China Plunges, Too
There is a bank panic. It is the next big thing. It will dominate the next week. London is now screaming. The English pound is worth a cup of coffee. Not that much. Gordon Brown and Alistair Darling (right) may be the most unpopular men in the City about ninety days after being the most popular. Bad bank talk will take over. The rot in the banks started with the housing bubble of 2002-2008. However it also included the stock market bubbles worldwide. There are reason why the bubbles are linked to the trade imbalances between the West and East Asia Here we are now, and global trade is collapsing. China announces tonight that it has fallen to an annual 6.8% growth rate, which is well under what it needs to maintain employment growth -- well below what it needs to give jobs to its college graduates. The unemployment rate in Europe is climbing quickly. It will peak over 9% here, perhaps more. The bank panic will come sooner than the unemployment panic. The next ninety days will be melodramatic. Again, a bank holiday is far-fetched but not impossible. Here is the drastic move that will work, that will not happen, that cannot happen until John Galt (of Ayn Rand's 1957 "Atlans Shrugged") returns from the mountains and camps out in Lafayette Park, across from the mothballed White House:1. Cut margin rates to 15%-20%-25%
2. Cut cap gains to 7.5%
3. Eliminate state taxes for two-three years
4. Eliminate sales tax on clothing, cars, houses, eateries, car
rentals, airline tickets, train tickets, mobile phones.
5. Forgive college loans or delay repayment three years.
6. Lower all credit card rates to 10% or under, for two years.
7. Suspend foreclosures on primary homes or condos till third quarter
'09
8. Raise the pillory. Name names.9. Furlough the Cabinet and its departments, and close the Executive Mansion, and keep Congress in session three months a year and let the president sign bills from the Camp David. The courts are ungovernable but not very expensive.
There is just the slightest possibility that the extremity of the situation may in fact force the Dem's to consider some of above re taxes. Their grand socialist plan won't work too well if the kill the golden goose (ie, those making over $200K per year). The perfect storm has formed and maybe it would require drastic action--cut taxes on effort and smarts to be sure the goose is there to pay for their socialist schemes.
Dick Morris two days ago predicts socialism is already a fait accompli: >50% of US citizenry on govt dole and/or pay no taxes, freeing Dem's to tax the rest with abandon.
Carpe Diem blog reports two areas of employment growth--healthcare and government; private employment declines.
two things that made sense to me:
last night on Fast Money (CNBC) a banking analyst chided the current approach to bank bailouts as solving the wrong problem. banks don't lend from capital-that is their bedrock. they lend from deposits and he seemed to want to increase those. otherwise banks take fed money and simply place it in their reserves.
Here's a quote from Wharton presentation from Jeremy Seigel:
"Siegel suggested that the government rescue plan could be improved with guarantees that recipients demonstrate they are using the federal dollars to extend credit.
According to Siegel, monetary policy has failed to stimulate the U.S. economy. The U.S. faces a situation similar to what happened in Japan during the 1990s when interest rates of zero could not revive the country's moribund financial markets. The only viable solution now open to American policy makers is Keynesian fiscal policy, a stimulus program that lowers taxes or increases government spending or both. Indeed, this is exactly the type of program -- costing at least $825 billion -- that the Obama administration and Senate Democrats are considering. Siegel said that policymakers should not worry about the impact on deficits; it is large, he added, but not dangerously so.
Towards the end of his 90-minute talk, Siegel offered some tongue-in-cheek advice to would-be entrepreneurs. "Start a new bank," he said. "You won't have the problems of existing banks, and the federal loans interest rate is near zero. Demand for loans is high, and you will face no competition from the private market. You could become very profitable." "
John – You’ve given us a pretty good lesson in international finances as pertains to ‘globalism’; that it can be seen as a delicate fabric which, when stressed (or torn) in any one part of it, affects the entire bolt. As the U. S. dollar is seen as supporting the entire weave, we can assume that a deliberate attack on the integrity of the fabric in any one sector will be sufficient to put the dollar itself at risk. That is why oil-producing nations (especially) have consistently called for replacing the dollar basis (against which everything else is calculated) with some other currency or financial instrument. Perhaps they knew that an attack on the dollar was imminent. Maybe they failed to consider that all other currencies would be adversely affected as well.
Now it is conceivable that the global financial meltdown was the result of careful planning by anti-American elements both within and outside our borders. When the Portuguese set up shop in Goa (India), the first thing they did was destroy Hindu temples and build churches in their place. The mogul invasions, earlier, razed Hindu temples as well. The point of this was to destroy what was seen to be the source of the people’s identity, hence their power. American power rests primarily on its financial infrastructure. That is why the World Trade Center Towers were attacked on 9/11. The people who planned this recognized the tentacles of American (financial) imperialism slowly strangling the rest of the world. Their attack was aimed at one of the heads of the hydra, hoping it would die and release its grip.
9/11 turned out to be the cornerstone of their war against America. It would achieve its purpose in a way that was never entirely clear to us. Nevertheless, we now find ourselves in the position we’re in in large part due to what happened on 9/11. The architects of the plan had no idea of how successful they would ultimately be. They were not concerned with innocent lives lost. Neither did they concern themselves with what would turn out to be financial hardships suffered by people around the globe. Their mission was simply to destroy America’s power base, relegating any consequence thereof to the necessary cleansing (some would say, by fire) of what was seen as America’s unholy stain on the world’s populations. As such, their effort was not to install a better system. It was merely to destroy the existing one that was seen as having become too oppressive and too arrogant.
Mohammed Atta and the rest were freedom fighters in their own eyes and in the eyes of those who sent them. They will be celebrated (just as Che is now) after America has fallen on its sword.
The question now remains: What will replace it – America’s (financial) sword, I mean. There are those who now seek to repair the damage. But their efforts are clumsy at best. Too many strands have already been severed. And all the thrashing around for old world solutions only serves to tear the cloth further. The weaving of a brand new cloth will be slow and arduous. Will it succeed? The only thing certain at this point is that America now stands disgraced and will not be invited to have any part in it.
Pure, wondrous fantasy by my man JB. I absolutely LOVE it, but this is the stuff of fairy-tales. The goal of the Congress (not yet going to lump in BHO, although that would not be a stretch) is not to solve our current fiscal "crises". The goal of the SanFran Leftist and her feeble-minded counterpart from Nevada is not solutions, but SOCIALISM.
They want to saddle the country with as much debt as they can. They want to create ditch-digging jobs for illegals-cum-immigrants. They want to ration healthcare and make the resource even more scarce in the meanwhile. They are working to create a slippery-slope toward socialism that cannot be undone by one or even successive RHINO administrations.
JB offers us solutions. How quaint. How naive. (but please don't stop!)
Tax cuts? It will take a far stronger, fouler-tasting medicine than that watery concoction to get us out of this mess, but we don't have much time left to devise a cure. The traitorous immigration policies of "conservatives" such as George Bush--thanks, Dad!--have the long-term demographics of this country trending heavily toward Hispanic voters who consistently vote for leftist candidates. When their numbers reach critical mass we will get Juan Peron, not John Galt.
So it seems that Great Britain is more broke than we are. So there goes the Sarbanes Oxley theory that the IPOs went to England instead of NY . so maybe London will suffer more investment related job losses than New York.
Geithner attacked the Chinese in his testimony regarding their dumping and or not applying sufficient tariffs. We have been the baby boomer generation that through Pavlovian use of advertising never knew its limits as to true consumption. We have created our own beast. Welcome to Hotel California. Its got a $42 billion budget gap. Putting more money in my pockets won't feed the beast because we are in Dante's Inferno with all the assets being burned
Sim said: "So it seems that Great Britain is more broke than we are. So there goes the Sarbanes Oxley theory that the IPOs went to England instead of NY . so maybe London will suffer more investment related job losses than New York."
Just because 10 years later the City collapses doesn't mean the thesis that SOX drove to English shores jobs that rightfully belonged on the Street. Wonder how all those investment bankers will look in OshKosh B'Gosh bib overalls digging ditches, knocking together frames, and pouring 'crete! Kinda has a Chinese "Cultural Revolution" feel to it, no? Now all we need is for the reporters at the Chicago Tribune, the Detroit Free Press, and NYT to join the ranks of the underemployed investment bankers in the job pool of manual laborers receiving the benefits of the stimulus infrastructure buildouts.
That cartoon of Brown and Darling reminds me of one by the legendary WaPo cartoonist Herblock. The provocation was a 70s struggle with the oil embargo. Nixon proposed starting DSL in February to provide daylight for children to catch their school buses. (We'll do anything and everything regardless of foolishness or expense if it can be tied to kids' welfare.) Herblock's cartoon showed his typical image of Nixon the Nefarious cutting one end off a blanket and in the next frame sewing it on the other end. The blanket of course did not lengthen; if short blanket was the problem, the tailoring job didn't solve the problem; it only gave the appearance of doing something to attack a problem. I picture the blanket now being labled "US economy" and the sewing job is the stimulus. Government pours money in on one end only to collect it on the backend in the form of taxes. Only Congress seems to be impressed with the idea.
Mr. Batchelor of course realizes that if the government wishes someone to engage in an activity (in this case, spending) that they should reduce or eliminate taxes on that activity. Of course, by imposing differing tax rates, Congress injects politics into the economic bottom line.
But I agree, this Congress and Administration is not about letting us recover - they are not content with simply confiscating a large portion of the fruits of our production (i order to control our behavior), now they see (in the name of an emergency) the opportunity to confiscate the means of production as well, so that the country may be remade in their image.
Obama has long reminded me of Chavez. He and his wife spent much of the campaign trying to convince those who perceive themselves as the underclass that they needed "change" because the current system would never offer them relief. I believed they spoke of revolution, not simply legislation. No one I explained it to ever called me a kook (including those on the left and ceneter). But how would they justify nationalizing industry? Then the economy crashed and everything was blaimed on the DEregulation of Bush and the Republicans. McCain's polls sank like a rock. Bush and Paulson declared the end of life as we know it and starting demanding banks accept bailout money. Now the road was paved for Obama & Co to declare ever lasting (Bush's) emergency conditions so that the majority of Americans who will now receive a relief check will cheer them on as they take control over one industry after another. Those who don't cheer will be ridiculed and otherwise silenced.
There is an interesting book from the early 1990s that predicted many of these issues, The Great Reckoning (http://www.amazon.com/exec/obidos/ASIN/0671869949/growinglifestyle/ref=nosim.).
Interesting to see if anyone decides to follow the advice of Davidson and Rees-Mogg to go with deflation rather than hyper-inflation. It might actually ... work.