The United States is Now in a Recession

[Guest Murray Parker]

Dresdner Kleinwort, the investment banking division of Dresdner AG, is pleased to announce that it has become a Primary Dealer in Irish Government Bonds.

 

Dresdner Kleinwort is now a Primary Dealer in the Government Debt of the following Eurozone countries:

 

Austria, Belgium, Finland, France, Germany, Ireland, Italy, Netherlands, Portugal (T-Bills), Slovenia and Spain.

 

The Primary Dealerships have been built up over the past year as Dresdner Kleinwort continues to grow its profile in the European Rates markets and in particular in European Government Bonds. Adding Ireland is another step towards Dresdner Kleinwort’s goal of becoming a top European Primary Dealer.

 

Commenting on the announcement Domenico Crapanzano, Global Head of Rates Trading said: “The role of Primary Dealer in Irish Government Bonds enhances Dresdner Kleinwort's position as a leading player in European Government Debt trading and distribution and completes the suite of Fixed Income products that we offer to our investor base.”

 

Gianluca Garbi, Head of Global Public Sector added: “We continue to grow our profile in the European Rates markets and in particular European Government Bonds. The Irish Primary Dealership is another step to strengthening Dresdner Kleinwort’s Public Sector franchise.”

 

Dresdner Kleinwort is the investment banking division of Dresdner Bank AG and a member of the Allianz Group. Headquartered in London and Frankfurt, with an international network of offices, Dresdner Kleinwort provides a wide range of investment bank products and services to European and international clients through its Global Banking and Capital Markets business lines.

 

Authorised by the German Federal Financial Supervisory Authority and authorised and subject to limited regulation by the Financial Services Authority.

[Guest Obama For America]

Below is a Statement From Senator Barack Obama on the Treasury Department's Plan

 

"The Treasury Department's concept of investing money directly into struggling banks so they can lend money to families and businesses is the right one. But we must make sure this plan is implemented in a way that helps homeowners and does not enrich Wall Street CEOs at the taxpayers' expense, something I have warned against from the first day of this financial crisis. Taxpayers who are now invested in Goldman Sachs should not be treated worse than when Warren Buffett invested in Goldman Sachs. Injecting capital into our financial institutions is essential to stabilizing our economy, but we must make sure we are not giving sweetheart, insider deals that shift the risk to taxpayers without giving them sufficient upside. And we must make sure that these institutions are helping homeowners stay in their homes, which includes abiding by a 90 day moratorium on foreclosures for families who are making a good faith effort to pay their mortgages. Finally, the plan appears to extend a broader set of guarantees to banks without requiring any additional regulation, which represents more of the same failed philosophy that got us into this mess.

 

"I will be studying the details of this deal to make sure we can advance the core concept while still protecting taxpayers and ensuring that CEOs are not being enriched on our dime," said Senator Barack Obama.

[Guest Nadeam]

Speaker Nancy Pelosi issued the following statement today in response to the Bush Administration’s plan to recapitalize the nation’s financial institutions to help stabilize the U.S. economy:

 

“The coordinated actions announced today by the Treasury Department, the Federal Deposit Insurance Corporation, and the Federal Reserve are steps in the right direction that could help to restore confidence in our financial markets and the routine flow of credit to our financial system that is essential for small businesses and consumers.

 

“From the first days of negotiations on the Emergency Economic Stabilization Act, Congress demonstrated bipartisan support for direct injections of capital into troubled financial institutions, even though the Administration's preferred approach was primarily to purchase troubled assets. The decision of President Bush and Secretary Paulson to take the critical step of direct purchases of preferred stock in financial institutions will, if conducted correctly, protect the interests of taxpayers. I also welcome the executive compensation restrictions, including a prohibition on golden parachutes, which are required of financial institutions that participate in the program.

 

“I have directed several congressional committees to review the actions taken by the Administration to ensure that the interests of the American people are protected.”

[Guest THE WHITE HOUSE]

Office of the Press Secretary

 

President Bush Discusses the Economy

U.S. Chamber of Commerce

Washington, D.C.

 

THE PRESIDENT: Good morning. I am pleased to be back to the U.S. Chamber. I want to thank the members of this fine organization for your efforts to support the spirit of free enterprise, and to advance the interests of businesses, large and small, across our great country. I'm grateful for the opportunity to talk to you about a subject that's on all our minds -- and that's the economy.

 

Bruce, I want to thank you for your leadership and your friendship. I want to appreciate the other members of the U.S. Chamber leadership group that is with us. I welcome the entrepreneurs that are with us; fellow citizens.

 

Our nation is dealing with a serious financial crisis. Over the past month, Americans have witnessed fast-moving events involving complicated financial issues. I know many of our citizens are concerned about their finances. They're worried about the extent of government intervention into the marketplace. In my conversations with business owners and workers and families across our country, I've heard the same message: The American people want a clear explanation of what this crisis means for them, what the government is doing to fix it, and how this will affect the future of the free market that makes our economy so dynamic and prosperous. And that's what I've come to talk about.

 

To understand how this crisis unfolded you have to look back more than a decade. For many years, the combination of low interest rates and the inflow of capital from around the world produced a period of easy credit here in the United States. This trend was especially apparent in the booming housing market, where many lenders issued mortgages to borrowers who could not otherwise afford homes. Many of those loans were then packaged into complex financial assets, which were sold to banks and investors all across the world.

 

These developments came together to set off a chain reaction when the housing market began to decline. With the supply of homes exceeding the demand from potential buyers, home values dropped. In addition, many homeowners with adjustable-rate mortgages saw their interest rates suddenly reset to higher levels. Both these factors caused a number of borrowers to default on their mortgages. In turn, many institutions holding assets related to those mortgages suffered serious losses, which caused some of them to run short of capital. This led to high-profile bank failures, restrictions in lending, and widespread anxiety -- all of which contributed to sharp swings in the stock market.

 

These developments were most visible on Wall Street, but their impact has reached far beyond. The drops in the stock market have eroded the value of Americans' retirement accounts and 401Ks. The tightening of credit has made it more expensive for many families to borrow money for cars and homes and college tuition. Many healthy businesses have found it harder to get loans to expand their operations and to create jobs for our workers.

 

The federal government has responded to this crisis with systematic and aggressive measures to protect the financial security of the American people. People look at this crisis and say, oh, it's only Wall Street. I don't think so. As a matter of fact, I know that if we had not acted it could affect the American people directly. The actions will take more time to have their full impact. It took a while for the credit system to freeze up; it's going to take a while for the credit system to thaw. These are decisive measures aimed at the heart of our financial challenges. And they're big enough and bold enough to work. And the American people can be confident that they will.

 

Let me explain this approach piece by piece.

 

First, the government has focused on preserving the stability of the overall financial system. For example, out of concern that the failure of Bear Stearns, Fannie Mae, Freddie Mac, and AIG could collapse our financial system, the government moved to protect the American people. We prevented a disorderly failure of these large, interconnected firms -- and we did so in a way that protects taxpayers and does not shield executives from the consequences of their irresponsible decisions.

 

Second, the government has taken unprecedented action to boost liquidity -- the grease that keeps the gears of our financial system turning. The Federal Reserve has used a variety of tools to inject hundreds of billions of dollars in new liquidity into the financial system. The Federal Deposit Insurance Corporation has temporarily guaranteed most new debt issued by insured banks, which will make it easier for banks to borrow needed money from each other. The Federal Reserve has announced a new program to provide support for commercial paper, which is a key source of short-term financing for American businesses and financial institutions.

 

Third, the government has provided substantial new protections for responsible consumers, businesses and investors. The federal government has temporarily expanded the amount of money insured in bank and credit union savings accounts, checking accounts, and certificates of deposit from $100,000 to $250,000. The FDIC has created a new short-term program to grant unlimited insurance for non-interest-bearing transaction accounts used by many small businesses. The Treasury has offered temporary government insurance for money market mutual funds. The Securities and Exchange Commission is vigorously investigating fraud, manipulation, and abuse in the markets. With these steps being taken by all these federal agencies, we're providing greater peace of mind for the American people -- and greater stability for our financial system.

 

Fourth, the United States is cooperating closely with our partners overseas, who are also feeling the effects of this global crisis. Last week, the Federal Reserve and other central banks around the world enacted a joint cut in interest rates, which will help ease the pressure on credit markets around the world.

 

Last weekend, I met with finance ministers from the G7 and G20 -- groups representing some of the world's largest and fastest-growing economies. On Wednesday, leaders of the G8 issued a statement underscoring our commitment to work together to resolve the crisis. The statement calls for a leaders meeting with a broader group of countries, developed and developing, to work together to improve the regulatory and institutional structures of our nations' financial systems.

 

Earlier this week, leaders in Europe announced steps to purchase equity in major banks, and provide temporary government guarantees for bank loans. Tomorrow at Camp David, I'll continue our close consultations by meeting with President Sarkozy of France and President Barroso of the European Commission.

 

Our European partners are taking bold steps. They show the world that we're determined to overcome this challenge together. And they have the full support of the United States.

 

Finally, the government has undertaken an historic effort to address the underlying problem behind the freeze in the credit markets. Earlier this month, Congress passed bipartisan legislation authorizing the Treasury Department to use up to $700 billion to help banks rebuild capital. This week, I announced that the Treasury will use a portion of that money to inject capital directly into banks by purchasing equity shares. Large banks, as well as smaller banks, community banks, and regional banks will all be able to participate, at their choice. The new capital will help banks fill the gaps created by losses during the financial crisis, so they can make loans to businesses and consumers.

 

In addition, the Treasury will use part of the $700 billion to purchase some of the troubled assets that are weighing down banks' balance sheets and clogging the financial system. This extraordinary effort is consistent with the G7 action plan. It is designed with one overriding purpose -- to help banks get money flowing, so small businesses can thrive and hire, so big businesses won't shut down operations. To help the American people is the goal of this plan.

 

The actions I just outlined represent an extraordinary response to an extraordinary crisis. Some of the steps may sound like technical matters, but they will contribute real benefits to the American people. As they take effect, they'll help restore stability and confidence in the financial markets. They'll make it easier for Americans to borrow money for their cars, and for colleges and basic necessities. They will speed the day when communities across our nation return to the path of prosperity, job creation, and long-term economic growth.

 

I know many Americans have reservations about the government's approach, especially about allowing the government to hold shares in private banks. As a strong believer in free markets, I would oppose such measures under ordinary circumstances. But these are not ordinary circumstances. We took this measure as a last resort. Had the government not acted, the hole in our financial system would have grown larger. Families and firms would have had an even tougher time getting loans, and ultimately the government would have been forced to respond with even more drastic and costly measures later on.

 

Some have viewed this temporary measure as a step toward nationalizing banks. This is simply not the case. This program is designed with strong protections to ensure the government's involvement in individual banks is limited in size, limited in scope, and limited in duration.

 

The government's involvement is limited in size. The government will only buy a small percentage of shares in banks that choose to participate, so that private investors retain majority ownership.

 

The government's involvement is limited in scope. The government will not exercise control over any private firm. Federal officers will not have a seat around your local bank's boardroom table. The shares owned by the government will have voting rights that can be used only to protect the taxpayers' investment, not to direct the firm's operations.

 

The government's involvement is limited in duration. It includes provisions to encourage banks to buy their shares back from the government when markets stabilize, and they can raise money from private investors. This will ensure that banks have an incentive to find private capital to replace the taxpayers' investment, and to do so quickly.

 

For those worried about the long-term consequences of the actions, our history offers some comfort. On several occasions over the past century, the government has taken partial ownership of private companies in the banking industry during times of great financial challenge -- most recently during the savings and loans failures of the 1980s and 1990s. In every case, the government relinquished its ownership stakes after the crisis ended. And we will do so again. The government intervention is not a government takeover -- its purpose is not to weaken the free market; it is to preserve the free market.

 

I know many are worried about the price tag of this rescue package. Every dollar spent will be subject to strong oversight by a bipartisan board. We will ensure that failed executives do not receive a windfall from hard-earned taxpayer dollars.

 

Ultimately, we believe the final cost will be significantly less than the initial investment. This is true for two reasons. First, many of the troubled assets that the government buys will increase in value as the market recovers. That means that the government eventually will be able to resell them for a higher price. Second, the government will receive quarterly dividends from the equity shares it purchases in financial institutions. If banks do not repurchase these shares within five years, the dividends they owe the government will increase substantially. This provides a clear incentive for banks to buy back their shares -- thus returning the money to the taxpayers as soon as possible.

 

As we work to resolve the current crisis, we must also work to ensure that this situation never happens again. Above all, that requires updating the way we regulate America's financial system. Our 21st century global economy continues to be regulated by laws written in the 20th century. Secretary Paulson has proposed a detailed blueprint for modernizing these regulations. Others have put forward good suggestions. Enacting these ideas into law must be a top priority for the next President and the next Congress.

 

Just as importantly, we must guard against unintended consequences. We must ensure that new regulations aimed at Wall Street do not end up hurting responsible business owners, limiting the ability of American firms to raise capital, or putting American workers at a competitive disadvantage. We must ensure that this crisis does not become an excuse to raise taxes on hardworking Americans -- which would only make the problem worse. We must ensure that our efforts to prevent a recurrence of this global crisis do not lead -- do not lead us to give in to false temptations of economic isolationism. The best way to demonstrate America's commitment to open markets is for Congress to approve the Colombia, Panama, and South Korea free trade agreements this year.

 

We must also ensure that government officials do not abuse our temporary position as shareholders in banks. We must not blur the line between the government and the private sector. We must not supplant the profit motive with political motives.

 

We must also never lose sight of the enormous benefits delivered by the free enterprise system. Despite corrections in the marketplace and instances of abuse, democratic capitalism remains the greatest system ever devised. It allows individuals to rise as high in their societies as their talents and ambition will take them. It rewards hard work, intelligent risk-taking, and the entrepreneurial spirit. Around the world, free market policies have lifted millions of people out of poverty, and given them the opportunity to build a more hopeful life. And here at home, it has given our large and dynamic economy the flexibility and resilience to absorb shocks, adjust, and bounce back stronger.

 

In the long run, the American people have -- can have confidence that this economy will recover. America is the best place in the world to start and run a business. America is the most attractive destination for investors around the globe. America is the home of the most talented and enterprising and creative workers in the world. We're a country where all people have the freedom to realize their potential and chase their dreams. This promise has defined our nation since its founding; this promise will guide us through the challenges we face today; and this promise will continue to define our nation for generations to come.

 

Thank you for listening. God bless you.

[Guest Andrew Davis]

Ground zero of today’s economic crisis was irresponsible mortgage lending by government-backed enterprises, most notably Fannie Mae and Freddie Mac,” explains Bob Barr, the Libertarian Party candidate for president. “Yet, Freddie Mac spent extravagantly to prevent Congress from imposing even loose controls over its operations. We need a full and open investigation of Freddie Mac’s lobbying practices, which have cost the taxpayers so much money,” notes Barr.

 

“The role of Democrats Barney Frank and Chris Dodd in protecting Fannie and Freddie from meaningful federal oversight is well-known. But now increasing information is coming out on Freddie Mac’s lavish payments to Republican Party consultants to protect the organizations as they drove the entire U.S. economy into the ground,” observes Barr.

 

“Sen. John McCain has personally called for reform of Freddie Mac, but he has surrounded himself with lobbyists dedicated to picking the public’s pockets,” Barr notes. “Normally companies have a perfect right to hire lobbyists, even to try to pick the public’s pockets, but Freddie Mac was a government-sponsored enterprise, with special privileges, including implicit government backing for its activities,” says Barr.

 

“Between 2000 and 2005, Freddie Mac paid Rick Davis, Sen. John McCain’s campaign manager, nearly $2 million to run the so-called Homeownership Alliance to oppose restrictions on Freddie’s ability to promote mortgage lending with implicit government backing. After closing this front group, Freddie Mac paid Davis’s lobbying firm, David Manafort, nearly a half-million dollars. Those payments, of $15,000 a month, only ceased in August,” Barr notes.

 

Barr also states that Mark Buse, Sen. McCain’s chief of staff, once worked at Freddie Mac, and “his lobbying group, ML Strategies, collected $460,000 between 2003 and 2004. All of that was spent to put taxpayers on the hook for ever-more expansive lending in the housing market,” explains Barr. “And nearly $3 million went to the firm of William Timmons between 2000 and 2008. Sen. McCain has tapped Mr. Timmons to manage his transition to the White House if he wins the presidency,” adds Barr.

 

“The latest revelation is that Freddie Mac paid the lobbying firm DCI $2 million to kill reform legislation authored by Sen. Chuck Hagel (R-Neb.). DCI is headed by Doug Goodyear, who managed the Republican National Convention. DCI focused its efforts on Republican Senators, and in 2005, Sen. Majority Leader Bill Frist refused to bring the Hagel bill up for a floor vote. DCI’s efforts helped block what might have been the last best hope to stop today’s housing debacle,” explains Barr.

 

“We need an independent investigation of the money spent and tactics used by Freddie Mac and Fannie Mae that enabled them to so abuse the public trust. That investigation will become even more important if Sen. McCain wins the presidency. So far, the taxpayers have been stuck with a bailout bill that exceeds $2 trillion, and the cost is likely to rise even further," observes Barr.

 

"Those who are responsible for today’s economic mess must be held accountable, and not granted special access,” insists Barr.

 

Libertarian Party presidential candidate Bob Barr represented the 7th District of Georgia in the U. S. House of Representatives from 1995 to 2003.

[Guest Bill Harold]

Ron Paul's stance on Monetary Reform. A great video to show members of the financial community. The key is to tie the dollar to the price range of gold.

 

 

[Guest LAW_*]

The Conference Board Consumer Confidence Index™, which had improved moderately in September, fell to an all-time low in October. The Index now stands at 38.0 (1985=100), down from 61.4 in September. The Present Situation Index decreased to 41.9 from 61.1 last month. The Expectations Index declined to 35.5 from 61.5 in September.

 

The Consumer Confidence Survey™ is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world's largest custom research company. The cutoff date for October's preliminary results was October 21st.

 

Says Lynn Franco, Director of The Conference Board Consumer Research Center: "The impact of the financial crisis over the last several weeks has clearly taken a toll on consumers' confidence. The decline in the Index (-23.4 points) is the third largest in the history of the series, and the lowest reading on record. In assessing current conditions, consumers rated the labor market and business conditions much less favorably, suggesting that the fourth quarter is off to a weaker start than the third quarter. Looking ahead, consumers are extremely pessimistic, and a significantly larger proportion than last month foresees business and labor market conditions worsening. Their earnings outlook, as well as inflation outlook, is also more pessimistic, and this news does not bode well for retailers who are already bracing for what is shaping up to be a very challenging holiday season."

 

Consumers' appraisal of current conditions deteriorated sharply in October. Those saying business conditions are "bad" increased to 38.3 percent from 33.4 percent, while those claiming business conditions are "good" declined to 9.2 percent from 12.8 percent. Consumers' assessment of the labor market was also much more negative. The percentage of consumers saying jobs are "hard to get" rose to 37.2 percent from 32.2 percent in September, while those claiming jobs are "plentiful" decreased to 8.9 percent from 12.6 percent.

 

Consumers' short-term outlook turned significantly more pessimistic. Those expecting business conditions to worsen over the next six months surged to 36.6 percent from 21.0 percent, while those anticipating conditions to improve fell to 9.9 percent from 13.4 percent. The outlook for the job market was also less favorable. The percent of consumers expecting fewer jobs in the months ahead surged to 41.5 percent from 26.9 percent, while those anticipating more jobs decreased to 7.4 percent from 11.9 percent. The proportion of consumers expecting their incomes to increase fell to 10.8 percent from 15.1 percent.

 

Source: October 2008 Consumer Confidence Survey™ The Conference Board

[Guest Department of Commerce]

U.S. Commerce Secretary Carlos M. Gutierrez today released the following statement on the advance third quarter real gross domestic product (GDP), which showed that the U.S. economy decreased at an annual rate of 0.3 percent in the third quarter of 2008:

 

“While not unexpected, the third quarter GDP report is clearly disappointing. The administration, along with Congress, has taken bold, necessary steps to help stabilize our economy. While it will take time for the full impact to be felt, Americans are the most resilient and productive people in the world, and we will bounce back.

 

“In the wake of a global slowdown, we need to continue pressing forward with open markets and free trade to generate growth, opportunities and prosperity. Now is the time to continue to engage with the world, and work with urgency to open new markets and expand opportunities for our exporters. I urge Congress to take up the three pending free trade agreements to send a signal that the United States is still the best place in the world to do business.”

[Guest Nadeam Elshami]

Speaker Nancy Pelosi today issued the following statement on third quarter Gross Domestic Product (GDP) numbers, which shrank at a 0.3 percent annual rate in the July-September, marking the worst showing since the 2001 recession, and weekly applications for unemployment benefits, which remained at 478,000, near an all time high.

 

“Today’s GDP news and jobless claims report confirm what Americans already know: that our nation’s economy is shrinking; consumers are not spending; and businesses are producing fewer goods. At a time of worsening economic conditions for families and workers, Americans expect leadership that will help Main Street recover.

 

“The House passed an economic recovery and job creation package in September, but the legislation was blocked by Republicans in the Senate and opposed by the President. With American families suffering, workers losing their jobs and businesses contracting their production, we must work together on a fiscally responsible plan that will boost the economy and restore consumer confidence.

 

“The New Direction Congress is committed to addressing the economic crisis in the short-term and the long-term, creating good-paying jobs here at home, providing relief to struggling families and small businesses, and making us more competitive in the 21st century global economy.”

[Guest Workers Action]

The pillars of the U.S. capitalist economy are crumbling and falling all around us while the federal government frantically races from one crisis to another, throwing money at them as if throwing water on a fire. It could well turn out that the money represents only a few drops of water thrown on threatening flames that will soon billow into an out-of-control wildfire so that nothing President-elect Barak Obama has proposed will succeed in averting the disaster.

 

Thus far, a breathtaking $700 billion has been rushed to the banks. The mortgage companies Fannie Mae and Freddie Mac, along with American International Group (A.I.G.), an insurance company, and Bear Stearns were bailed out. But Lehman Brothers was denied a lifeline and went under. Washington Mutual went down, thereby earning it the title of the largest bank failure in U.S. history. The U.S. automobile industries are in a perilous state and might face bankruptcy. Financial institutions in general are in dire straights. Meanwhile, the debt the U.S. government has incurred has reached an astronomical $10 trillion, which means that it has doubled as a percentage of the Gross Domestic Product (G.D.P.) over the past 30 years. And those of us in the working class have accumulated historically high debts. Meanwhile, the stock market has suffered whiplash as it has plunged from historic highs to historic lows, then back up again, and then down.

 

Expert economists, who are usually overly upbeat about economic prospects since the economy requires people's confidence in order to function smoothly, sound decidedly morbid. Former Federal Reserve Chairman Alan Greenspan said the economic crisis is "outstripping anything I've seen and it still is not resolved," Warren Buffet, a multibillionaire, referred to it as an "economic Pearl Harbor," and Nassim Taleb, whose opinion ranks high in the eyes of the rich, offered the most dire prognosis: it could be worse than anything since the Revolutionary War, meaning it will be worse than the Great Depression. And he added that he has started waking up in the middle of the night worried about the prospects.

 

The Crisis

Starting on the most superficial level, one could say that the sub-prime loan debacle kicked off the nose-dive. These loans were made by banks and mortgage companies like Freddie Mac and Fannie Mae to people who simply could not afford to repay them. Often, people were lured in with low-interest loans that were programmed to reset at much higher rates after a few years, making repayment virtually impossible. In many cases, the institutions that made the loans would then bundle them together into a package and resell them to other investors ? not only in the U.S. but all over the world ? where the investors had no idea of the toxicity of their purchase. So those who made the loans scored a quick profit and left others holding the bag. As long as housing prices kept rising, all was well. The loans accelerated until the ceiling was hit, foreclosures began to pile up, and then everything began to collapse.

 

A second tendency has also been at work that has contributed to this economic meltdown. Debt has been incurred on an increasingly higher level on all fronts here in the U.S., including by governments, businesses, and consumers. And this has been happening virtually all over the world, placing the global economy on a precarious precipice. In other words, almost every country on some level has been living beyond its means. But as a result, banks are refusing to provide loans because, as the economy has taken a sour turn, they fear that loans might not be repaid.

 

A third tendency has proliferated that has been particularly lethal. All kinds of investments have been made, particularly by the rich, which take the form of sophisticated gambling. Here one needs advice from mathematicians who know how to calculate the probabilities. For example, some invest in hedge funds that bet that a particular currency will increase in value, or a particular commodity will lose value. If correct, these funds can pay fabulous profits, allowing some brokers to go home with over $1 billion in a single year. But the unpleasant reality for these risky investments is that the future does not always resemble the past. Even the best calculations can be foiled by the unexpected. But until now, a wealthy elite has made huge sums of money by shrewd investments simply by placing their bets.

 

One might think that the crisis that is slowly unfolding is simply a financial institution crisis. Unfortunately, our lives are entangled with theirs, meaning they will take us down with them.

 

For example, many businesses, especially the bigger ones, require credit to operate. They get loans, sometimes on a daily basis, to pay their operating expenses and then repay the loans as the profits arrive. This is normal procedure. Without these loans, the businesses will fold, and workers will be without jobs. As for the hedge funds, many of them involve our pensions. If they go down, the pensions go with them, thereby endangering the income of present retirees, not to mention future prospects.

 

The 40 percent drop in the stock market has wiped out, or nearly wiped out, many 401k's, which workers have been forced to purchase because companies can then eliminate funding workers' traditional pensions. Moreover, when the 401k is invested in the company's own stocks, the added demand raises the price of the stocks, thereby delivering a windfall to the owners.

 

Finally, in a worse case scenario, we could find ourselves in the same position as the Argentine working class: we try to withdraw our money from the banks and they no longer have it.

 

All this is to say that the economy is currently in a state of free fall. No one knows how far away the ground is.

 

Capitalism is the Root Problem

Capitalists, having a large stake in maintaining the system, have assured us that by making a few adjustments, these cataclysmic breakdowns can be avoided in the future. For example, hedge funds, which were created in the 1980's, have been notoriously unregulated and thus provide an easy target for reforms. Leaving aside the fact that they made the same promises after the Great Depression, a closer look at the internal mechanisms of capitalism leads to the inescapable conclusion that these tumultuous convulsions are unavoidable as long as capitalism survives.

 

Capitalism is a system based on competition. Business owners compete against one another for profits, and workers compete against one another for jobs. If one business scores higher profits than its competitors, it can use the additional money to lower the cost of its product, deprive the competitors of their customers, and drive them out of business. Consequently, simply in order to survive, capitalists must maximize their profits. And this drive becomes the underlying culture of society. The rich strive for ever-greater profits, and everyone judges one another by how much money they have.

 

However, every business operator knows that in order to maximize profits, production costs must be minimized, and production costs include labor costs. Management is therefore trained in all the tricks to keep workers' wages low, benefits to a minimum, and, if possible, replace workers by machines or computers altogether. So under normal operating conditions, capitalism aims at keeping workers' compensation as low as possible and profits as high as possible. Hence, unless workers organize themselves into unions and attempt to reverse these trends, the inequality in wealth, which currently stands at historic highs, continues to grow.

 

With the buying power of the working class increasingly squeezed, eventually a limit is reached. Capitalists overproduce and their products go unsold. Few in the working class can now afford to buy the recently built houses that stand empty. U.S. automobile sales are down between 30 and 40 percent in comparison to last year, and cars sit in the lots of dealerships. Supply is abundant, demand has shriveled, and the economy is caught in a vice of overproduction with a recession as the outcome. Because of these underlying tendencies, capitalism has been plagued by crises of overproduction since its inception.

 

Because labor is the source of all value, and because capitalists try to operate with fewer and fewer workers, preferring to replace them with machines, there is a tendency for the amount of value produced to decline in the manufacturing sector, which in turn means a lower rate of profit. Consequently, the rich look for other avenues of investment such as the stock market or hedge funds. Here one does not have to be concerned with all the complexities of hiring workers and securing raw materials and machines in order to produce a commodity. The stock market and hedge funds are only about money. One can place a bet by pushing a button, and presto, make millions of dollars, sometimes in just a few seconds.

 

In capitalism, people do not get rich by working. They get rich by having other people do the work for them, or they simply place their bets. And as capitalists, they have far more inside information that allows them to make educated bets than those of us in the working class. In the 1990's, the rich doubled their wealth on the stock market while our wages dropped.

 

But eventually even educated bets can fail on an enormous scale, as capitalists have recently discovered. In the final analysis, all the money in the stock market, hedge funds, etc., only has value in so far as it is based on the value created by labor. When this connection is severed, a bubble appears and, when stretched too far, bursts. However, in their compulsive greed for profits, the rich are always seeking new get-rich-quick schemes that eventually produce bubbles.

 

What To Do

First, we need to organize workers in every arena: at work, in communities, at schools, etc. Organizing the unemployed should be a high priority because their ranks will be growing. We will all be hit hard, and people will want to fight back.

 

Second, we must link up different working class organizations into larger coalitions. For example, the Central Labor Councils in New York City and San Francisco have already organized demonstrations of working people and passed resolutions condemning the bailout for the banks. Recently, the faculty union at the California State University system reached out to other teachers' unions in the state so that together they could demand more federal funding to help our money-starved schools and universities. The faculty union pointed out that if the federal government has $700 billion to bailout the banks, surely it has a few billion for our public schools. One should note, by the way, that schools have pleaded for more money for years, only to be told by the government that there was none. When the banks needed a bailout, $700 billion appeared immediately.

 

Third, we must begin to consolidate these coalitions in the direction of a political bloc of working people and our allies, including the oppressed in general: immigrants, Blacks, Latinos, women, etc. The business owners go to their Democratic or Republican representatives in government for help. We need our own political party that can represent our interests. But in order to reflect our interests accurately, it must be democratically run so that the entire constituency can define its guiding principles and select its leading representatives. We cannot continue to elect Democrats to office and expect a different outcome; they all are on the corporate payroll. We need a party that recognizes our interests are counterposed to those of the employers, corporations, bankers, speculators, etc. ? a party that understands that we must not be asked to sacrifice our standard of living and whole well-being in order to subsidize their life of luxury. We did not cause this financial crisis, and we refuse to allow it to be resolved at our expense while the rich emerge unscathed. A party of working people could begin by demanding a stop to the Wall Street bailout but help for those who face foreclosures in houses they live in and help for those who have lost their jobs.

 

Finally, throughout this struggle, we must clearly and relentlessly explain why capitalism does not operate in the interests of working people but serves the interests of a fabulously rich minority at the expense of the vast majority, even in the best of times. The rich employers raise profits by lowering labor costs, throwing us out of work, polluting the environment, conducting wars for oil and profit, and reducing humanity to a constant struggle for survival. With their own self-interests and greed at the helm, the rich have just steered us into an iceberg. It is time for a reversal. We working people make the country run; we should run the country.

 

This means we will need to build a society that defends and promotes ALL our interests -- our COLLECTIVE interests -- as its highest priority. And since we need one another to thrive, the well-being of each individual will be considered a necessary condition for the well-being of everyone. Health care, quality education, housing, convenient transportation, and a clean environment will be everyone's birthright. All will be guaranteed a job, and by providing the unemployed with work, we can reduce the workweek with no loss in the amount of wealth created. People will be rewarded on the basis on their work, not on the bets they place or on how hard they make others work for them. We will lift everyone's standard of living, not allow a minority to get rich by making everyone else poorer.

 

But society can only operate in everyone's interests if we all have a voice in creating public policy. This means that all major decisions must be discussed, debated, and voted on by all so that policies will be determined by the most persuasive arguments, not by the largest campaign contributions to politicians. Accordingly, we can run our economy on clear, rational principles as opposed to the dark dealings of capitalism. In the final analysis, it will be a society based on rationality, cooperation, and morality, not on greed, competition, and gambling.

 

Now is the time to begin

[Guest Catherine]

Ongoing financial market turmoil is leading policymakers to consider increasingly complex regulation for a complex financial world. But without a sound understanding of both the causes of recent instability and the effects of proposed policies, swift action could to lead to undesired outcomes.

[Luke_Wilbur]

Citigroup stock is down another 26 percent today, it is the worst one-day percentage decline for the company ever. It can be purchased at $4.71/per share. JPMorgan Chase & Co. is down 17.8 percent and can be purchased for $23.38. My bank Suntrust is down 13.01 percent and selling at $24.61 a share.

 

I feel sorry for all their common stock shareholders. They are in risk of losing their money. Preferred stock shareholders have a little better insurance and do pay a dividend.

 

Better yet, invest in yourself and start your own business is the best bet.

[Guest Ann Coulter]

You know what really irritates me about liberals? (Besides the fact that they're spineless little girls in pretty dresses who can't play rough because it musses up their hair...)

 

They always think liberalism fixes the problem -- even when it was liberalism that caused the problem in the first place!

 

Case in point, the Financial Meltdown of 2008 (and counting). To hear liberals tell it, it all goes back to Ronald Reagan -- who with his seductive "B-actor" charm fooled America into thinking that by slashing taxes, regulation, and government spending we could unleash free enterprise and create a new wave of prosperity.

 

Sure, liberals concede, that seemed to work for, oh, the better part of three decades, but now we're paying the price for all that "greed." The solution? A return to the pre-Reagan policies of Jimmy Carter, LBJ, FDR... Speaking of which, what will victory look like in the "War on Poverty"? When are they going to produce an "exit strategy" from that quagmire?

 

Unfortunately, the facts -- as always when you're talking about liberal theories -- tell a different story. A story in which all the major villains, it turns out, have one thing in common: government.

 

That's right. From the "Community Reinvestment Act" that pressured banks into affirmative-action lending, to those "government-sponsored enterprises" Fannie Mae and Freddie Mac -- who bought up all the resulting subprime loans and repackaged them as "investment grade" securities -- the greasy thumb-prints of government were all over this fiasco from beginning to end.

 

But those, as I say, are facts. And facts have no place in the fantasy world of Democratic policy-makers. Nor does history -- true history, that is, as opposed to the public-school propaganda that teaches, for instance, that FDR's New Deal got us out of the Great Depression, when in reality it only deepened and prolonged it.

 

But the question remains: What can those of us in the fast-dwindling, Reality-Based Community do to survive financially as the Obamacrats prepare a "New New Deal" that threatens to outspend the original by about ten thousand to one?

 

Personally, I don't have a clue. But thank goodness I know of someone who does

[Guest DCA]

And that person would be ...?

[Guest Fed Up]

No one, but the man upstairs

 

Alan Williams, Labour member for Swansea West, accused the Goldman Sachs of failing to cooperate with a British government probe into the Northern Rock crisis. Williams expressed disbelief over Goldman's refusal to disclose the financial models it used to analyse Rock to National Audit Office investigators. Goldman, a big adviser on privatisations gave the British Treasury specific advice on the "mechanics" of the Government's guarantee for Northern Rock, UK's fifth largest lender.

[Guest Maxwell]

These greedy leeches have brought the globe to it's knees and so should be hung out on the gallows in a public execution.

[Guest LAW_*]

Actually the British Treasury asked Goldman Sachs to liaise with the Northern Rock as it took the process forward. Following legal advice received in September 2007, the Treasury considered that it should avoid taking any actions that were properly a matter for the directors of Northern Rock. The Treasury judged that it could not directly intervene in the process run by the company to find a potential buyer. ◦Although the Treasury discussed the options analyses prepared by Goldman Sachs and tested the assumptions used, it did not request access to the underlying financial models developed by its advisers, which were regarded as proprietary information. This limited its ability to validate estimates of the costs and benefits of each option.

[Guest Ron_*]

These greedy leeches have brought the globe to it's knees and so should be hung out on the gallows in a public execution.

 

This is the same bunch that helped get gas prices to $4 a gallon and oil to almost $147 a barrel. why have they been shutdown?

[Guest Enron]

Goldman Sachs faces tougher regulatory oversight and greater public scrutiny, which push bankers and traders to leave. Their days may be numbered.

[Guest Netty]

Gerald Celente on Civil Unrest, Ghost Malls, and Another American Revolution

 

 

View the video at YouTube.

[Guest Karen DeCoster]

In Europe, we have been protected from the worst effects of the crisis thanks to welfare states built up over the past 60 years to cushion citizens from the threats posed by the free market. We can all count on state health care, social housing, education, unemployment support and other universal, tax-funded services.

[Guest Norbert Trenkle]

The causes of the current crisis in the international financial markets, which is threatening to develop into a genuine global market crisis, have been attributed by almost all commentators and economic experts to the uninhibited freedom granted to speculation, particularly in the USA. The principal agents of this speculation are generally held to be the banks and investment-funds, but also the governments and central banks (particularly the US government and federal reserve) which have enabled and supported this development. Those who have for years seen the causes of every economic and social fissure – mass unemployment, pressure on wages, increased local competition and the tearing down of social security – in the fact that speculation has been set free and become an end in itself, and who see regulation and control of the financial markets as the key to solving these problems, now feel that their views have been confirmed.

[Guest James the Just]

Some of us simply cannot close our eyes to the struggle and suffering of billions in the hopes that the resulting chaos will fail to effect us.

[Guest DC Government Worker]

In March, the number of unemployed persons increased by 694,000 to 13.2 million, and the unemployment rate rose to 8.5 percent. Over the past 12 months, the number of unemployed persons has grown by about 5.3 million, and the unemployment rate has risen by 3.4 percentage points. Half of the increase in both the number of unemployed and the unemployment rate occurred in the last 4 months.

 

The unemployment rates continued to trend upward in March for adult men (8.8 percent), adult women (7.0 percent), whites (7.9 percent), and Hispanics (11.4 percent). The jobless rates for blacks (13.3 percent) and teenagers (21.7 percent) were little changed over the month. The unemployment rate for Asians was 6.4 percent in March, not seasonally adjusted, up from 3.6 percent a year earlier.

 

Among the unemployed, the number of job losers and persons who completed temporary jobs increased by 547,000 to 8.2 million in March. This group has nearly doubled in size over the past 12 months.

 

The number of long-term unemployed (those jobless for 27 weeks or more) rose to 3.2 million over the month and has increased by about 1.9 million since the start of the recession in December 2007.

 

Manufacturing employment fell by 161,000 in March, with widespread job losses occurring among the component industries. Factory employment has declined by 1.0 million over the past 6 months. In March, the largest decreases occurred in fabricated metal products (-28,000), machinery (-27,000), and transportation equipment (-26,000).

 

The construction industry lost 126,000 jobs in March, with declines occurring throughout the industry. Employment in construction has fallen by 1.3 million since peaking in January 2007; nearly half of that decline occurred over the last 5 months. In March, employment fell in specialty trade contractors (-83,000) and construction of buildings (-33,000). These declines were split about evenly between the residential and nonresidential portions of these industries. Heavy and civil engineering construction also lost 10,000 jobs. Employment in mining and logging declined by 18,000 in March.

 

Employment in professional and business services fell by 133,000 in March, with declines throughout most of the sector. More than half of the loss occurred in temporary help services, which cut 72,000 jobs in March and 767,000 since December 2007. In March, architectural and engineering services lost 16,000 jobs.

 

Retail trade employment fell by 48,000 over the month. Since peaking in November 2007, employment in the industry has declined by an average of 44,000 per month. In March, employment decreased in building material and garden supply stores (-13,000), automobile dealerships (-12,000), and electronics and appliance stores (-10,000). Employment in wholesale trade fell by 31,000 in

March, with nearly all of the decline occurring in durable goods.

 

Employment in financial activities continued to decline in March (-43,000). The number of jobs in this industry has dropped by 495,000 since an employment peak in December 2006. More than half of this loss occurred in the past 7 months. In March, job losses occurred in credit intermediation (-15,000); real estate (-12,000); and securities, commodity contracts, and investments (-7,000).

 

Leisure and hospitality shed 40,000 jobs in March, with most of the decrease in the accommodation industry (-23,000). The leisure and hospitality industry has lost 351,000 jobs since an employment peak in December 2007.

 

Transportation and warehousing lost 34,000 jobs in March, raising total job losses to 265,000 since employment peaked in December 2007. In March, employment declined in truck transportation (-15,000), support activities for transportation (-7,000), and couriers and messengers (-5,000). Health care employment continued to trend up in March (14,000); however, monthly job growth in

the first quarter averaged 17,000 compared with 30,000 per month in 2008.

 

In March, the average workweek for production and nonsupervisory payrolls fell by 0.1 hour to 33.2 hours, seasonally adjusted--the lowest level on record for the series, which began in 1964. The manufacturing workweek decreased by 0.2 hour to 39.3 hours, and factory overtime was unchanged at 2.7 hours.

[Guest LAW_*]

The April oversight report for COP is entitled Assessing Treasury’s Strategy: Six Months of TARP. In this report, COP offers a preliminary look at Treasury’s strategy and offers a comparative analysis of previous efforts to combat banking crises in the past.

 

Over the last six months, Treasury has spent or committed $590.4 billion of the TARP funds. Treasury has also relied heavily on the use of the Federal Reserve’s balance sheet which has expanded by more than $1.5 trillion (not including expected TALF loans) in conjunction with the financial stabilization activities it has undertaken beyond its monetary policy operations. This has allowed Treasury to leverage TARP funds well beyond the funds appropriated by Congress.

 

The total value of all direct spending, loans and guarantees provided to date in conjunction with the financial stability efforts (including those of the FDIC as well as the Treasury and the Federal Reserve) now exceeds $4 trillion. This report reviews in considerable detail specific criteria for evaluating the impact of these programs on financial markets.

 

Watch Chairwoman Elizabeth Warren introduce COP’s latest report