may as well be done properly and get the fox out of the hen house.
——–
On economics (1) Keynesian ‘theory’, so beloved at Harvard and elsewhere, is totally invalid and well refuted by some very able analysts, among them Prof Hayek (a Nobel Laureate), Harry Hazlitt, von Mises and many more. Keynes actually states that saving is a form of economic sin and government spending and deficits are to be embraced! Whether macro or micro-economics you cannot spend your way out of debt!! He also called ‘investment’ = any spending by government. Odd, when you save money in a bank you automatically invest as the bank loans it out to business. That’s real investment. Government spending is a tax on your savings and fiat ‘demand’ by government is almost never legitimate investment. Fiat = forced, not natural. Keynes was a pedophile, a homosexual and Fabian SOCIALIST whose real goal was the slow demise of capitalism to be replaced by a socialist state. That IS Fabian by definition. It does seem to be occurring.
Under Keynes, Bailouts and Stimulus and low interest rates are considered good. How can people believe this? Spend your way out of debt? Tell your local bank you want more money so you can accomplish that.
So – fire almost all the Keynesian advisers and get some real economists on board! That is essential to real progress.
Who cares if Citi fails? The bank accounts are protected, not by FDIC, but are untouchable by law as segregated funds that Citi does not own. The share price is already a penny stock – the other major class of stakeholders. Get it off life support. Too big to fail? Nonsense. Too big to carry. Dinosaurs become extinct. Let more able managers (smaller banks) pick up the pieces at fire sale prices.
For AIG and others swilling fat bonuses at taxpayer expense, claw it ALL back in income tax if the company received Bailout funds – retroactive to date of Bailout. The contracts with middle management are still honored by doing it that way.
There is no cure for a Depression (which we have), the Depression IS the cure for past excesses!
All rigidities have to be removed – loan amount of devalued mortgaged homes, rigid labor wages, etc.
If a house is devalued by the MARKET, the loan should be diminished accordingly. What’s the problem that cannot be worked thru? The homeowner just has a smaller loan; he doesn’t have something for nothing and the banks do not really have an ‘asset’ if the mortgage is under water! What is the problem with downsizing the loans? (that cannot be remedied).
If not, the pain continues – unemployment, foreclosures and frozen credit channels.
We might also add that fractional reserve banking bears a huge portion of blame, as does central bank monetary policies.
Then there are CRA Act changes that need to be repealed (modified in Clinton years to encourage sub-prime).
Regards…..Dean.
Comment by Nathan W. Coleman on 15 March 2009:
I agree with Sherry (Sherry on 9 March 2009): “There can be no better investment in America than to invest in America becoming energy independent.”
We need a crash program to reduce and eventually eliminate our dependence on foreign oil. For reasons expressed by Sherry, this program should be an integral part of the economic recovery plan.
And I agree with Sherry that conversion to electrical powered (plug-in) vehicles may be the ultimate solution for powering new transportation vehicles. But how about the millions of vehicles now on the road? Because of the high conversion cost it is not practical to electrify these vehicles. But they can be converted to run on compressed natural gas–quickly and economically. And the refueling infrastructure can easily be built, as needed. We have the technology and the natural gas reserves to accomplish and sustain this program, which could quickly provide significant reduction in oil imports.
Comment by Old Bill on 17 March 2009:
Hey Sunshine, Let me ask you a question. The last big recession was in what year? 1997. Correct. Who was President then? W. J. Clinton, remember him? Who took over from him and never said ONE WORD ABOUT THE NEARLY BANKRUPTED AMERICA HE INHERITED? He sucked it up and never let on to the American public the mess he faced. His name? George W. Bush. I wish you luck on your job search in the private sector.
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