When the government poored billions into the financial markets it made it more likely our country will face a significant crisis in the future.
When the government poored billions into the financial markets it made it more likely our country will face a significant crisis in the future.
The 2009 federal deficit soared to $1.4 trillion in the fiscal year that ended in September:
...At about 10 percent of the overall economy, the gap between federal spending and tax collections is the largest on record since the end of World War II, and bigger in nominal terms than the past four years of deficits combined.
..."There is no doubt we started the year in a difficult fiscal situation. But Congress and the administration have made a bad situation much worse with an unrelenting spending binge that has plunged our nation into a dangerous level of deficit and debt," said Rep. Paul D. Ryan (R-Wis.), the senior Republican on the House Budget Committee.
...Economists universally agree that the nation cannot run such massive deficits indefinitely...
Aside from this record deficit, the Dems want to add a repressive tax for using unclean energy onto businesses in their cap and trade bills that will be passed on to citizens in higher utility bills. They also want to pay for the largest government led-expansion of health insurance in history in ways we don't even realize yet. Seriously, who do you think is going to pay for it?
Both parties are at fault here. That's why the Republicans were booted out of Congress in 2006 but the Dems aren't helping here, atl all.
Aren't struggling citizens and businesses at their wits end, already? Their goals simply defies common sense and good judgment.
In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
The warning signs are all around about the growing U.S. deficits which caught the attention of Canada's Prime Minister:
Canadian Prime Minister Stephen Harper called the U.S. deficit "dangerous" on Monday and said it would eventually require tax increases -- a path he said his Conservative government would avoid.
Harper was responding in Parliament on Monday to a question from the opposition Liberals on the need for more transparency in stimulus spending and a suggestion that Harper copy the Obama administration and publish spending details online.
Harper replied: "The Liberal Party cites the United States as their fiscal model ... In the United States the deficit is running at four times the size of our deficit. It is a dangerous, long-term structural deficit that existed even before the recession began, one that will require tax increases eventually."
"That's not a direction we want to go," he said.
The U.S. Treasury declined to comment on Harper's remarks.
Have you ever wondered what states have the highest per capita state taxes?
Vermont is the highest with each person paying $3,600 per year. Next is Hawaii followed by Wyoming, Connecticut, and Minnesota, according to the U.S. Census Bureau for 2005.
What prompted me to look into this was a statement made by a Fox News commentator who said how come the highest taxed states are in the worst financial shape referring to New York and California. But this is incorrect. Per capita California is ranked 10 and New York 11th so they are not the highest taxed states.
Oklahoma ranks 35th at $1,933.00!
China feels strong enough these days to offer up the idea of a world currency thanks to the billions we buy from them in cheap goods and the billions they loan us.
Now they have entered into a monetary deal in a Latin America country for the first time:
"Argentine officials are hopeful that a new currency swap deal with China will bolster confidence in the peso while giving the monetary authority greater power to defend the currency.
"This should boost confidence," said an Argentine Central Bank official who asked for anonymity. "Even if none of this money is ever used, its mere existence should serve to boost confidence in the currency."
The two nations agreed to a three-year currency swap totaling 70 billion yuan, ($10 billion).
China's state news agency, Xinhua, reported earlier Monday that Argentina could use the deal to pay for Chinese imports in yuan. But the Central Bank official said the deal's main goal is to restore confidence in the Argentine government's ability to manage the value of the peso..."
President Obama may face tough challenges at Thursday's G20 meeting. Many leaders from left-leaning European countries have blasted Obama's massive spending plans.
The BBC reports today France may actually walk out of the meeting:
"France will walk away from this week's G20 summit if its demands for stricter financial regulation are not met, the finance minister has told the BBC.
Christine Lagarde told HardTalk that President Sarkozy would not sign any agreement if he felt "the deliverables are not there".
Strengthening financial regulation will be one of the key issues at the G20.
France wants a stronger global financial regulator than the US and the UK would like.
If France were to leave the summit, it would be a blow to both UK Prime Minister Gordon Brown and US President Barack Obama..."
G20 summit will show the shift of power from U.S.-led economic order towards emerging market nations (Z: one writer's perspective)
Daniel Hannan, MEP for South East England, gives a speech during Gordon Brown´s visit to the European Parliament on 24th March, 2009. This video has been viewed over 600,000 times. Brown gets quite a verbal whipping.
Check out Hannan's blog, too, at the London Telegraph.
Liberal states have had liberal spending habits, right? So it's not too surprising in New York that nearly 9,000 state jobs will be eliminated.
What led to this action by the governor was that unions refused to give any wage concessions, which seems like a rather foolish move on their part:
"Gov. David Paterson will reduce the state work force by 8,900 positions -- through a combination of layoffs and attrition -- after public employee unions declined to go along with concessions to help balance the state's budget.
The decision to lay off government workers, the first time since the budget crisis of the early 1990s, came after a breakdown in discussions with unions over Paterson's plan to freeze state salaries and have workers take a one-week furlough, among other cost-saving steps.
"This is not a decision that has been reached lightly. However, given the fact that savings through labor concessions were not achieved, Governor Paterson was forced to make this difficult decision for the good of the entire state," Dennis Whalen, the governor's director of state operations, said in a memo this afternoon to state agency commissioners.
The job cuts, to begin this summer, will save $481 million over two years, according to Jeffrey Gordon, a spokesman for the governor's budget division.
Word of the work force reductions came just a few hours after Paterson said the state's deficit had swelled by another $2.2 billion to $16.2 billion -- the largest in state history. The state's next fiscal year starts next Tuesday..."
Concerns about spending trillions of borrowed foreign money by the U.S. government to spend its way out of a serious economic recession isn't just affecting Americans who find it very worrisome. Now criticism has spilled into Europe:
"Barack Obama and Gordon Brown's plans to increase spending on economic recovery have been described as "a road to hell" by the European Union presidency.
Internal European divisions are growing over the Prime Minister and US President's strategies to fight the economic crisis just one week before a critical G20 summit in London.
Mirek Topolanek, the Czech prime minister who is running a caretaker EU presidency after the collapse of his government on Tuesday, highlighted European splits over fiscal stimulus plans promoted by Mr Obama, with Mr Brown's support.
Mr Topolanek warned the European Parliament that the Obama administration's stimulus package and financial bail-out "will undermine the stability of the global financial market".
...Writing in newspaper articles published across Europe on Wednesday, Mr Obama implicitly criticised countries, such as Germany, France and the Czech Republic, that are opposed to further stimulus measures..."
Other recent headlines made by President Obama:
Obama's Special Olympics comment bothersome York Daily Record
Obama Says a Way Out of Afghanistan Is Needed (didn't he campaign this place is where the real war was?)
Obama ponders Afghan 'exit plan' BBC News
China, one of the largest purchaser of U.S. debt, is now worried about their treasury holdings. Gulp.
...His remarks came ahead of the meeting of finance ministers and central bankers in London this weekend to lay the groundwork for next month's G20 summit on the global downturn.
...While relations with the US are broadly stable, there was displeasure when treasury secretary Timothy Geithner said President Barack Obama believed China was manipulating its currency. The administration subsequently rowed back from the remarks.
"They are worried about forever-rising deficits, which may devalue treasuries by pushing interest rates higher," Frank Gong, a JP Morgan economist, told Reuters. "Inside China there has been a lot of debate about whether they should continue to buy treasuries."
...Figures released this week show a mixed picture for the Chinese economy, with exports slumping by more than 25% in February and retail sales weakening, but a sustained surge in bank lending which some analysts believe offers hope of a recovery."
Big goverment: Recession-----Depression-----Disaster
6834.58 -228.35 (-3.23%) Mar 2 12:15pm ET
Stocks Drop, and Dow Falls Below 7000 Mark -
Photo credit: Ari Levinson
In a word, yes!
Pictured above is Barack Obama giving a speech at the University of Southern California in support of California Proposition 87 in 2006. The proposition would have established a $4 billion program with a goal of reducing petroleum consumption by 25%, with research and production incentives for alternative energy, but it did not pass. In terms of Obama's energy policy, he has consistently argued for a reduction in the usage of fossil fuels, having voted for the Energy Policy Act of 2005 and opposed drilling for oil in the Arctic National Wildlife Refuge.
There is a new website called Stimulus Watch that has added the many projects from the Economic Stimulus bill that we, our children, and their children and their children will pay over the decades to come. The ability to sort, comment, and track these projects are part of the website.
The data on their site comes from the U.S. Conference of Mayors' MainStreet Economic Recovery Report.
What's useful about this website is that local citizens can fill in the blanks about the projects listed for their city and makes comments and vote for or against as they learn more about them, which is pretty cool.
The project for Oklahoma are listed here. The total cost of all the projects submitted by Oklahoma City is $501,318,000 and for Tulsa it is $944,612,008.
This website could be a great resource going forward so I think it's worth checking out.
Apparently the Economic Stimulus plan President Obama signed into law is not being view favorably by the markets. Duh! Did anyone think they would be happy?
This could be dramatically dire for investors if the markets keep going down. But another way to look at this big problem if the fall continues; stocks will be on the 90% clearance table soon!
"Investors' sagging confidence has pulled the major stock market indexes to their lowest levels in over a decade. The Standard & Poor's 500 index fell to April 1997 levels Monday, while the Dow Jones industrial average, down about 150 points, reached its levels of October 1997 as investors succumbed to their growing worries about a recession that has no end in sight.
"People left and right are throwing in the towel," said Keith Springer, president of Capital Financial Advisory Services..."
One retail expert thinks so. I would hate to even think he could possibly be right but add his concerns to the unprecedentd government spending gamble that will be taking place and one wonders:
"There's no question the American consumer is hurting in the face of a burst housing bubble, financial market meltdown and rising unemployment.
But "the worst is yet to come," according to Howard Davidowitz, chairman of Davidowitz & Associates, who believes American's standard of living is undergoing a "permanent change" - and not for the better as a result of:
...The end of rampant consumerism is ultimately a good thing, he says, but the unraveling of an economy built on debt-fueled spending will be painful for years to come.
The next time you hear President Barack Obama or the democratic-led Congress blame President Bush for the bailout bill last fall, be aware of the facts:
The final bill that passed was an alternative to President Bush's bailout plan and included oversight (see below).
Maybe I'm missing something here but I say don't be fooled.
Also be sure to read about an ad that ran in the Wall Street Journal yesterday which was signed by hundreds of economists about the current stimulus package at the CATO Institute.
Read the latest TARP bill at ReadTheStimulus
"...Over the past several days, we have worked with our Republican colleagues to fashion an alternative to the original plan of the Bush administration.
I must recognise the outstanding leadership provided by -- Barney Frank, whose enormous intellectual and strategic abilities have never before been so urgently needed, or so widely admired.
I also want to recognise -- Rahm Emanuel, who combined his deep knowledge of financial institutions with his pragmatic policy experience to resolve key disagreements."
...With passage of this legislation today, we can begin the difficult job of turning our economy around, of helping those who depend on a growing economy and stable financial institutions for a secure retirement, for the education of their children, for jobs and small business credit.
Hello??? Is anyone in Congress paying attention to this report:
"President Obama's economic recovery package will actually hurt the economy more in the long run than if he were to do nothing, the nonpartisan Congressional Budget Office said Wednesday.
CBO, the official scorekeepers for legislation, said the House and Senate bills will help in the short term but result in so much government debt that within a few years they would crowd out private investment, actually leading to a lower Gross Domestic Product over the next 10 years than if the government had done nothing.
CBO estimates that by 2019 the Senate legislation would reduce GDP by 0.1 percent to 0.3 percent on net. [The House bill] would have similar long-run effects, CBO said in a letter to Sen. Judd Gregg, New Hampshire Republican, who was tapped by Mr. Obama on Tuesday to be Commerce Secretary.
The House last week passed a bill totaling about $820 billion while the Senate is working on a proposal reaching about $900 billion in spending increases and tax cuts..."
The "Buy America" provision in the stimulus bill President Obama is trying to get passed in Congress has brought warnings from Australia:
"Australia condemned the "Buy American" provisions in the United States stimulus measures on Thursday, warning the move to protect U.S. iron and steel makers would lead to a retaliatory trade war.
The U.S. Senate on Wednesday voted to soften the "Buy American" plan to ensure the provisions of the $900 billion stimulus bill remained consistent with U.S. trade agreements.
..."This is the wrong course of action, they have got to reverse their decision," Crean said in a statement. "It will result in retaliatory action, it will result in a trade war."
...He said Australia was also examining the "Buy American" to see if it had any impact on the Australia-U.S. free trade agreement."
I found a listing of recent quotes from President Obama on the economy as he seeks to sell a stimulus plan to Congress stressing its urgency. In a two week time frame, he describes the economy from very weak to near catastrophic yesterday, if no action is taken.
|FROM 'WEAKENED' TO 'CATASTROPHE'|
President Obama's descriptions of the state of the economy have grown stronger since he took office two weeks ago:
In a brilliant and long overdue move, President Obama caps executive compensation to $500,000 if they receive federal money in a bailout.
The party's over.
"President Obama on Wednesday imposed a $500,000 cap on executive pay for companies that get federal bailout money.
"In order to restore our financial system, we've got to restore trust," Obama said. "And in order to restore trust, we've got to make certain that taxpayer funds are not subsidizing excessive compensation packages on Wall Street."
Obama said the lavish bonuses for some Wall Street executives are "shameful." He bemoaned a "culture of narrow self-interest and short-term gain."
Here's an interesting and worrisome fact for today:
"...The Dow Jones lost 4% (332 points) to close at 7,949; the S&P 500 fell 5.2% (44 points) to 805; the Nasdaq tumbled 5.8% (88 points) to end at 1,440; and the Russell 2000 plummeted 7% (32 points) to finish at 433. It was the Dow's worst Inauguration Day drop in its history and pushed the S&P to its worst start to a year.
...Nouriel Roubini, the New York University professor who predicted the economic and stock-market meltdowns, said at a conference today that U.S. financial losses may hit $3.6 trillion.
“If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion,” he said in Dubai. “This is a systemic banking crisis.”
This isn't good news:
"We lost 2 billion dollars and like any other business we have to stay afloat." And to keep from sinking, the United States Postal Service is considering cutting thousands of jobs nationwide. Lavelle Pepper with the post office in Shreveport says they too are feeling the affects of the same disease hitting the country... a struggling economy. "We employ about 685,000 people. If we do layoffs it would include clerks, carriers, mail handlers across all crafts."
Pepper says the postal service is looking to eliminate 40,000 jobs nationwide. There's not an exact number on how many of those could be from the Ark-La-Tex. Pepper says workers who are not part of union with six or less years of service would likely be the first on the chopping block. "We've identified 16 thousand people that are not covered under contract. We'll see what those numbers add up to."
The two days following the election of Barack H. Obama, a president-elect of many firsts, the stock market drop in value was the largest since 1987 and is the largest two day point loss in Dow history!
Does the financial markets not have confidence in Barack Obama and his promises to fix everything for everybody? It may be my amateur take on things but it makes sense the market is sending this signal along with dismal economic news.
The president-elect has nothing in his track record of managing anything that I'm aware and he has promised a lot which will cost billions. During these trying times, which could get far worse than better, I hope his supporters are comforted by his words of hope and change and his request to his fans to believe in him.
But it may not take long for his fans to get disenchanted. Sensing this as a very real problem his team has formulated a plan to let people down gently from all his promises which generated a euphoria unlike we've seen in any presidential race.
Having said all this, I hope and pray that president-elect Obama will be successful for our country's sake and future.
One adoring fan of Barack Obama, whose post was allowed to say on Obama's presidential website:
This may not be good news for an Obama presidency. I don't see how he can fulfill all he said he would with the reality of what is going on:
"The stock market posted its biggest plunge following a presidential election as reports on jobs and service industries stoked concern the economy will worsen even as President-elect Barack Obama tries to stimulate growth.
The market's decline came a day after the biggest presidential Election Day gain since the New York Stock Exchange first opened for trading on a voting day in 1984.
...The report by ADP Employer Services showed companies cut 157,000 jobs in October, the most since November 2002 when the U.S. was emerging from a recession. The Institute for Supply Management said service industries in the U.S., which make up 90 percent of the economy, contracted by the most on record..."
This is not good news:
"British Prime Minister Gordon Brown said Sunday he is confident that Saudi Arabia will contribute to the International Monetary Fund's bailout reserves after he promised business leaders in the Gulf that they would have a say in any future new world economic order.
Brown is using a four-day tour of the Gulf to call on oil-rich Middle Eastern countries to be among the biggest donors to the IMF's coffers to rescue failing nations, which at $250 billion have already been depleted by emergency cash calls from Iceland, Hungary and the Ukraine totaling some $30 billion.
...Brown has attempted to win favor with Arab states by stressing they have not been represented enough on international bodies and promising them a seat at the table amid discussions by world leaders "grasping toward new world order."
"I believe that your country has a crucial role to play and your voice must be heard," Brown told business leaders in Saudi Arabia..."
The Senate has reached the needed 60 votes to pass their version of the financial bailout bill.
Nearly 100 Democrats in the House of Representatives voted against the financial bailout bill yesterday. Fifteen Democrats in California from the home state of the Speaker of the House, Nancy Pelosi, even voted against the bill.
Rep. Barney Frank, D-Mass., one of the main congressional negotiators, and chairman of the House Financial Services Committee failed to get his democratic team on his own banking committee on board with the bill!. Now that's telling.
Yet, all we hear the Democrats on TV do is to spew their partisan venom against the Republicans.
The first financial bailout vote is taking place in the House of Representatives now. The vote is split and could take an hour or two to complete. Meanwhile, the Dow is going down over 600 points, at one point, because the vote isn't going in the direction for bailout approval.
We all need to remind ourselves who have been in charge of both houses of Congress, the chief legislative and regulatory making bodies of our government, these past two years, but who blame the Republicans at ever turn - the Democrats.
It might be a mistake to forget this fact.
Update 1:07 PM CT: The financial bailout bill as it is currently written has failed in the House
Update 2:01 PM CT: Reports are out now that the U.S. House may have passed it had it not been for Nancy Pelosi who spoke before the house during the vote blaming everything on the Bush Administration - 12 Republicans apparently switched their votes!
The Democrats are on TV are now denying this and are blaming the Republicans for putting their hurt feelings ahead of the country.
The Dow is now down by 635 points.
What has caused the near melt-down of our economy? Ths video may give us some insight but I don't know if all of it is true so watch it with that caveat. At the end there is a vote for McCain/Palin moment.
Here we are in the mist of the biggest economic crisis since the great depression and we hear from the Democrats, including Sen. Majority Harry Reid, how it's all John McCain's fault for coming to Washington.
Give me a break.
Doug Mills/The New York Times
Historic meeting with President Bush took place this afternoon to work out a plan to keep our economy from collapsing.
Update: 6:00 PM CT: Reports are coming out of Washington now that the meeting ended badly with no deal. Some say it was a disaster. No doubt, Obama will blame McCain.
Since 2000, approximately 50,000 refugees have entered the United States each year from various regions of the world.1 Although persons with immigrant status are legally required to be vaccinated before entering the United States, this requirement does not extend to U.S.-bound persons with refugee status.* After 1 year in the United States, refugees can apply for a change of status to that of legal permanent resident, at which time they are required to be fully vaccinated in accordance with recommendations of the Advisory Committee on Immunization Practices (ACIP).2-3 A potentially less costly alternative might be to vaccinate U.S.-bound refugees overseas routinely, before they depart from refugee camps. To compare the cost of vaccinating refugees overseas versus after their arrival in the United States, CDC analyzed 2005 data on the number of refugees, cost of vaccine, and cost of vaccine administration. This report summarizes the results of that analysis, which suggested that, in 2005, vaccinating 50,787 refugees overseas would have cost an estimated $7.7 million, less than one third of the estimated $26.0 million cost of vaccinating in the United States. Costs were calculated from the perspective of the U.S. health-care system. To achieve public health cost savings, routine overseas vaccination of U.S.-bound refugees should be considered.
April 2008 was by far the most expensive month ever for the U.S. in terms of fuel consumption.
Source: OPIS Transportation Fuel Index
A big rise in food prices world-wide is at crisis level. What's next?
UN Secretary General Ban Ki-moon said the U.N and all members of the international community are very concerned, and immediate action is needed.
He spoke to reporters at U.N. offices in Austria, where he was meeting with the nation's top leaders for talks on how the United Nations and European Union can forge closer ties.
"This steeply rising price of food — it has developed into a real global crisis," Ban said, adding that the World Food Program has made an urgent appeal for additional $755 million.
...In Haiti, the poorest country in the Americas, protests have brought down the government and killed six, while in Cameroon at least 24 have died in protests linked partly to rising living costs.
Governments of several food-growing countries, worried about domestic shortages, have imposed export curbs, spooking markets at a time when world inventories are down sharply.
Japan announced $100 million in emergency food aid on Friday and World Food Program's executive director said on Thursday the cost of feeding the world's hungry had spiked nearly 40 percent amid spiralling food costs and oil prices.
Not good news:
Rice advanced above $25 for the first time as Wal-Mart Stores Inc.'s Sam's Club warehouse unit restricted purchases of some types of rice in the U.S.
The cereal, the staple food for half the world, has more than doubled in the past year as China, Vietnam and India curbed exports to safeguard domestic supplies. Sam's Club limited customers to four bags of jasmine, basmati and long-grain white rice per visit in all U.S. stores where allowed by law, company spokeswoman Kristy Reed said by e-mail.
Consumers have started hoarding rice as supplies shrink. Thailand, which ships one third of the world's exports, may restrict sales, a World Bank official said this week. Wheat, corn and soybeans gained to records this year, spurring social unrest in countries including Haiti and Egypt.
``We have been neglecting our basic rice production infrastructure and research and development for 15 years,'' said Robert Zeigler, director-general of the International Rice Research Institute in the Philippines. ``National hoarding really doesn't help the market,'' he told Bloomberg Television.
The U.S. warehouse clubs are trying to protect business customers, like smaller restaurants, caterers, nursing homes and day-care centers, said Jim Degen, principal of J.M. Degen & Co., a food industry advisory firm based in Templeton, California.
...UN Secretary-General Ban Ki-Moon said April 20 rising food costs may hurt economic growth and threaten political security.
From BBC World News
Many parts of America, long considered the breadbasket of the world, are now confronting a once unthinkable phenomenon: food rationing. Major retailers in New York, in areas of New England, and on the West Coast are limiting purchases of flour, rice, and cooking oil as demand outstrips supply. There are also anecdotal reports that some consumers are hoarding grain stocks.
At a Costco Warehouse in Mountain View, Calif., yesterday, shoppers grew frustrated and occasionally uttered expletives as they searched in vain for the large sacks of rice they usually buy.
"Where's the rice?" an engineer from Palo Alto, Calif., Yajun Liu, said. "You should be able to buy something like rice. This is ridiculous."
...Due to the limited availability of rice, we are limiting rice purchases based on your prior purchasing history," a sign above the dwindling supply said.
Shoppers said the limits had been in place for a few days, and that rice supplies had been spotty for a few weeks. A store manager referred questions to officials at Costco headquarters near Seattle, who did not return calls or e-mail messages yesterday.
Spiking food prices have led to riots in recent weeks in Haiti, Indonesia, and several African nations. India recently banned export of all but the highest quality rice, and Vietnam blocked the signing of a new contract for foreign rice sales.
"I'm surprised the Bush administration hasn't slapped export controls on wheat," Mr. Rawles said. "The Asian countries are here buying every kind of wheat." Mr. Rawles said it is hard to know how much of the shortages are due to lagging supply and how much is caused by consumers hedging against future price hikes or a total lack of product.
Unbelievable. Is this figure right? Unfortunately, it probably is. Americans have to spend nearly $250 million more per day for gas than just a year ago! Since the Iraq war started that figure has risen to an astonishing $626 million per day spent on gas which is not available for spending or savings.
This is seriously bad:
Retail and wholesale fuel prices shattered all previous records last month, and products used in the transportation sector began April with numbers up as much as 238% from five years ago. The wholesale and retail fuel price comparisons are included in the detailed OPIS Transportation Fuel Index (TFI) released this morning: http://www.opisnet.com/tfi.asp.
OPIS TFI Highlights:
Bad news for Americans:
Americans' percentage of equity in their homes fell below 50 percent for the first time on record since 1945, the Federal Reserve said Thursday.
Homeowners' portion of equity slipped to downwardly revised 49.6 percent in the second quarter of 2007, the central bank reported in its quarterly U.S. Flow of Funds Accounts, and declined further to 47.9 percent in the fourth quarter — the third straight quarter it was under 50 percent.
That marks the first time homeowners' debt on their houses exceeds their equity since the Fed started tracking the data in 1945.
The total value of equity also fell for the third straight quarter to $9.65 trillion from a downwardly revised $9.93 trillion in the third quarter.
Home equity, which is equal to the percentage of a home's market value minus mortgage-related debt, has steadily decreased even as home prices jumped earlier this decade due to a surge in cash-out refinances, home equity loans and lines of credit and an increase in 100 percent or more home financing.
Economists expect this figure to drop even further as declining home prices eat into the value of most Americans' single largest asset.
U.S. Comptroller, David Walker, will resign soon and become President and Chief Executive of the Peter G. Peterson Foundation, a new think tank. Walker still had 5 years left on his 15 year term. He was compelled to leave, I guess, due to the inaction of our seriously dysfunctional Congress.
The news foundation he will head will call attention to critical social, economic and environmental problems threatening the nation's economy and imperil the American way of life for future generations. It might just take a foundation like this to help make changes and improvements in our government. I hope they are successful.
One of government's chief internal watchdogs resigned yesterday, as Comptroller General David M. Walker, an outspoken gadfly and frequent witness on Capitol Hill, announced his plans to lead a new foundation focused on U.S. fiscal responsibility.
...Walker was an outspoken critic of the costs of the wars in Iraq and Afghanistan, Social Security, Medicaid and Medicare spending -- issues on which the Democratic-led Congress, and Republicans before it, have had trouble building consensus.
...Walker's resignation takes effect March 12. He will lead the Peter G. Peterson Foundation, a new think tank whose mission, according to its Web site is "to enhance public understanding of the nature and urgency of selected key sustainability challenges that threaten America's future," including "unsustainable" growth in entitlement spending, and energy consumption. Washinton Post
Fiscal Wake Up Tour GAO (Related Presentations from the former Comptroller General)
David Walker: U.S. fiscal irresponsibility worse than terrorism. (video) zTruth
America's Financial Future Part I by David M. Walker:
America's Financial Future - Part II
More bad news for the economy:
Wholesale inflation last year shot up by the largest amount in 26 years while retailers suffered their worst December shopping season in five years as mounting economic woes caused consumers to put away their wallets.
The Labor Department reported that wholesale inflation was up 6.3 percent for all of 2007, reflecting a huge increase for the year in various types of energy costs ranging from gasoline to home heating oil.
Meanwhile, retail sales fell by 0.4 percent in December, the worst showing in six
months, the Commerce Department reported. Consumer confidence has plunged, reflecting the worsening housing slump and a lingering credit crisis.
For inflation, the year ended on a more positive note, with wholesale prices falling
by 0.1 percent in December. That reflected decreasing costs last month for gasoline and other energy products. It was a significant slowdown after prices had soared by 3.2 percent in November, which had been the biggest one-month increase in 34 years.
...Federal Reserve Chairman Ben Bernanke last week sent a strong signal that the Fed is more worried at the moment about weak growth than inflation, given a series of weaker-than-expected data in recent weeks.
More bad news for the economy:
Citigroup plans to announce a writedown of as much as $24 billion and layoffs that could total as much as 24,000 due to subprime and credit-related losses, CNBC has learned.
The plans will be unveiled Tuesday by Citigroup's new CEO, Vikram S. Pandit, after the banking giant reports fourth-quarter earnings. At the same time, Citigroup could also announce that it is cutting its dividend payment.Citigroup is likely to cut between 17,000 and 24,000 positions over the course of the year through a combination of layoffs, attrition and selling off businesses as part of Pandit's cost-cutting plan, sources said. Previously, it was estimated that the layoffs could reach 20,000. Source CNBC
"Just under two-thirds (63%) of the gain in household income from 2003 to 2005 went to just 5% of the nation’s wealthiest households."
From the Economic Policy Institute:
Earlier this week Congressional Budget Office (CBO) updated its authoritative data series on household incomes (1979-2005). The new data—highly regarded as a particularly complete source of information on this important topic—reveal a sharp increase in income inequality over the past few years. In fact, the increase in income inequality (both pre-and post-tax) as measured by the change in the shares of income going to different income classes, was greater from 2003 to 2005 than over any other two-year period covered by the CBO data. Over these years, an amazing $400 billion in pre-tax dollars was shifted from the bottom 95% of households to those in the top 5% (all income data in this report are inflation adjusted and in 2005 dollars). In other words, had income shares not shifted as they did, the income of each of the 109 million households in the bottom 95% would have been $3,660 higher in 2005.
...The CBO data reveal the severe depth of our inequality problem. Though overall tax reductions during this period have meant slightly faster post-tax income growth for households in each income group, it has made little difference to the overall picture of inequality and has even exacerbated unequal outcomes over this period.
The problem is particularly stark in recent years. Before the current problems in housing and financial markets developed, the overall economy grew solidly over this recovery, with notably strong productivity growth. As the CBO data reveal, aggregate household income grew $1.1 trillion in the 2003-05 period (see appendix table). But these gains have failed to flow broadly throughout the income scale, and the extent of their concentration at the top of the income scale is historically unique. Just under two-thirds (63%) of the gain in household income from 2003 to 2005 went to just 5% of the nation’s wealthiest households.
Such concentration of income is unsustainable in a democratic society. The distribution mechanisms that have historically worked to ensure much more equitable outcomes appear to be wholly inoperative. Fixing them must be at the heart of any serious economic policy discussion.
Read the report for a complete picture (see link at top).
The rate of the decline in home prices is accelerating and spreading. The gauge of 10 major metropolitan areas nationwide showed that home prices fell an average of 6.7% year-over-year, the biggest decline since the index was started in 1987. The previous record decline had been 6.3% in April 1991.
In the last five years economists note, homeowners have taken out money from their home equity which has helped drive our economy. Will the decline in home prices and the accompanying loss of home equity purchasing power affect the economy in the months and years to come?
"The decline in home prices accelerated and spread to more regions of the country in October, according to a series of private indexes released Wednesday.
Prices fell 6.1 percent from October 2006 in 20 large metropolitan areas, according to Standard & Poor’s/Case-Shiller indexes, compared with a 4.9 percent decline in September. All but three of the 20 regions saw real estate values fall, and even the three places — Seattle, Portland, Ore., and Charlotte, N.C. — where prices were up from a year ago saw prices fall from a month earlier.
...Prices are dropping fastest in the Midwest, which has been hit hard by job losses in manufacturing, and in California, Florida and the Southwest, where the housing boom was at its frothiest. Prices have fallen the most in Miami (12.4 percent from a year ago), Tampa (11.8 percent) and Detroit (11.2 percent). Prices are also falling in the nation’s two largest metropolitan areas — Los Angeles (8.8 percent) and New York (4.1 percent).
The quickening decline in home prices could hurt the broader economy by leading to more foreclosures as homeowners have more difficulty refinancing mortgages and by sapping consumer spending as Americans feel less wealthy. But economists also noted that a faster descent from boom-era prices would allow the housing market to right itself sooner by removing vacant homes from the market."
It has become quite apparent that the richest Americans control a larger and larger percentage of the nation's wealth. It's a figure that most Americans have to be sick about. President Bush says it is because most Americans lack the proper skills. When will Americans say enough, we are done and mean it?
According to new data from the Internal Revenue Service, the wealthiest 1 percent of Americans earned a record-breaking 21.2 percent of all income in 2005, reported today in the Wall Street Journal. Up sharply from 19 percent in 2004, and surpasses the previous high of 20.8 percent set in 2000, at the peak of the previous bull market stocks, the Journal reports.
The bottom 50 percent earned 12.8 percent of all income, down from 13.4 percent in 2004 and a bit less than their 13 percent share in 2000, according to the Journal.
"In an interview yesterday with The Wall Street Journal, President Bush said, "First of all, our society has had income inequality for a long time. Secondly, skills gaps yield income gaps. The IRS data show that the median tax filer's income -- half earn less than the median, half earn more -- fell 2% between 2000 and 2005 when adjusted for inflation, to $30,881. At the same time, the income level for the tax filer just inside the top 1% grew 3%, to $364,657. Wall Street Journal
The IRS data confirms the growing concerns most Americans have for their future earning power and security. A nation that consistently only increases the earnings of its top tier earners is a failed nation.
..."Chief Executive Officer (of KB Home) Jeffrey Mezger said in the statement he expects ``housing industry conditions to continue to worsen through the end of the year and into 2008.'' KB Home reported its second consecutive quarterly loss after $690 million in pretax expenses to write down land and inventory.
``The writedown was much bigger than anyone had been expecting,''' said Dan Poole, who helps manage $31 billion at National City Private Client Group in Cleveland. ``If there's good news out there, it's few and far between.''
Rueters reports U.S. foreclosures were up 9% from June and a whopping 93% from one year ago! States that once enjoyed a hot housing market are feeling the pain the most. I guess this is taking the place of the dot com bust. I wonder what will be the next hot thing?