Where is the US economy headed?

During a severe drought in Central Virginia a few years ago there came this PR gem:
If it's yellow, let it mellow.
If it's brown, flush it down.

Not meaning to sound too alarmist about this, but I found an article in the online Houston Chronicle about drought conditions in the 2nd largest food producing state (behind CA).

Can someone post that story from chron.com Thank you.

a story that talks about CA and TX:
http://www.cbsnews.com/stories/2009/02/28/national/main4835584.shtml

I am not convinced that this a problem big picture. The need for ag is down as people around the world become poorer and unable to afford American products. Americans overall should still eat well because less is exported (see what has happened to the milk protein market for illustration), though it sucks for Texans and Californians.

Hawkeye 10--It wasn't AIG that was the proximate cause of the downturn, it was Fannie Mae, Fannie Mac, Barney Frank and Christopher Dodd. Note:


Thursday, October 09, 2008
Barney Frank and Christopher Dodd deserve blame for Fannie and Freddie
The Independent, a British newspaper, blames the Democrats for the failure of Fannie Mae and Freddie Mac:

What is the proximate cause of the collapse of confidence in the world's banks? Millions of improvident loans to American housebuyers. Which organisations were on their own responsible for guaranteeing half of this $12 trillion market? Freddie Mac and Fannie Mae, the so-called Government Sponsored Enterprises which last month were formally nationalised to prevent their immediate and catastrophic collapse. Now, who do you think were among the leading figures blocking all the earlier attempts by President Bush " and other Republicans " to bring these lending behemoths under greater regulatory control? Step forward, Barney Frank and Chris Dodd.

In September 2003 the Bush administration launched a measure to bring Fannie Mae and Freddie Mac under stricter regulatory control, after a report by outside investigators established that they were not adequately hedging against risks and that Fannie Mae in particular had scandalously mis-stated its accounts. In 2006, it was revealed that Fannie Mae had overstated its earnings " to which its senior executives' bonuses were linked " by a stunning $9.3billion. Between 1998 and 2003, Fannie Mae's executive chairman, Franklin Raines, picked up over $90m in bonuses and stock options.

Yet Barney Frank and his chums blocked all Bush's attempts to put a rein on Raines. During the House Financial Services Committee hearing following Bush's initiative, Frank declared: "The more people exaggerate a threat of safety and soundness [at Freddie Mac and Fannie Mae], the more people conjure up the possibility of serious financial losses to the Treasury which I do not see. I think we see entities that are fundamentally sound financially." His colleague on the committee, the California Democrat Maxine Walters, said: "There were nearly a dozen hearings where we were trying to fix something that wasn't broke. Mr Chairman, we do not have a crisis at Freddie Mac and particularly at Fannie Mae under the outstanding leadership of Mr Franklin Raines."

When Mr Raines himself was challenged by the Republican Christopher Shays, to the effect that his ratio of capital to assets (that is, mortgages) of 3 per cent was dangerously low, the Fannie Mae boss retorted that "our assets are so riskless, we could have a capital ratio of under 2 per cent".

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/01/AR2009030101218.html?hpid=topnews

almost $200 billion into AIG so far, and on the hook for many hundreds of billion more, and we STILL can't pull the trigger on nationalization. We are some stupid MF'ers.

But, Hawkeye10_WHY, then is the President'[s PRESS SECRETARY SAYING:

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Gibbs: WH won't nationalize banks
By CAROL E. LEE | 2/20/09 6:07 PM EST Text Size:







The White House sought to restore confidence in the nation’s financial institutions on Friday by insisting that the Obama administration has no plan to nationalize the banking system.

Trading was near decade lows at the end of a tumultuous week on Wall Street, with Bank of America and Citigroup shares dropping over fears they could be nationalized.

“Let me reassure, as best I can,” press secretary Robert Gibbs said during the daily briefing. “The administration continues to strongly believe that a privately held banking system is " is the correct way to go, ensuring that they are regulated sufficiently by this government. That's been our belief for quite some time, and we continue to have that.”

The stock market was more or less unchanged following the briefing, and some commentators credited Gibbs with calming jittery nerves on the trading floor, despite press effort to parse his words.

Asked if his comments mean the administration was not ruling out bank nationalization, Gibbs went further to clarify his meaning, without going all the way on the point.

“No. No, no. Let me be clear,” he said. “The president believes that the bank " a privately held banking system regulated by the government is " is what this country should have.”

“’Should have,’ but does that mean he will not nationalize banks?” a reporter asked.

“It's hard for me to be clearer than " than where I just was.
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It's possible, of course, that Obama, who is more ingenuous than anyone in American History, MAY, with some Clintonian weasel words, reverse Gibbs' statement--stay tuned.

It just may be that Obama, watching the stock market continue to plummet, knows that nationalization may take the market from 7,100 to 6,100 in short order.

What the feds are doing to prop up AIG is wrong; it's an international company that is being proped up with US taxpayer funds. That's just plain wrong!

If you don't like the message, attack the messenger, genoves.

okie, That's a dead horse you're trying to beat to death. We are in financial crisis NOW!

Yeah, and its a dead horse that was killed with the wrong medicine, so the point of this discussion is, learn from your mistakes, and quit trying the same old failed medicine. It will kill alot more horses.

Translation of the above: It is some people's opinion that not enough government intervention or regulation was the problem. I believe there was too much, such that the lending industry fell into the habit and direction from the federal government, via Fannie and Freddie, to lend money to people that were bad credit risks, with hardly any money down. What this did was to spur home sales, thus driving up prices along with it. Then when the economy hits a slower stretch and when more defaults began to occur, prices of the homes began to fall. Since little or no equity was held in alot of these properties, the properties were not worth what the outstanding loans were, thus there was decreasing incentive to keep paying on these loans, thus people walked away in increasing numbers. This in turn fed the further decrease in home values, and so on, the vicious cycle continued.

The point of this is that if everyone had to qualify for a home loan the old fashioned way, without being propped up by the government, and actually had to have some percentage of the loan in money down, like it used to be in the old days, then none of this would have ever happened. Clearly, the dead horse is due in large part to the medicine prescribed by the federal government. They are the culprits. People like Barney Frank, Chris Dodd, and whoever else that cooked this whole thing up, and the people at Fannie and Freddie that cooked the books. These people should be in jail, that cooked the books. There are some of us that see this has been swept under the rug, and the culprits that killed the horse are still there making policy. And we are mad about it. Not only do they get away with it, but we have to pay for it, we being the law abiding and responsible citizens out here.

However, the walk away rate for those can afford their home mortgage is so far very low. If it becomes clear that home values will not recover for a long time this might change, but so far moral obligation trumps financial self interest.

The commercial side might get nasty though....the complicated ownership as well as the built in liability shields might make it easy of commercial real estate owners to walk way in a heart beat if things go bad. I don't know enough to say, just enough to worry.

okie, I only read your first sentence, but FYI it's the Bush administration's eight years that has gotten us to this point. Bush and McCain didn't even know our economy was already in stress and ready to explode. Quit baying about Mae and Mac that was under the Bush administration's watch; if they had done their job, we wouldn't be in this condition now. Don't forget, the GOP had the majority in congress for 75% of Bush's tenure, and the GOP also used their filibuster during the last two years of democratic majority.

All the government departments responsible for our economy was under Bush. The SEC and other federal departments failed to do their jobs properly, because most were incompetent just like Bush.

Bush repeated often "our economy is fundamentally strong."

You're a stupid ass who can't see what Bush wrought our country.

Bush is not free of all blame, but when they finally did express concern, they were beat down. I understand McCain was one of those that attempted to bring attention to this problem, but nothing was done, but it was probably too late anyway. But any claim that the Democrats are blameless in this is even more wrong in my opinion. After all, they considered Fannie and Freddie as their own little kingdom from which to engineer their social engineering. The video I posted clearly demonstrates that mindset, such as don't dare question our puppets, Fannie and Freddie. And of course nobody wishes to be accused of racism, and that undertone seemed to be evident in this as well.

But I go back to the beginnings of this, Fannie and Freddie, created in 1939 or thereabouts. I see no reason why they even needed to be created in the first place. Eventually, any government intervention into a market, such as the loan or lending market, is going to lead to unintended consequences, and that is exactly what happened.

On another note, Obama's green jobs won't work. For obvious reasons, if they would only use their head. If you intentionally use higher priced technologies, it costs money, no getting around it. And it affects the economy negatively.

http://www.foxnews.com/politics/first100days/2009/03/01/european-model-shows-downside-green-jobs-creation/

"President Obama's proposal to create 5 million green jobs over 10 years "is a political smokescreen designed to disguise the fact that his energy and environmental policies are going to be very costly," Max Schulz of the Manhattan Institute, a conservative think tank, told FOXNews.com.

"The reality is these various policies are going to hurt the economy, cost jobs in efficient industries and raise prices," Schulz said."

okie wrote:

"...if they would only use their head." This from the number one dummy on a2k.

And now Obama is saying the same thing.
Why arent you saying he is wrong also?

I've been complaining MM, but I'm being drowned out by apologists.

Basically all of the economists said that same thing at the time. Those are the same economists who are now saying that we need a stimulus package.

More pledges broken:

"Obama Will Sign Spending Bill Despite Earmarks
President will break a campaign pledge on Monday and sign a budget bill laden with millions in lawmakers' pet projects, administration officials said."

http://www.foxnews.com/politics/first100days/2009/03/01/budget-chief-obama-sign-spending/

I'm disappointed to see that he will do that.

Cycloptichorn