Where is the US economy headed?

C I
"Loose credit is worse for our economy; it only exacerbates an already over-extended economy.

That is what I tried through various quotes.

"Is it Heaven?
No
This is USA"

I'm not sure where Jim Sinclair got his figure, because as he said none of the banks are coming clean on all their losses. They are afraid that the news will put our economy in a depression. It's a self-survival thing where ethics no longer is of any concern. I thought more of the problem would get exposed by now, but it's still being kept under wraps. Everybody is in great fear. (Thanks to dummy Bush and his good economic tax cuts.)

Conscience
"On Friday, the Dow Jones clawed its way back from a 200 point deficit to a mere 31 point loss after the Federal Reserve injected $38 billion into the banking system. The Fed had already pumped $24 billion into the system a day earlier after the Dow plummeted 387 points. That brings the Fed's total commitment to a whopping $62 billion.

By some estimates, $326.3 billion has now been added to the G-7 Nations' intra-banking system to prevent a breakdown. That amount will steadily rise in the weeks ahead as the situation continues to deteriorate. Some readers may remember that on Tuesday, August 7, the Fed announced that it was NOT planning to bail out the market.

My, how quickly things change.

http://www.dissidentvoice.org/2007/08/stock-market-brushfire/

" IN MATTERS OF CONSCIENCE, THE LAW OF THE MAJORITY
has no place"---Mahathma Gandhi

That only confirms the huge problem facing the world economy; they'd rather work on stop-gap actions rather than let the world economy slide into depression; that's too painful sooner than later.

Gandhi never heard of Mayor Daley of Chicago.

What ever happened to all those conservatives who kept telling us that our economy was great because more Americans owned their homes?


U.S. home foreclosures soar in August


By ALEX VEIGA, AP Business Writer
Tue Sep 18, 8:32 AM ET



LOS ANGELES - The number of foreclosure filings reported in the U.S. last month more than doubled versus August 2006 and jumped 36 percent from July, a trend that signals many homeowners are increasingly unable to make timely payments on their mortgages or sell their homes amid a national housing slump.


A total of 243,947 foreclosure filings were reported in August, up 115 percent from 113,300 in the same month a year ago, Irvine, Calif.-based RealtyTrac Inc. said Tuesday.

There were 179,599 foreclosure filings reported in July.

Economic Hurricane
"By now, you've probably seen the photos of the angry customers queued up outside of Northern Rock Bank waiting to withdraw their money. http://news.bbc.co.uk/2/hi/uk_news/6998507.stm The pictures are headline news in the UK but have been stuck on the back pages of US newspapers. The reason for this is obvious---the same Force 5 economic-hurricane that just touched ground in Great Britain is headed for America and gaining strength on the way


A more powerful fiscal-tsunami is about to descend on the United States where many of the banks have been engaged in the same practices and are using the same business-model as Northern Rock


The Bush administration needs to come to grips with the "systemic" problems of the current market-model and act fast. When crowds of angry people are huddled outside the banks to get their money; the system is in real peril. Credibility must be restored quickly.
Market analyst, Jon Markman offered these words of advice to the financial giants:

"Before they (the financial industry) take down the entire market this fall by shocking Wall Street with unexpected losses, I suggest that they brush aside their attorneys and media handlers and come clean. They need to tell the world about the reality of their home lending and loan securitization teams' failures of the past four years -- and the truth about the toxic paper that they've flushed into the world economic system, or stuffed into Enron-like off-balance sheet entities -- before the markets make them walk the plank


BERNANKE'S LEGACY: Was he a man or a mouse?



Bernanke can either be a statesman---and tell the country the truth about our dysfunctional financial system which is breaking down from years of corruption, deregulation and manipulation---or he can take the cowards-route and "buy some time" by flooding the system with liquidity, stimulating more destructive consumerism, and condemning the nation to an avoidable cycle of double-digit inflation.



We'll know his decision on Tuesday.

http://www.informationclearinghouse.info/article18410.htm

The problem is that governments in recent years have been unable to impose any austerity measures because if they do they are not governments anymore and the voters will bring in a government which won't. Or at least it won't until it has no other alternative.

It isn't Mr Bush stupid. It's the voters. They are scapegoating Mr Bush. One might assume, according to some psychologists, that the ones who feel most guilty are the ones who stuff Mr Bush loudest.

spendi: It isn't Mr Bush stupid. It's the voters. They are scapegoating Mr Bush. One might assume, according to some psychologists, that the ones who feel most guilty are the ones who stuff Mr Bush loudest.


I agree; the voters must take on the responsibility for putting him into office twice - when it was obvious he was incompetent and mismanaged almost everything he touched.

The 35 percent in this country who still supports Bush belongs in the same league; they're dumber than Bush.

The market reacted to the 50 basis point drop in the interest rate by an uptick by 336 points. A facade that hides the internal problems of the increasing defaults on the subprime loans still not revealed to the public.

I think I saw a report that reported a 115 percent increase in defaults from last year. It's gonna get worse as the weeks and months expires.

Will there be a "run" on the banks?

Not something anybody has to really worry about... Theyll just keep printing more money

I think there may well be a run, but it won't be on banks. It will be on asset-backed securities, mortage-backed securities, investment funds, and the like. Banks and money are well-enough regulated these days to be fairly resistant to panics. But these other liquid assets I mentioned are as unregulated and as devoid of safety measures as money in the 1920s was. If we're going to see panics and runs, I think we're going to see them on these assets, not on banks and money. There is historical precedent for this in the 1997 East Asian crisis.

I don't usually like cut'n paste jobs from ones favorite pundits' blog or op-ed. But as it happens, Paul Krugman explained the phenomenon well in a recent New York Times article, so I'll make an exception here.



Full Article

To Peggy-back on Thomas' post - most banks are protected by FDIC up to $100,000, and there are ways to increase the limit by having a different combination of owners in one family. Those mortgage companies who racked up those subprime loans are the ones in big trouble - and we're still not sure how big a problem it is, because they're not coming clean - yet.

What's worse, it's increasingly obvious that there's no good way to price/value the more esoteric securities; you can't buy them, as there's no real way to tell what the actual value of what you are buying is. So you can't sell them off, except at huge losses which grossly undervalue the asset.

I think that the rate cut yesterday will do absolutely nothing, other then to further the drop of the dollar, scare away foreign investment, and make a small group of people money. Inflation will be a problem.

Cycloptichorn

Cyclo, Inflation has been upon us for the past five years; salaries did not keep up with inflation, but the cost of most consumer goods have gone up. The reason our economy continued to show increases was funded by bigger borrowings by consumers, and many used the equity in their homes to borrow more. That "gold mine" disappeared with the subprime debacle, and liquidity is straining so badly, governments are feeding more money into a sinking ship. The half point decrease in the loan rate isn't going to cure what ails us. Consumers are already maxed out on debt, and more borrowings will only make things worse - not better.

Can anyone explain to me why 'core' inflation leaves out energy and food prices? As these are the sectors which have risen in price so much lately, it would seem false to leave them out of the calculation.


Cycloptichorn

As with many of the stats produced by our government, it has very little meaning to reality. Even the unemployment rate only considers those who have lost jobs during the past four to six weeks, and drops those people still without jobs beyond that period.

I've seen reports that says our country needs to create new jobs at the rate of 250,000 to 150,000 every month to keep up with demand. All one needs to do is figure out how many high school and college graduates we produce every month, and that gives a pretty accurate estimate of what is required to maintain full employment. It never comes even close to those numbers.

The recent report of 4,000 jobs lost as the worst record for the past four years seems to me playing with numbers adjusted by too many variables. Even Countrywide announced laying off 12,000 recently, and that didn't even show a blip on the unemployment rate.