Obama isn't going to save you

You are going to have to do it yourself.

The one thing I've consistently seen on the progressive web sites whenever someone points out an economic problem is an attitude of, "Just wait until Obama gets in. Then he'll fix this."

This is delusional thinking! It's as bad as the mindless, head nodding of the Republicans when Bush told them that people hated America "because of our freedom."
For instance, there is talk of a "New New Deal". Obama is promising universal health care.

Where exactly is this money going to come from?
First of all, we need to get a grip on what we are facing.

An Economic Time-Bomb

The Bush Administation and Federal Reserve has worked hard to make certain that the costs from the credit bubble bust will be pushed onto the next administration.
For instance, the FDIC has only taken over 8 banks so far, but they'll be taking over hundreds of failed banks in the next couple years.

"They are dragging their feet in forcing these banks to reserve realistically," said Bert Ely of Ely & Co., a bank consulting firm in Alexandria. "Some of these banks could have been closed two or three quarters earlier."[...]
The pace of failures will probably increase, particularly if the economy remains weak.

Federal regulators listed 90 institutions as troubled at the end of March, about 1 percent of U.S. banks and thrifts. The list is expected to grow when it is updated at the end of August. Historically, regulators end up closing about 13 percent of the institutions.

Some analysts say that regulators are understating the problem. Gerard Cassidy, an analyst with RBC Capital Markets, estimated in July that more than 300 banks could fail over the next three years.

America's banks are dragging their feet on writing off enormous losses that will cause dozens of banks to be insolvent. How large are the losses? No one knows for certain, but some estimate the losses to be $1 Trillion to $2 Trillion. Banks have "only" written off about $500 Billion so far.

Why would the losses be so large? Why would the banks continue to go under? Because 45% of homes purchased on 2006 are now underwater (i.e. owe more than they are worth), and a third of all homes bought in the last 5 years are underwater. And that doesn't include people who have taken out home equity loans or second mortgages. The number could be as high as 55-60%.
As I've pointed out before, negative equity is the leading cause of defaults and foreclosures in America today. Also, negative equity precludes a homeowner from any refinance bailout package.

The subprime market has stopped getting any worse. Yet the banking system isn't getting any better. That's because the real estate implosion is working its way up the chain to the Alt-A and the prime Option ARM markets.

Banks are currently foreclosing on 1,300 homes every single day in just California. Even that doesn't reflect reality because people are living in their homes 12 months after making their last mortgage payment. There simply isn't the manpower available to kick all these people out.

Based on an independent analysis by Chris Whalen from Institutional Risk Analytics, 8 percent of all banks, or around 700 banks have been identified as "troubled." This is quite a divergence from the FDIC estimate.

U.S. banks hold roughly $6.84 trillion in bank deposits. Almost $2.6 trillion of these deposits are uninsured. There is only $274 billion of the $6.84 trillion as cash on hand at banks. This means that $6.5 trillion has been loaned to consumers, businesses, developers, etc. The FDIC has $53 billion to cover $6.84 trillion of deposits. Does that give you a warm feeling?

The U.S. banking system is essentially insolvent. The Treasury, Federal Reserve, FASB, and Congress are colluding to keep the American public in the dark for as long as possible.

Saying the American banking system is insolvent is a very strong claim. What proof is there of that?

The Financial Accounting Standards Board recently voted to delay implementing new accounting rules until November 2009. These rules would have forced banks to bring $5 Trillion in bad loans onto their books, thus immediately forcing hundreds of banks into bankruptcy.
Oh, sure. We could delay the rules again, but would that make the banking system any more solvent? Is a lie put off until tomorrow any less of a lie?

Banks have been using all sorts of Enronish accounting trickery to avoid booking all these losses. One of those methods has been to off-load their bad debts onto the Federal Reserve portfolio. The problem here is that the Fed's portfolio has already been poisoned to the point that it can't bailout Wall Street anymore.

The same story applies to the FHA.

While you weren't paying attention, the federal government has already put you on the hook for $4,748.62 to bail out Wall Street bankers. These massive bailouts have increase the monetary supply and pushed up the inflation rate. Some expect inflation to reach the double-digits as early as next year.

Partying Zimbabwe-style

The Bush Administration will be leaving America with a record budget deficit that will only get worse next year, and a monstrous trade deficit.
These twin deficits require America to borrow $2 Billion a day, 365 days a year, from foreigners in order to maintain our unsustainable lifestyles. That money is coming directly from autocratic governments that don't have our best interests at heart.

What does that mean? It means that countries like China now call the shots on our most important domestic policies.

Investors in Asia, the biggest foreign owners of Fannie Mae's $3 trillion of bonds, were asking the Treasury to bolster the government- sponsored company and its smaller competitor, Freddie Mac, said three people with knowledge of the talks.

The next afternoon, before financial markets opened Monday in Asia, Paulson announced the rescue plan, saying he would seek authority to buy unlimited equity stakes in the companies and their bonds if needed, while the Federal Reserve would lend directly to Fannie and Freddie. Congress included the proposals in a broader housing bill that President George W. Bush signed into law last week.

Freddie and Fannie rely on foreign institutions. Investors and central banks outside the U.S. own about $1.3 trillion of Fannie and Freddie's corporate and mortgage bonds, according to the Treasury. Chinese institutions are the biggest holders in Asia.

Think about that for a moment.
If foreign nations can force us to create a multi-trillion dollar taxpayer-funded bailout of our financial institutions (that those foreign nations also happen to be heavily invested in), what's to stop them from preventing us from creating a multi-trillion dollar universal health care system?
All they would have to do is to not lend us money. That's all. Nothing more. They wouldn't need to fire a single shot, or issue a single warning. That's what happens when your nation doesn't save any money.

This is the sort of situation that Obama will inherit, assuming he becomes president. Before he can propose a universal health care system he's going to have to go to our Asian creditors and sell the idea to them first. Asia just happens to be the same continent that we've been bombing for the last five years.

A Call To Arms

So does that mean there is no hope?
On the contrary. What it means is that our job is simply much larger than some here would like it to be.

The Republicans have set up Obama to fail, and without our help he will fail. The Bush Administration has looted everything that wasn't nailed down, and has to a large part timed the collapse to happen after they've already fled the country.
They've been able to do this because the American people allowed them to. The system has been set up to fail, and Obama has to work with the system as it exists...unless the American people say otherwise.

The American people set up this system and they can change it any time they want to. People forget just how much power they have.
The trouble is that you can't change the system from within the system. You aren't going to stop the Obama Administration from failing simply by using the ballot box. You need to get out into the streets.
You are also going to have to educate yourself. No longer can you accept 30-second sound bites that have no substance.

For example, do you think that FDR's New Deal legislation happened simply because of what happened through the ballot box? No.

The New Deal happened because the American people made it happen. The roots of the New Deal started two years before FDR was elected. Not only that, the American people didn't let up on the pressure once FDR was elected.

Empty is the cupboard,
no pillow for the head,
we are the hunger children
who cry for milk and bread.
We are the hunger children
who cry for milk and bread.
We are the worker's children
who must, who must be fed.

- sung by children at the gates of the White House, Thanksgiving Day, 1932, shortly before they were arrested

Do you think that FDR thought up the idea of a Bank Holiday out of the blue? No. States like Michigan had already shut down their banks beforehand.

And then there was the rise in labor unions during FDR's Administration that allowed a middle class to develop in this country. Do you think that it simply happened because the government passed the Wagner Act? No.
It happened because working people took to the street and made it happen.

Do you think FDR invented programs such as Social Security and unemployment benefits out of thin air? No. These programs were being pushed by radical left parties like the communists, which was gaining increasing popularity. The Democratic Party was in real danger of losing the the vote of the working man and woman. [That's why seeing Obama debating on Fox News concerns me.]

People, we have arrived at a defining moment. If we cringe from our responsibility then the job will be that much harder in the future. We need to look past the candidate and instead focus on the goals.
The cost of failing to act is extremely high. If we allow our nation to undergo another round of looting we will doom us all to 3rd world status for generations to come.

If we fail yet again then we will have no one to blame but ourselves.

Comments

The American people made it happen

That's no lie, there were already riots going on in the streets and people were marching on Washington by the time FDR came into office.

But, people need to demand real trade, economic policy change right now.

I like the title. Frankly what the hell is that which makes people think Obama is going to do something? Has he said he's going to tackle this tsunami coming at us? No. Is there a plan beyond dumping the costs of this fiasco onto the US taxpayer plus go ahead and allow millions of Americans to lose their homes?

Their GSE bailout bill supposedly only helps about 400k homeowners.

Look at the Instapopulist and see that Barrons is basically reporting the GSEs are going down as we type.

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I've done a lot of reading in the social science lately...

....and the accepted paradigm is that human culture has gone through various phases which I won't bore you with here. The thing is a very peculiar phenomenon is now occurring. Since the age of mass communications which allows the voice of one person to reach millions we've seemingly regressed to a prior form of social organization called 'The BIg Man' where one person was given the authority to organize everyone else's lives.

Obviously this won't work today with culture composed of millions of troop members instead of 50 as you find in hunter-gatherer groupings.

Yet, folks cling to this hope that 'The One' will come along and save us. That dependency is of course still hard-wired into us. Almost makes me wish Obama would win so folks could learn how that's not gonna work. Problem with that is it would be very damaging to the 'progressive' cause as the cud-chewers believe Obama is a 'progressive'.

We could be seeing a transition coming to a new social order....

Or not.

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'When you see a rattlesnake poised to strike, you do not wait until he has struck to crush him.'

anyone reading Obama will not save you

Time the time to click on the links and study the graphs.

Many of these articles, I sure was not aware of and he is citing some pretty credible sources.

Very scary shit but click on all of his link references, seriously.

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Scary Indeed.....

...yet the citizenry continues to chew it's cud. Frankly I am NOT an Obama fan but I would not want to wish what's going to happen to the next President on anyone....

Except McSame.

He and Nancy and all 'the boys' in Congress deserve to be in charge when the shit hits the multiple fans. They are the ones who are responsible. My post Bush sends National Guard to Georgia... tries to point out that the meme 'Bush did it...' is mostly a lie.

In conjunction with this post I can see the Dems getting a real rude surprise. If not this year then in the off-year election. And folks say Bush is stupid!

Maybe....

But he looks to be a damn site smarter than the 'Democrat' Party.

OT: The site is really starting to pickup with some really quality posts Robert. Good freakin' job!

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'When you see a rattlesnake poised to strike, you do not wait until he has struck to crush him.'

A new movie to educate the sheeple

Movie to be released next week dealing with our trouble(s).
Primer
http://www.agorafinancial.com/iousa.html

Saw it on Beck today, apparently if you figure what was taken from Social Security, the Clinton surplus was only one year.

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oh my

This looks really good. Thanks weaver I think I just found the theme/content for this Friday Movie Night series, "special" edition.

I remember when Walker of the GAO came out with his damning statements and he stepped down from the GAO.

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media blitz

It looks like this is a one time movie event where they have scheduled some sort of conferencing Q&A along with the showing, nationwide (it's good to be Blackstone). I cannot go there is nothing even remotely near me, but while I suspect this is going to appeal to those neocon, privatization types, I'm really not so sure that's what they are recommending at all here in terms of policy. David Walker, while sure I believe he is a conservative I think he's being truly honest about the US budget deficits and the issue with rising health care costs.

Anyway, if someone is going it would be nice to see a movie review blog post.

Mother of lesser of evils

I am not so much hearing the Obama as a savior message as some here from regular people, its mostly coming from the MSM, as well as from Obama's detractors trying to build upon the McCain "celebrity" ads.

The president no matter what party will have little influence or desire to change the status quo in reality. If we want real change we need to change congress, to break the stranglehold of corporate interests and lobbyists. And to do this we really need to start at the grass roots - state and local races - these folks at the local level eventually become the governors, mayors, congressmen of the future so we need to support more labor and poulist leaning people downticket - this is the greatest opportunity to influence govt as well as develop the leaders of the future.

In general , a bad democrat will be marginally better than a "good" republican for working people, but not by much. We need to remind the democrats who their base is, just like the religious right is constantly doing for the republicans.

I am of mixed mind presidentially, there just is no viable third party choices and if their were the deck is stacked so against anyway. On one hand I have to lean Obama, because at least he is proposing the bandaid solutions of increased social safety nets - something sorely neeeded but fails to address the structural trade and economic problems. OTH, it may take another humiliating defeat for democrats again at the hands of McCain, before the democrats finally get back to their roots.

This election season sucks, and is the mother of lesser of evils choice

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Follow the $$

Considering Presidential campaigns now spend so much money one could start a major corporation, fund a jobs program and maybe start a small country, yes the big money is clearly running the show and more importantly, the agenda.

I think getting the money out of DC is starting to look like the top issue to get anything else.

It's pretty clear the American people gave a mandate to Congress to pass legislation in favor of the US middle class in 2006 and frankly, they have done almost nothing.

So far, all attempts to get the corporate/special interest money out of DC and out of campaigns has failed.

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History of Republican Dynasties vs Limousine Liberals

There have been 3 times in U.S. History when Republicans held the White House for 3 terms: Lincoln-Johnson-Grant, Harding-Coolidge-Hoover, Reagan-Bush. Just look at the economies at the end of those 12 year dynasties - 1872, 1932 and 1992. There are so many economic conditions in common.

- 1872. End of Grant Presidency, high unemployment, weak dollar, banking crisis, high national debt. No regulation.

- 1932. Hooverville. No need to elaborate much except to note the 12 years of no financial regulation.

- 1992. Housing prices fall, very mild deflation, lingering unemployment The S&L Crisis continues. Remember the connection between McCain and Charles Keating? Why would McCain persist in his faith based economics of deregulation?

The common thread in all this is that 12 year Republican Dynasties are an unmitigated disaster. If McCain is elected, our troubles are only started. McCain and his adviser Phil Gramm (whom he still consults), are the firmest believers in deregulation and 'Free Trade'.

If you were Obama, would you have something to say about this? I would. But Obama likes to talk like a college professor. America needs, and the rank and file Democrats want a black FDR. But the limousine liberals run the party since at least the time of McGovern.

Cleavland beat Blaine with Identity Politics (Blaine tarred by 'Rum, Romanism, Rebellion' sermon of a preacher). Clinton and FDR won on the economy.

Try to get that bunker built before Election Day.

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Burton Leed

College Professor?

More like a guru of some large self-help inspirational talk show circuit.

I really wish people had paid attention to policy positions in the primary for here we are.

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Where the squeeze puts all of us in a bind.

To me the planned economic destruction of our country is part of the scheme by the Dominionists to remake the USA as part of their larger overall PNAC plan. Disaster capitalists and prosperity gospulists and militant authoritarians salivate at the chance to create their regency on earth to prepare it for God's coming return.(Only if it has been evangelized and transformed before hand though.) They learned from their errors of 1934. They liked the economic and social situation of that time. Depression, joblessness, looming threats of a civil war and world war with fascism growing all around. For a Law and Order Savior to lead the way out of the valley of despair into the glorious light of militarism, barbarianism, religious fanaticism and rightous destruction of 'enemies' both foreign and domestic. We also have the added problems of our debt being owned by others and jobs sent overseas or taken by immigrants here for much less pay. The cost of living goes up or remains the same but our urning goes on a downward death spiral.

We are in revolutionary times and it is of the dark side, of empire and greed for power. The age of the psychopath. The more they do to us the harder it will be to overthrow them as time goes on. They have planned long and worked hard and well to get us to this pitiful and depressed state with more to come. It saps our energy to fight when it is needed to survive. Dropping of the other iron shoe shoe is yet to come if we don't stop it.

"What is the future? It is a boot smashing in to our face forever."---Eric Blair {George Orwell}

"The hardest thing to do is replace one established gov't organization with a new one."--Niccolo Machiavelli

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Age of the Psychopath

nice phrase but this is an all things economic blog. I strongly suspect people wrongly assign some sort of great conspiracy plan when it's more about a series of special interests, getting their very special $$$ and that just plain all adds up to macro economic disaster for the United States.

It's typical in sociology that the psychology of the masses, in this case the investor/executive class, has no conscious plan and it's simply herd behavior.

It's the same action as a group of sheep following the lead only to go falling off a cliff.

herd jumping off of a cliff

There is no plan or thought to drive the herd off of the cliff, they simply follow the stream as others are doing.

We are not trying to advance CT (conspiracy theories) on this site. We are trying to analyze economic conditions that are in favor of the facts, the US middle class and see which policies would actually work to get the nation back on track.

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CT

Agreed Robert.

While I enjoy a good conspiracy theory as much as the next guy, the main reason i am preferring this site over many other populist sites is precisely because of more a fact and reality based lean.

Unfortunately treading too far into the world of the tin foil hat saps the credibility and effectiveness of otherwise potentially good populist sites

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thinking person's site

To dig through economic, trade, immigration policy takes a lot of time and a lot of learning. I think that's why one sees so much CT. People know something is very wrong, but don't have enough background to know exactly what it is, so along comes a good sounding CT and they go with that.

Trick is to get CT's to use their logical brains and learn some things they probably do not yet understand.

It's a phase like puberty. ;0

Just in case, there is the user content control system on here, you can demote a blog or forum to plain "disappear" as well as comments and you can promote a forum to the front page (the Instapopulist). It's by consensus, one person alone cannot do that.

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'God ain't gonna help you Kid'

I remember the story from the 60's of a Vet friend in 1970 who said while a less than merciful cop smashed his face while he said the words 'God Help Me'.The cop said

'God ain't gonna help you kid'

As a nation, we will overcome when we understamd the cop and the vet.

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Burton Leed