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As a communist I wish to warn the normal middle class people .
The worst enemy of American capitalism is none other than those American capitalists who manipulate an control the Economy.
Like the so called"communism" this system will die very soon.
Unsung, unhonoured and without any drop of tears
Op-Ed Columnist
Stimulus Gone Bad
By PAUL KRUGMAN
Published: January 25, 2008
House Democrats and the White House have reached an agreement on an economic stimulus plan. Unfortunately, the plan ?- which essentially consists of nothing but tax cuts and gives most of those tax cuts to people in fairly good financial shape ?- looks like a lemon.
Specifically, the Democrats appear to have buckled in the face of the Bush administration's ideological rigidity, dropping demands for provisions that would have helped those most in need. And those happen to be the same provisions that might actually have made the stimulus plan effective.
Those are harsh words, so let me explain what's going on.
Aside from business tax breaks ?- which are an unhappy story for another column ?- the plan gives each worker making less than $75,000 a $300 check, plus additional amounts to people who make enough to pay substantial sums in income tax. This ensures that the bulk of the money would go to people who are doing O.K. financially ?- which misses the whole point.
The goal of a stimulus plan should be to support overall spending, so as to avert or limit the depth of a recession. If the money the government lays out doesn't get spent ?- if it just gets added to people's bank accounts or used to pay off debts ?- the plan will have failed.
And sending checks to people in good financial shape does little or nothing to increase overall spending. People who have good incomes, good credit and secure employment make spending decisions based on their long-term earning power rather than the size of their latest paycheck. Give such people a few hundred extra dollars, and they'll just put it in the bank.
In fact, that appears to be what mainly happened to the tax rebates affluent Americans received during the last recession in 2001.
On the other hand, money delivered to people who aren't in good financial shape ?- who are short on cash and living check to check ?- does double duty: it alleviates hardship and also pumps up consumer spending.
That's why many of the stimulus proposals we were hearing just a few days ago focused in the first place on expanding programs that specifically help people who have fallen on hard times, especially unemployment insurance and food stamps. And these were the stimulus ideas that received the highest grades in a recent analysis by the nonpartisan Congressional Budget Office.
There was also some talk among Democrats about providing temporary aid to state and local governments, whose finances are being pummeled by the weakening economy. Like help for the unemployed, this would have done double duty, averting hardship and heading off spending cuts that could worsen the downturn.
But the Bush administration has apparently succeeded in killing all of these ideas, in favor of a plan that mainly gives money to those least likely to spend it.
Why would the administration want to do this? It has nothing to do with economic efficacy: no economic theory or evidence I know of says that upper-middle-class families are more likely to spend rebate checks than the poor and unemployed. Instead, what seems to be happening is that the Bush administration refuses to sign on to anything that it can't call a "tax cut."
Behind that refusal, in turn, lies the administration's commitment to slashing tax rates on the affluent while blocking aid for families in trouble ?- a commitment that requires maintaining the pretense that government spending is always bad. And the result is a plan that not only fails to deliver help where it's most needed, but is likely to fail as an economic measure.
The words of Franklin Delano Roosevelt come to mind: "We have always known that heedless self-interest was bad morals; we know now that it is bad economics."
And the worst of it is that the Democrats, who should have been in a strong position ?- does this administration have any credibility left on economic policy? ?- appear to have caved in almost completely.
Yes, they extracted some concessions, increasing rebates for people with low income while reducing giveaways to the affluent. But basically they allowed themselves to be bullied into doing things the Bush administration's way.
And that could turn out to be a very bad thing.
We don't know for sure how deep the coming slump will be, or even whether it will meet the technical definition of a recession. But there's a real chance not just that it will be a major downturn, but that the usual response to recession ?- interest rate cuts by the Federal Reserve ?- won't be sufficient to turn the economy around. (For more on this, see my blog at krugman.blogs.nytimes.com.)
And if that happens, we'll deeply regret the fact that the Bush administration insisted on, and Democrats accepted, a so-called stimulus plan that just won't do the job.
today's news reported that as soon as president bush annouced the taxrefund , the oilprice shot up again .
wouldn't it have been a lot simpler if the money would have gone to the oil-producers right away ?
it would have been a lot easier to administrate
hbg
it looks like those JITTERS will persist for some time to come .
let's hope there will be no CONVULSIONS !
Quote:Worldwide share jitters continue
Global stocks were down on Friday, ending two straight days of solid rises as concerns returned about the state of the worldwide financial sector.
While the main Dow Jones index was down 154 points to 12,225 in mid afternoon trading on Wall Street, European shares had earlier finished lower.
London's FSTE closed down 6.8 points to 5,869, while Frankfurt's Dax lost 4.3 points and Paris' Cac fell 37 points.
Analysts said sentiment was hit by reports a hedge fund was in trouble.
Reports said that one of the main US hedge funds was in financial difficulty, but no names have been suggested.
US economic plan
Global stocks had risen earlier on Friday as investors welcomed the previous day's announcement of a US government plan to spend $150bn (£76bn) reviving the country's economy.
Strong earnings from Microsoft and building equipment firm Caterpillar had also helped to lift the mood, with Japan's main Nikkei index closing up 4%.
On Monday, stock markets from Japan to the UK were heavily sold on growing fears that the US would fall into a recession and drag down other key economies too.
In many markets, the falls were the worst since the 11 September 2001 attacks on the US.
The resulting turmoil prompted the Fed, the US central bank, to cut US rates to 3.5% from 4.25%.
Analysts now expect more volatility in the short term.
"We expect sharp gains and losses in the next few days and weeks," said Heinz-Gerd Sonnenschein, a strategist at Postbank in Germany.
"The US has done many things to stabilise the market, but all the bad news is not yet out there."
you can say that again ! hbg
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7208316.stm
Published: 2008/01/25 19:03:41 GMT
Want to see the story of the Bush years?
They have basically erased any gains we made in the 90's. Bravo, fools who supported them! Bravo.
Cycloptichorn
I dont know where the economy is going, nobody does.
For instance, on of our "favorite" people on her, a person that claims to have such insight into the economy, made this prediction...
Quote:cicerone imposter on Sun Nov 28, 2004 5:38 pm
Without having read the link you provided, I can say with some confidence that Krispy Kreme is headed for bankruptcy within the year
Anybody wanna bet what actually happened to Krispy Kreme?
I dont know where the economy is going, nobody does.
For instance, on of our "favorite" people on her, a person that claims to have such insight into the economy, made this prediction...
Quote:cicerone imposter on Sun Nov 28, 2004 5:38 pm
Without having read the link you provided, I can say with some confidence that Krispy Kreme is headed for bankruptcy within the year
Anybody wanna bet what actually happened to Krispy Kreme?
Not only has all the gains during the 90s been wiped out, many are now losing their jobs, homes, and cars.
BRAVO! Some 30 percent still believe Bush is doing a good job. BRAVO again.
Where is the economy heading?
Downhill.
Quote:Deep recession feared in U.S.
Falling business sentiment fuels gloomy outlooks
Jacqueline Thorpe, Financial Post
Published: Monday, February 25, 2008
Jeff Haynes/AFP/Getty Images
Economists are no longer talking about a U.S. recession but a deep recession after figures yesterday showed business sentiment continued to plummet in early February.
Forecasts for a more severe retreat came as CIBC World Markets forecast U.S. house prices would end up sliding 20% before the dust has settled on the American housing meltdown. CIBC estimated 50% of U.S. homeowners who took out below-prime mortgages in 2006 will end up in a negative-equity position -- owing more than their house is worth.
"There seems to be a sense of a very deep-seated collapse in the economy," said Michael Englund, chief economist at Action Economics.
The Philadelphia Federal Reserve's index of manufacturing activity in the U.S. Northeast dropped to -24.0 in February from January's already terrible reading of -20.9. Analysts had been expecting a bounce to about -10 after that sharp drop in January.
"As far as this indicator is concerned, a recession, and a severe one at that, is already underway," said Paul Ash-worth, of Capital Economics.
"The headline index is now consistent with a deep recession, if sustained at this level," said Ian Shepherdson, chief economist at High Frequency Economics, in a note.
The index is based on a survey of manufacturing firms by the Federal Reserve Bank of Philadelphia and their plans for general activity, shipments, new orders, employment and hours worked. It is one of the earliest monthly readings on the U.S. economy and has had a solid track record at predicting national manufacturing and future trends in actual output.
The collapse in the outlook for activity six months out was particularly worrisome, Merrill Lynch said. It posted the steepest decline in the 40-year history of this report, suggesting the United States is facing a recession on par with the early 1990s' downturn rather than the milder 2001 contraction.
Mr. Englund said that although the index measures only sentiment -- gauging what businesses say they will do rather than actual output -- it prompted him to reduce his forecast for first-quarter growth to 0.5% from 0.8%.
He said both consumer and business confidence turned dramatically south as the U.S. Federal Reserve slashed interest rates by 75 basis points in an emergency rate cut in late January.
"The sheer panic tone to the Fed may have actually fed a sense of panic, which is the very thing they were trying to quell with interest-rate reductions, " he said.
While private-sector interest rates were dropping nicely at the turn of the year, rising inflation expectations amid soaring commodity prices have forced rates higher again.
Applications for U.S. mortgages plunged by 11.5% last week as borrowing costs on 30-year fixed-rate mortgages rose by 37 basis points to 6.09%, the highest since late December.
The rise in borrowing costs will be a further constraint on the U.S. housing industry, which is only half-way through its "worst … housing meltdown in the postwar era," said Benjamin Tal, senior economist at CIBC World Markets, in a report.
He estimates 30% of below-prime mortgages taken out in 2006, including subprime and other exotic mortgages, are already in a negative-equity position and that could climb to 50%, prompting the urge to walk away from homes.
http://www.financialpost.com/story.html?id=326071
From xingu's article: Applications for U.S. mortgages plunged by 11.5% last week as borrowing costs on 30-year fixed-rate mortgages rose by 37 basis points to 6.09%, the highest since late December.
There's a cotradiction here that most people fail to see - or care. As our short term interest rates continue to fall, borrowings by consumers continues to escalate for long term loans that has an impact on most families. Some credit cards are still offering 20 percent plus interest rates; and banks are now paying less than one percent on money market accounts.
They have us screwed from both ends. People wonder why our economy is facing a recession.
Good evening. Am I correct that the Fed Reserve meets again this week? If so, are yall predicting no change, a 1/4% cut or a 1/2% cut?
Or (gasp) 3/4%? I would bet on another 1/2%.
I am surpirised, I guess that mortgage rates, as cited by CI in the 30 year fixed of just over 6%, are not falling. I do know that the bankers I have been talking to on the 15-stories of retail/office/condo space we have in the pipelinefreak out at the word "condos."
I don't know, MM, what you meant by the reference to Krispy Kreme (KKD). I see that the stock is at something like $2.80/share. The 52-week high was $11.00 plus. I don't know what it was when CI made his comment back in late 2004. I suspect it was much higher. That company, like its product, was full of hot air. It made its money by selling franchises, and, as I understand it, a lot of those folks got, um creamed.
in 2004/2005 krispy kreme launched a broad entry into the canadian market . i'm sure they knew of the success of tim horton doughnuts in canada over many , many years .
unfortunately , canadians were used to "timmies" and KK flopped in canada . since KK had invested heavily in canada at that time , the downfall of that business no doubt sent the stock on the downward trail .
it seems that they are doing reasonably well in the U.S , but may need some extra time to recover their losses .
so if you want to help them : BUY KRISPY KREME DOUGHNUTS !
the similar fate befell CANADIAN TIRES some years ago when they tried to enter the U.S. market - the air went out of their tires and it took them some time to recover from their losses .
find story here :
KRISPY KREME "CREAMED" IN CANADA
i think it shows that what works in the home country will not always work in another country .
another good example is the beating that mercedes-benz (daimler) took when when they tried to take over chrysler - that "expedition" cost them dearly .
on the other hand , GENERAL MOTORS is doing quite well in europe - and particularly germany - with its OPEL products .
the new SATURN car (aura ?) is actually based on a european GM-OPEL MODEL .
Quote:U.S. producer prices soared in January
New data show prices rising at fastest pace in over 16 years
BREAKING NEWS
The Associated Press
updated 9:15 a.m. ET, Tues., Feb. 26, 2008
WASHINGTON - Inflation at the wholesale level soared in January by the fastest pace in 16 years, pushed higher by rising costs for food, energy and medicine.
The Labor Department said Tuesday that wholesale prices rose 1 percent last month, more than double the 0.4 percent increase that economists had been expecting.
The worse-than-expected performance was certain to capture attention at the Federal Reserve, which has chosen to combat a threatened recession by aggressively cutting interest rates in the belief that weaker economic growth will keep a lid on prices.
But the combination of rising inflation and weaker growth raises the threat of "stagflation," the economic malady that plagued the country through the 1970s, when a series of oil shocks left households battered by the twin problems of stagnant growth and rising prices.
The 1 percent jump in wholesale prices followed a 0.3 percent decline in December and was the biggest one-month increase since a 2.6 percent increase in November. That gain had been driven by sharply higher energy costs.
With the January jump, wholesale prices have risen over the past 12 months by 7.5 percent, the fastest increase since the fall of 1981, when the country was in a deep recession.
The big jump in wholesale prices followed a worse-than-expected increase in consumer prices, which rose by 0.4 percent last month as consumers got hit by higher costs in the same areas of food, energy and health care.
The wholesale report said that energy prices jumped 1.5 percent, reflecting a 2.9 percent rise in gasoline and an even bigger 8.5 percent jump in the cost of home heating oil.
Food prices, which have been surging because of increased demand stemming from ethanol production, rose by 1.7 percent last month, the biggest monthly increase in three years. Prices for beef, bakery products and eggs were all up sharply.
Core wholesale inflation, which excludes food and energy, posted a 0.4 percent increase, the biggest increase in 11 months. This gain was led by a 1.5 percent spike in the cost of prescription and non-prescription drugs.
© 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
http://www.msnbc.msn.com/id/23349559/
This ethanol nonsense is turning out to be a nightmare.
Since the majority of food costs do not go for products from the farm, it is hard to blame the inrease on ethanol production.
I would look at higher fuel prices for manufacturing and transport before I blamed ethanol when it comes to food.
parados wrote:Since the majority of food costs do not go for products from the farm, it is hard to blame the inrease on ethanol production.
I would look at higher fuel prices for manufacturing and transport before I blamed ethanol when it comes to food.
I agree; oil is now selling at about $100/barrell, a substantial increase since Bush took over the white house. Most people use energy to heat/cool their homes, and in their vehicles. The US cosumes more oil than many countries combined while China and India increase their demand. Price has only one way to go; up.
Those higher energy costs must be absorbed in the cost of preparing the food and shipment. There is no way to decrease the costs.
Inflation Soars as Confidence Plunges
By THE ASSOCIATED PRESS
Published: February 26, 2008
Filed at 10:17 a.m. ET
NEW YORK (AP) -- No good news today on the economic front. Consumer confidence plunged, the wholesale inflation rate soared, the number of homes being foreclosed jumped, home prices fell sharply and a report predicts big increases in health care costs.
Consumer confidence weakened significantly as Americans worry about less-favorable business conditions and job prospects. The New York-based Conference Board says in a report released on Tuesday that its Consumer Confidence Index plunged in February to 75.0 from a revised 87.3 in January.
The reading -- the lowest since the index registered 64.8 in February 2003 -- is far below the 83.0 analysts expected.
The index measures how consumers feel now about the economy. It has been weakening since July, suggesting that wary consumers may retrench financially, which could fatigue the economy further.
Inflation at the wholesale level soared in January, pushed higher by rising costs for food, energy and medicine. The monthly increase carried the annual inflation rate to its fastest jump in a quarter century.
from xingu's post :
Quote:Core wholesale inflation, which excludes food and energy, posted a 0.4 percent increase, the biggest increase in 11 months. This gain was led by a 1.5 percent spike in the cost of prescription and non-prescription drugs.
CORE WHOLESALE INFLATION INCREASED BY 0.4 % .
so if you all stop eating , driving your cars , heating or cooling your houses , you have nothing to complain about :wink: .
JOKE , JOKE , JOKE
hbg
What is most discouraging is the simple fact that the candidates for president aren't offering the emphasis on our economy that it deserves.
They're talkig about "words and turbans."
