--December 25, 2008--
There certainly seems to be a difference between the financial sector, which has managed to lose more money than anybody in the history of the world, and the manufacturing sector, which is suffering the result. Unconditionally, they back up the dump truck for the financial sector, but heap ridicule and scorn upon the automobile industry. Finally, after much foot dragging they provide threats and some of the begged for help. Why the difference?
One is Wall Street, Banks, the ultra rich, connected Ivy Leaguers; the other employs the working poor, blue collar, the white collar, and the middle class. One makes windfall profits from outsourcing entire industries, the other loses their living from the same.
To be sure, the Big Three have made big mistakes, but they're mistakes of the short-term golden parachute and budget limitations. The Chiefs aim for, and hit, bad targets because they're given bad incentives. These incentives are a result of poor laws and poor regulations. They don't have the resources for long-term goals because our government, unlike those of other countries, neglects to help.
Here's a European view of our problem from before the crash, when our media was slathering lipstick on the pig.
A SUPERPOWER IN DECLINE America's Middle Class Has Become Globalization's Loser
How we got here. Some of the things that will have to change. Not exactly what your politicians or media or business opiners tell you.
Asia and the Meltdown of American Finance
Asia doubts "Free Market Fundamentalism."
An Asian View of the Global Financial Crisis
Middle East doubts "Free Trade."
President Elect Obama's administration still mired in the status quo and is not yet making enough changes.
Key Variables to Watch for in Friday's Jobs Report
--November 17, 2008--
Not knowing what is going on in the US economy is dangerous for retirements and savings. But it seems to me that most people cannot spend enough time reading to know more than a bit of the puzzle. Those who do learn more seem to get stuck on the symptoms, or worse the propaganda. In the hope of getting to the disease, the Hard Times Herald is my "boil down" of economic information that spews forth from of the worldwide media circus.
The analysts and the economists who successfully called the October crash (and they were few) have now split into two schools of thought, the deflationists and inflationists. The deflationists believe that the depression hasn't gotten going yet and the worst is yet to come. One sector after another will go into hard recession and depression. A halving of the Dow and S&P from this point is possible.
The inflationists believe that the money flood released by the central banks in countries around the world is going to be an irresistible force. The result will be a recovery and roaring inflation as soon as 2009. They like commodities, agriculture, energy, utilities, the metals, and don't let the train pull out of the station without you.
There is a spectrum between these extremes with various times for deflation now, and inflation later. It's a good time to track ongoing developments, but beware of the TV talking heads. They never warned of the crash.
A study shows that the cost of turning our backs on the automobile industry is 2.5 to 3 million jobs. It would be a devastating blow to the staggering economy.
Some say foreign car companies could take over in a year. Even given that rosy forecast, the technology infrastructure of a domestic company cannot be replaced. The foreign cars that are manufactured here have very important technology that is reserved for import from abroad. We would give up a key part of our National Security, the Arsenal of Democracy. Defense costs would rise and our National Security would weaken.
Do we really have the option to to backstab our fellow citizens again?
"I've got mine. You go retrain for… something."
It might happen.
Reuters: Automaker failure could hit 2.5 mln jobs: study
Auto industry collapse would crush U.S. economy: study Nicolas Van Praet, Financial Post
Subprime mess, mortgage meltdown, derivatives bomb, banking crisis, depression.
What started all of this?
Import addiction.
China, Asia, etc. our pushers decided to reign in our credit line and Uncle Sam
got the DTs.
Global creditors end U.S. spending spree, Patrice Hill
It's easy to blame the usual suspects. Mortgages for the poor, or deadbeat homeowners who walk away when they get upside down, Wall Street crooks, greedy bankers, etc. It is not so easy to deal with a 30-year way of life that is euphemistically called, "Free Trade."
No one can live off their credit card without ever having to pay it back. In the same way, our country cannot simply import everything and write IOUs. We have to make what we use (preferable) or we have to make things to trade for what we use (less efficient).
Tariffs, like a chopped-up charge card, keep a country from buying that which it cannot afford, and force it to make that which it must. Our economists rave against this, but look at where they've gotten us. There is something seriously wrong with current US economic thought. What other country in the world indulges in this madness?
We built up a malignant level of trade debt and budget debt (the two are related). The Fed has been resorting to ever-increasing extremes to keep Frankenstein's monster going. Our creditors got nervous, they reined in our leash, and we choked.
Now China might start spending US Treasuries to build its own infrastructure. They'll be selling Treasuries at the worst possible time for the United States. It's hard to depend on the kindness of strangers.
Reuters: China stimulus may knock U.S. Treasuries near term
Few articles talk about this. None of the bailouts addresses this. We're in desperate times and still no one fixes the problem, something to keep in mind when thinking about when and where to invest.
The IMF and others believe that China, Asia and the emerging markets will lead the way to recovery. As the United States could take a decade to dig out of the hole it's still digging into, it's going to be more important than ever to have a truly global investment portfolio.