Politics and Media Headlines 3/13/09
by Caro, Fri Mar 13, 2009 at 11:03:51 AM EDT
Obama's econ failure: Still no plan to fix the banks (McClatchy)
The Treasury Department has failed to persuade the world that it has a viable plan to stabilize big U.S. banks, and unless and until it does so, the economic downturn at home and abroad is unlikely to bottom out. Federal Reserve Chairman Ben Bernanke has said as much, telling Congress last week that "restoring a reasonable degree of financial stability will be critical determinants of the timing and strength of the recovery." Yet experts warn that each week that goes by without a credible bank plan puts an economic recovery and public confidence in President Barack Obama at risk.
I'm surprised to see McClatchy so down on Obama. They gave him a lot of help last year.--Caro
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Half of Americans Are Two Paychecks Away from Hardship (Money & Business, U.S. News & World Report)
The eroding labor market is expected to trigger additional pain for banks as job losses undercut consumers' ability to make their mortgage payments. With unemployment on the march, Julia Rodgers, a mortgage advisor with the National Community Reinvestment Coalition, told me last week that homeowners should have at least three months of mortgage payments saved up to protect themselves from a job loss. But a recent study by MetLife indicates that consumers don't have nearly enough of a financial cushion to keep them afloat should a job loss occur.
U.S. Household Wealth Falls by Trillions (New York Times)
In the last few months, most Americans have felt poorer. Now they have the numbers to prove it. The Federal Reserve reported Thursday that households lost $5.1 trillion, or 9 percent, of their wealth in the last three months of 2008, the most ever in a single quarter in the 57-year history of recordkeeping by the central bank. For the full year, household wealth dropped $11.1 trillion, or about 18 percent. Though the numbers do not yet reflect it, the decline in the stock market so far this year has probably erased trillions more in the country's collective net worth.
I'll make the same comment to this that I made yesterday in regard to the decrease in billionaires--THAT WEALTH WAS NEVER THERE. It never existed. It was all imaginary.--Caro
Delicious Cake Futures (Planet Money, NPR)
When Joshua Bearman was a third grader, he got locked out of the lunchroom economy. His classmates piled their jazzed-up, sugarfied, food/not food snacks on the table and traded until the best junk won, while Joshua sat on the sidelines with the sardines and raisins his family sent. Then, one magical day, he dreamed up the delicious cake futures.
For most of my adult life, I've been the one who questioned people like Joshua. When will that cake arrive? What kind will it be, and how big? Will it be big enough to pay for all of the snacks you've received? And during all that time, the people snookered by the schemes have become angry with ME because I was the reason their dreams would not come true--for telling them that their dreams were only dreams, and not reality. But it was only last year that the full reality of human nature came home to me. As I've said before and will keep saying: Most of the people WANT TO BE FOOLED most of the time. Click through to listen to the audio.--Caro
"The Bezzle" Defined (by Karl Denninger at The Market Ticker, thanks to katiebird at The Confluence)
Here are some examples of "The Bezzle": Liar loans... Overly-rosy projections about growth in property values... Overly-rosy projections about the stock market... "The Internet is doubling every three months!": It was - for about six months... In short The Bezzle is "the lie" that is always present in business... But when The Bezzle becomes the underlying premise and basis for business transactions that entire segment of the market is doomed.
When to Take Cover (by Mark Thoma at Economist's View)
In 1999, John Kenneth Galbraith explained how to spot speculative excess:... "[W]hen you hear it being said that we have entered a new economy of permanent prosperity with prices of financial instruments reflecting that happy fact, you should take cover. This has been the standard justification of speculative excess for several centuries -- for a good part of the millennium. My one-time Harvard colleague Joseph Schumpeter thought inevitable and even beneficial what he called `creative destruction' -- the cyclical process by which the system eliminates the people and institutions which are mentally too vulnerable for useful economic service. Unfortunately the process has larger and less benign effects, including the possibility of painful recession or depression."
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