September 2009

Treasury: Millions more foreclosures coming

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The Assistant Secretary for Financial Institutions Michael S. Barr gave written testimony before the House Financial Services Committee today that put things into perspective.

[W]e recognize that any modification program seeking to avoid preventable foreclosures has limits, HAMP included. Even before the current crisis, when home prices were climbing, there were still many hundreds of thousands of foreclosures. Therefore, even if HAMP is a total success, we should still expect millions of foreclosures, as President Obama noted when he launched the program in February.

The thing to keep in mind is that there is no chance that HAMP will be a total success.

People, Do not get a payday loan! Period!

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This is positively disgusting. Those predatory, 100% and over interest rate payday loans are now being offered by Wells Fargo.

A few of the nation's largest banks -- including Minneapolis-based U.S. Bancorp, Wells Fargo & Co. of San Francisco, and Fifth Third Bancorp of Cincinnati -- are now marketing payday loan-type products, with triple-digit interest rates, to their checking account customers.

People, just don't do it. Do not get a payday loan. You'd be better off hanging out on a street corner with a sign which says need money now and begging for change.

Here is an action item to support legislation to restrict payday loan interest rates to 36%, a loan shark rate sure enough.

Agree with us or else! Fed herds Economists to group think

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I've often wondered what it would be like to be a graduate student of some economists who clearly are not in statistical reality and often mathematical reality. Would you not be allowed to get your dissertation accepted unless you group speak the party line, regardless of what your own research tells you?

A Huffington Post article, Priceless: How The Federal Reserve Bought The Economics Profession, details a similar situation with Economics Academia and the Federal Reserve big brother club. It seems the Fed has a lock on getting published, a critical issue if one expects to receive their PhD. No publications, no graduate degree and assuredly no tenure in Academia.

The Fed's Intolerance For Dissent

When dissent has arisen, the Fed has dealt with it like any other institution that cherishes homogeneity.

Citizens Revolt

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This video will probably go viral in the next day or two. Perhaps this is why Congress is looking to give the President the power to shut down the internet in times of "national crises".

Anyway, this isn't the first person I know who is doing it, but she is the first to use youtube. Watching it is very cathartic!

Lehman Brothers was Ice 9

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Simon Johnson has coined the phrase, Lehman Brothers was Ice 9. How apt and if you don't know what ice-nine is, read Cat's Cradle.

A new memo was released which showed Lehman Brother's executives knew their bankruptcy would cause a domino effect to start the financial crisis.

Bloomberg got a hold of the confidential memo:

The warning was ominous: “Massive global wealth destruction.”

That’s what Lehman Brothers Holdings Inc. executives predicted before they filed the biggest bankruptcy in U.S. history. “Impacts all financial institutions,” read one bullet point in a confidential memo prepared for government officials obtained by Bloomberg News. “Retail investors/retirees assets are devastated.”

Americans Reduce Personal Debt Load by $21.6 Billion in July 2009

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Americans just reduced their debt load by $21.6 Billion or 10.5% in one month. This monthly drop is a record, going back to 1943.

The Federal Reserve current consumer credit release has last month's consumer credit at $2.4936 trillion and July consumer credit total was $2.4721 trillion.

That's still an astounding figure for consumer debt, $2.5 trillion and about the same total market as 2006. Of course the U.S. population has increased from that time.

Unfortunately the credit card companies didn't get as whacked, with only a 8% drop.

These numbers do not include mortgages, home loans.

My question is how much of this is by choice and how much is limiting consumers access to credit, charge offs and bankruptcy?

August credit card charge offs were at 10.55%...

Anticipation of Recovery is just a Fiction, it is not there

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Anticipation of recovery is just a fiction, it is not there

This is a quote from the United Nations Conference on Trade and Development (UNCTAD).

We still do not see that this is a real recovery

What they are referring to is a need for greater than 1.6% Global GDP growth for 2010.

Tumbling profits in the real economy, previous over-investment in real estate and rising unemployment will continue to constrain private consumption and investment for the foreseeable future.

The UNCTAD is also pointing to recent commodities increases as pure speculation, increasing excessive risk.

Manpower reporting record drop in hiring plans for the next year

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The almighty permatemp agency, Manpower, keeps track of hiring projections. They are reporting for Q4, 2009 employers' hiring plans are at an all time low. Manpower has been keeping track since 1962.

A net -3% of employers said they'll hire in the fourth quarter, down from -2% in the third quarter, on a seasonally adjusted basis, according to the Milwaukee-based firm's survey of more than 28,000 employers. Before this year, the survey's previous low point was a net 1% hiring outlook for the third quarter of 1982.

A year ago, a seasonally adjusted net 9% of firms said they would hire in the fourth quarter. The Manpower survey measures the percentage of firms planning to hire minus those intending layoffs. Manpower doesn't measure the number of jobs. The survey's margin of error is +/- 0.49%.

Virtues of the Public - Part 2 (Absence of) Profit Motive

Note: this is a cross-post fromThe Realignment Project.

“A term like capitalism is incredibly slippery, because there’s such a range of different kinds of market economies. Essentially, what we’ve been debating over—certainly since the Great Depression—is what percentage of a society should be left in the hands of a deregulated market system. And absolutely there are people that are at the far other end of the spectrum that want to communalize all property and abolish private property, but in general the debate is not between capitalism and not capitalism, it’s between what parts of the economy are not suitable to being decided by the profit motive. And I guess that comes from being Canadian, in a way, because we have more parts of our society that we’ve made a social contract to say, ‘That’s not a good place to have the profit motive govern.’ Whereas in the United States, that idea is kind of absent from the discussion. So even something like firefighting—it seems hard for people make an argument that maybe the profit motive isn’t something we want in the firefighting sector, because you don’t want a market for fire. “
— Naomi Klein

Introduction:

As I discussed in part 1 of this series, “Public Virtues” will examine those areas in which the public sector has an economic advantage, and compare and contrast those where the private sector is supposed to have an advantage. And where better to start than the profit motive, the first principle of capitalism that’s been held up, not just as an explanation of why corporations get better and better at making widgets if people give them money, but why the public sector is inherently and unalterably inefficient, technologically stagnant, and uncompetitive. The profit motive, as everyone knows who’s lived in the capitalist world, basically holds that because people want to make a profit, they are pushed towards the maximization of their resources, and thus seeking to make profits, they make the system as a whole more efficient and productive.

However, most honest thinkers, i.e those not professionally involved in proving that capitalism is infallible, admit that the profit motive only spurs innovation and efficiency where it actually exists. Where it doesn’t, you wind up with market failures.  And where the market fails, that’s the natural place for the public sector. The debate, however is how often and where this happens.

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