Understanding this economic quagmire is one thing…. explaining it is another.

[Video: The Crisis of Credit Visualized, Part 1]

[Video: The Crisis of Credit Visualized, Part 2]

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2008 has been a year that in many ways defies easy summation.  Granted the words “utter disaster” “meltdown” “beginning of the end” could all come to mind, but so could “amazing triumph” “realization of hope” “beginning of change” and the like.  It all depends on how you want to look at it, and which parts you’d like to focus on.

I think the best I can do is… “it could be worse” and right now that’s true.

But the world continues to spin, and in it’s spinning we draw to the end of the year and the beginning of the next.  Sadly the calendar and various night spots are the only places where the strike of midnight matters.  For all things that matter, it’s just another day.  There’s been a lot of things I’ve wanted to touch on these past few days, I just really haven’t known how to go about it.  The economy isn’t great, and we all know it, though that seems to be a big focus for our incoming Prez and his Cabinet, so maybe there’s hope for at least some improvement, though for every bailout and stimulus check the money still has to come from somewhere and it’s likely that our kids and grandkids and perhaps beyond will still in some form or fashion be dealing with the fallout from each dollar spent… I don’t know where it all will come from other than just continued printing of money and exchanging cash for debt which devalues each cent and increases inflation and all around just further plunges us into the depths of economic failure… but there are those much smarter than I working on this case and hopefully they have a plan that while beyond my comprehension will nonetheless help to improve the financial state of the country.

However, there are other fears on tap, not manufactured fears heightened by changing color scales and random warnings, but actual threats to the well being of all peoples of the world.  Iraq’s security has improved beyond the holdouts who will likely continue to try to fight what is in their mind the good fight long after we’ve left and Iraq has been governing itself for decades, but while one warfront lessens in severity another picks up as the war in Afghanistan, so oft neglected while Iraq gained in focus, continues to escalate and grow in new and different ways, changing in dynamic, and requiring untried tactics to gain ground in the conflict.  And while American continues to fight in Afghanistan and along the border of Pakistan, Pakistan develops greater tension along the border of another of it’s neighbors in India, spawning most recently from the horrible terrorist attack and hostage situation in a hotel in India that has reportedly been traced back to Pakistan.  On top of that, the UN is still working on a commission to look into the assassination of Benazir Bhutto who was aiming to lead Pakistan into a new progressive future.  Then there’s the new escalation of force by Israel against the Palestinians in Gaza and specifically Hamas following the end of the cease-fire and Hamas’ continued rocket attacks even during the cease-fire, the show of force which is dividing the Arab community as many extremists turn on their various country’s leaders for not taking a hard enough stance against Israel and/or for Hamas in a conflict that many are worrying could prove to be a rallying point for extremists and a growing source of violent intent and action.  In addition there’s been a raise in gas prices as a result of predictions that oil routes could be shut down due to violence and protests in the Middle East (in the grand scale of things, hardly the worst thing to spawn out of all this madness, but it still effects us so it’s worth mentioning).  Our incoming leadership has been strangely quiet about all of these world events as opposed to his revealing of plans regarding the economy, instead deferring to the current President George W. Bush and taking cues from him on what the country will do in response to all of these events and conflicts.

Like the economy I have no answers about any of these conflicts, they spawn from years upon years of issue between various social and religious factions along and about many different borders, and each conflict has it’s own intricacies that will require great care and consideration, as the clock continues to tick down the minutes to midnight and the end of 2008, I can only hope for resolutions to the many conflicts that face our world and a stabilization that would benefit us all in the next year.  I’m not holding my breath, and crossing my fingers would make it really hard to type any more of these late night rants, but regardless of what comes next… perhaps as some mantra that will just make it easier to get through the day remember that “it could be worse.”

…people are dealing with hangovers.  That said, here’s some news!

If you’re from India and looking to do some world travel… you may want to avoid Pakistan as tensions between the two countries are still running a little hot.  No one is looking to go to war (fingers crossed) but things aren’t exactly civil, and as a result India’s Foreign Ministry is warning it’s citizens to stay away from that border if they can.  Probably help tensions some if everyone stayed in their own airspace… but hey…

Meanwhile in Iran, shoe throwing has become the protest of choice as calls for the release of the shoe throwing journalist who nearly pegged the surprisingly nimble soon to be former President Bush at a press conference earlier this month continue, while the man awaits trial for his zany actions.

In bummer news, one time Catwoman Eartha Kitt has passed away as a result of colon cancer at age 81.

There’s a new green fuel being used- liposuctioned fat!  Unfortunately the man who had been doing the surgeries was allowing unlicensed assistants help him out leaving some of his patients scarred, and it’s illegal to use medical waste to fuel machinery.  Ah well, it was worth a shot.  Next up is used VHS tapes  just a thought…

Good news for lazy bums who enjoy their naptime- apparently sleeping a little more can help prevent calcium deposits from forming in the heart.  So next time someone yells at you for sleeping in, just tell them you’re not lazy, you’re healthy!

While the economy may be down, and retail chains are posting record low numbers and in some cases closing their doors, there’s one company that did quite well this holiday season- Amazon.com had it’s best season ever after 14 years of being active.  Apparently brutal winter storms, long or inconvenient hours of work (for those who still have jobs), gas prices, and a desire to avoid shopping nightmares like black friday, along with general laziness and the ease of button clicking as a shopping method, all contributed to people just staying in and shopping from home and making Amazon a winner this year.  Good for you.  (btw… late gifters, Amazon.com also carries my books of poetry, I’m just sayin’)

Who’s having the best year ever?  Why it must be President Elect Barack Obama who now tops the list of people most admired by Americans according to a recent poll, topping former #1 George W. Bush, who now sits in 2nd place.  One could pro’lly make the case that whoever holds the Presidency will pretty much always be at the top of the list, but it’s still worth noting.  Who else made the list? 

USA Today says one-third of about 1,000 people interviewed named Mr. Obama as their first or second choice. The report published Friday says it is the first time a president-elect has topped the yearly survey in more than 50 years.

U.S. President George Bush fell to a distant second in the survey after holding the top spot for seven years.

Hillary Clinton – Mr. Obama’s pick for secretary of state – emerged as the most-admired woman in the poll, a position she has held for 13 of the past 16 years.
 
Republican John McCain’s running mate, Alaska Governor Sarah Palin, came in second on the women’s list, while McCain himself ranked third among men.

Pope Benedict, the Reverend Billy Graham and Hillary Clinton’s husband, former President Bill Clinton, tied for fourth most-admired man.

Among the most admired women, talk-show host Oprah Winfrey came in third, U.S. Secretary of State Condoleezza Rice placed fourth and Mr. Obama’s wife, Michelle Obama, ranked fifth.

The survey was conducted by phone in the middle of December.

USA Today says this year’s support for Mr. Obama is the second-highest rating in the survey’s history, behind President Bush’s 39 percent in 2001 after the September 11 terrorist attacks.

The paper says support for President Bush has declined almost every year since then, falling this year to just five percent.

So there you go folks your post Christmas wrap-up, now I’m off to take a nap… just looking out for my heart!

And you thought the U.S. was in the shitter….

Iceland’s economy collapses

As we’ve written here in the past, things aren’t exactly rosy in the U.S. when it comes to the dollar, housing, and other such issues.

The U.S. Gov’t has just committed an unprecidented act and taken over the 2 largest housing finance institutions in the United States, Freddie Mac and Fannie Mae.

(The) government (is now) in charge of the twin mortgage giants and the $5 trillion in home loans they back.

The move, which extends as much as $200 billion in Treasury support to the two companies, marks Washington’s most dramatic attempt yet to shore up the nation’s housing market, which is suffering from record foreclosures and falling prices.

The sweeping plan, announced by Treasury Secretary Henry Paulson and James Lockhart, director of the Federal Housing Finance Agency, places the two companies into a “conservatorship” to be overseen by the Federal Housing Finance Agency. Under conservatorship, the government would temporarily run Fannie and Freddie until they are on stronger footing.

Of course, with the government now owning the debt of the people and, well, let’s be honest… the Chinese mostly owning most of the debt of the U.S., does that mean the Chinese will have some say in the running of the companies?  Eh… that’s another thread for another time.

So how did it all get here?

Sunday’s announcement brings an end to months of speculation about the fate of the two firms. Shares of Fannie and Freddie, which have fallen more than 80% as of the end of Friday’s session, were hammered this summer among concerns they would need to raise additional funds to cover future losses or need to be taken over by its federal regulator. Investors feared that either step would reduce or wipe out the value of current shareholders’ stakes.

In mid-July, the Treasury Department and Federal Reserve announced steps in to make funds available to the firms if necessary and Congress approved the sweeping proposals later that month.

Shortly thereafter, regulators stepped up their review of Fannie and Freddie. Paulson announced in August that he had tapped Wall Street firm Morgan Stanley (MS, Fortune 500) to help him examine the firms.

Sources familiar with the matter told Fortune that Morgan Stanley had determined that both Freddie and Fannie faced “meaningful” capital issues before deciding last week that government intervention was necessary. Morgan Stanley has called a firm-wide meeting on Monday morning to explain the deal.

Officials ruled out a capital infusion – a less drastic option than convervatorship – after considering questions such as whether the government would have to keep putting money in and how best Treasury officials could protect taxpayers, according to one of the sources.

In the end, the route taken amounts to “a timeout, not a liquidation,” says the source. “Conservatorship leaves all options open for the next administration.”

Following an exhaustive review, FHFA’s Lockhart said Sunday that the two companies could not continue to operate without taking “significant action.”

Fannie and Freddie have become virtually the only source of funding for banks and other home lenders looking to make home loans. Their ability to do so is crucial to the recovery of the battered home market and the broader U.S. economy.

The two firms buy loans, attach a guarantee, then sell securities backed by the loans’ income stream. All told, they own or back $5.4 trillion worth of home debt – half the mortgage debt in the country.

Well, that sounds like some considerably bad mojo.  Of course, taking a government that’s ridiculously in debt and putting them in charge of 2 major financial institutions that are ridiculously in debt seems like a really great idea though, doesn’t it?

So there’s a big to-do going on about the words of one of McCain’s (now former I’d assume) financial advisers.  This cat Phil Gramm said in an interview with the Washinton Times that ours is a “nation of whiners” and that the current recession is all in our heads.  Well done Mr. Gramm, perfect timing for such remarks when McCain himself is hanging in Detroit Michigan, a place that’s been struggling under job loss and market collapse for some time now, mostly as a result of the failed economic programs and policies that McCain still to this day clings to.

Right now the two big government backed mortgage managing institutions Fannie Mae and Freddie Mac are continuing to post losses and the stock market is reflecting the downturn with drops in stock prices anywhere from 10-20%.  There’s talk of the Treasury needing to step in and bail them out to the tune of roughly $1 trillion of the tax payer’s money, but such a thing is unlikely to happen either with this President, or the next due to the highly charged political climate.  The collapse of these two institutions could prove to be worse than the fall of any investment bank. 

Now I don’t know that Obama would prove to be any better when it comes to fixing our broken economy, but I know for a fact that McCain is stuck behind the times and clinging to a past that doesn’t exist, total reform is going to be needed to remedy our current troubles.  Sadly I don’t think anyone in our government has the brass to step up and try to implement those changes.

You may want to keep it local folks.  Oil rose again today teasing a new record high of $146 a barrel before easing to roughly $144 a barrel, bringing prices at the pumps ever higher, now sitting at a national avg of $4.10

Not that anyone can afford to buy a tank of gas these days anyway, as payroll across the U.S. continues to be cut for the 6th straight month. 

Payrolls fell by 62,000 after a 62,000 drop in May that was greater than first reported, the Labor Department said today in Washington. The unemployment rate held at 5.5 percent after soaring the most in two decades in May. The Institute for Supply Management’s non-manufacturing index sank to a five-month low.

Falling employment, along with record gasoline prices and tumbling home values, may cause consumers to tighten their budgets after spending the more than $100 billion of tax rebates. The longest string of payroll declines since the economy was pulling out of the last recession indicates limited scope for a Federal Reserve interest-rate increase this quarter.

“After the tax rebates are gone in another 30 days, you’ll see consumer spending drop back,” said Stuart Hoffman, chief U.S. economist at PNC Financial Services Group Inc. in Pittsburgh. “There will not be any employment or real wage growth to help real spending in the second half of the year.”

So while the band-aid of the Tax Stimulus Check was nice for about a month after you got it, after it’s gone, nothing has improved, infact, things have still been getting worse.  And for the next 6 months all we have to look forward to is the continued free-fall of our economy as jobs continue to be lost along with houses, and with the ever rising price of oil- our ability to drive as well.

Happy Independence Day America!

It’s something I’ve made mention of on more than a few occations here.  The economy sucks.  In a big way.

And it’s not getting better, it’s getting worse.  Increases in cost of imported good, Decreases in the value of the dollar, Continued massive spending in Iraq, our country’s debt grows at an astronomical rate. 

Unemployment continues to grow as jobs are outsourced to other countries and businesses cut employees (or just their number of hours spent working) to save money (not seeming to decrease the bonuses their CEOs recieve at the end of the day… but that’s another rant for another time).

So which of the two Candidates proposes a better way for us to get out of it?

Here’s the tax plan each Candidate is proposing (note that just because they’re proposing these plans doesn’t mean they’ll happen, every plan would have to be voted upon by Congress)

The tax plans                                                   Obama                           McCain
$227,000 – a year – plus                                $23,000 more               $15,000 less
$112,000 – $227,000 (15% of population)  $2,300 less                    $3,200 less
$66,000 – $112,000 (20% of population)   $1,290 less                     $1,009 less
$38,000 – $66,000 (20% of population)     $1,042 less                     $319 less
$19,000 – $38,000 (20% of population)     $892 less                        $113 less
$0 – $19,000 (20% of population)               $567 less                         $19 less
Impact of tax changes on federal budget:   Returns $700 billion     Costs $600 billion
Source: Urban-Brookings Tax Policy Center. Numbers are estimates and averages.

So there you have it, McCain gives big breaks to the top 1%, and smaller breaks to the middle class and below- basically keeping the Bush tax cuts intact, Obama aims to give the middle class and below a bigger break- but make up the difference by taking it out of the top 1%.

Under McCain’s plan the deficit will continue to grow.  Of course, neither of these plans take into account the spending that could be occuring in our various overseas endeavors (ie: continued occupations in Middle East countries and picking fights with others) so it’s quite likely that neither candidate’s plan will rectify the cash bleed as it stands.

Anyone scared yet?  Well don’t even think of trying to run for the border, while we’re fighting to keep the illegals out of the country, there’s a new provision that was added to the Heroes Act of 2008 which was primarily touted as the bill that increased benefits for veterans- if you want to leave the country, you will be taxed on all of your assets as though you were selling them.  Think of it as a moving tax.  Everything you own will cost you.

So with the deficit rocketing towards a record $400 billion for the year, $9 trillion total, we’re all tied in to this wonderfully sinking ship.  One thing is clear, it’s not going to matter what Candidate takes the wheel- it’s not going to be a matter of steering to change the course, it’s going to be a matter of fixing the hole in the bottom.  Something that’s going to require an overhaul in how we as a nation do business.

I’m not a smart enough man to have the answers, but I think it’s time we stop looking for soundbites and flag pins, and start looking for the folks who might actually have the knowledge to apply to fixing the problems we face.

Everywhere you look there’s signs of it, the TV is more filled than ever with commercials offering debt management programs, friends and family lose jobs and houses, and the cost of everything is in a constant state of increase…

So what does it mean for the average American, and what do they have to say about it?

The New York-based research group Conference Board said Tuesday that its Consumer Confidence Index dropped to 50.4 from a revised 58.1 in May. The reading was the lowest since February 1992, when it was 47.3.

Among the components in the overall report, the Expectations Index – a measure of consumers’ economic outlook for the future – hit an all-time low, declining to 41 from 47.3 in May.

The Present Situation Index, which measures how the average consumer feels about the economy right now, decreased to 64.5 from 74.2 in May.

The number of respondents reporting that business conditions as bad increased to 32.5% from 29.7% in May, while those claiming business conditions as good declined to 11.5% from 13% last month.

Consumers’ take on the job market was also more pessimistic this month. Those who said jobs are hard to get increased to 30.5% from 28.3% in May, while those saying jobs are plentiful declined to 14.1% from 16.1% the month before.

The labor market for the months ahead was also cause for concern. The percent of consumers expecting fewer jobs in the near future increased to 35.5% from 32.3%, while those who think there will be more jobs declined to 8% from 9%.

The six-month outlook for future business conditions got worse in June. Those who expect business conditions to worsen until December rose to 33.9% from 32.9%, while those who expect business to get better decreased to 8.8% from 10.6% in May.

The index – based on a survey of 5,000 U.S. households conducted for The Conference Board by TNS – has declined for six months in a row. The index uses 1985 as the benchmark year when the index stood at 100.

Gas prices are rising again after a 3 day decline, and the prices of homes are decreasing- leaving many home owners with morgages that are worth more than their houses. 

Some claim that things aren’t that bad, with consumer spending still holding steady, though many point to tax returns and stimulus checks as the sources for the spending, and as soon as that resource has been tapped, the decline in spending will be immediately felt.

So what do we do from here?

I’m afraid there’s no clear answer…

I’ve had a few questions and been made aware of concerns over not receiving an economic stimulus check yet during the last two days. According to the IRS payment time table, the final direct deposit date was on May 16th. Even if you haven’t gotten your direct deposit yet, it doesn’t necessarily mean there’s a problem with your tax return.

Whether you agree or don’t agree with the governments decision to kick-start the economy in this way, here’s the main reasons you may not have gotten your check on time:

1. If you filed with a tax service such as Jackson Hewitt or H&R block, your stimulus payment may be on a later time table. More likely than not, you agreed to have their tax service fee directly taken out of your tax return. By doing that, your return didn’t come directly from the IRS. It was actually paid to you by the tax service company. To the IRS, this means that you’ll receive your payment by check and not by electronic deposit. The time schedule for the check payments are listed here.

2. Perhaps it’s too obvious to mention, but it’s possible there was an error with the tax return that was filed. In this case, the IRS will contact you to advise of the problem. Once the issue is remedied, the stimulus payment will be sent or direct deposited.

Also from the IRS website:

A small percentage of tax returns will require additional time to process and to compute a stimulus payment amount. For these returns, stimulus payments may not be issued in accordance with the schedule above, even if the tax return was processed by April 15.

Lastly, when in doubt, ask the IRS! If you still haven’t received your refund within 28 days from the original IRS mailing date, you can start a refund trace online here!!