Bailout, the $700 billion dilemma and world markets

[kgun]

I always love these comments, I mean should they just hold the summit at a McDonald's and serve Diet Coke or something? or perhaps Spam in a Can.....I get it, people are hurting economically, they're sipping $500.00 wine (chutzpah).....its good to be the 'king'!

Obama made it cheaper:

President-Elect Obama's First YouTube Address

Official site:
http://www.change.gov/

Related:
Obama Adds Online Video to Weekly Address

[cw1865]

Obama made it cheaper:

President-Elect Obama's First YouTube Address

Official site:
Change.gov: The Obama-Biden Transition Team

Related:
Obama Adds Online Video to Weekly Address

The modern equivalent to FDR's 'fireside chats'

[cw1865]

Nice little debate on the auto side of the bailout....

msnbc.com Video Player

[kgun]

And now, on Cnn they are showing companies like Online Trading Academy - Online Trading - Trading Education - Trading School - Stock Trading - Day Trading arranging trading courses costing more thant USD 5000.

My rule of tumb: 10 % make money on trading. In order of priority trading is about:

1. Psyche - relying on yourself.
2. Money management.
3. Tarding system and platform. Eg. being able to compute the risk / reward potential before you enter a trade.

In the mean time, Japan and the EURO zone has formally entered a recession. Growth is reduced in India and China. Pakistan has got a loan from IMF and Citigroup are going to cut 50,000 jobs.

It started with toxic loans inflated house prices (the pin):

"Speculative bubbles can continue for years on end. It's impossible to predict when one will end. The end of the current stock market bubble has been predicted since the mid 1990s, yet it goes on and on. Eventually, an event occurs that acts as a crash catalyst, a pin that pricks the bubble. The event presents investors with stark and conclusive evidence that the source of fuel for the speculation is about to be cut off. For example, if the Fed were forced to raise interest rates to protect the dollar from speculation, the "don't fight the Fed" bull market mantra singers will fall suddenly silent. Buyers of stocks at lower prices will quickly outnumber buyers of stocks at higher prices. In a financial bubble, this tends to happen swiftly as investors, each knowing they are part of a mass speculation yet believing they alone will get out in time with their profits, suddenly discover that their belief is exactly the same as that held majority of fellow speculators, who then all rush for the exits at the same time. Prices collapse with breathtaking speed. It is an awesome event".

We are now witnessing global repercussions and a negative impact on the real economy. Commentators say that the recession will bottom out in 2010. I am not sure. While I worked in the Central Bank of Noway, we used a term: "Dead meat has to be cut away". My own opinion:

1. The financial sector is to efficient and too big to the demand.
2. The air and car industry are also too big to the global demand.

Commisions proportional to the magnitude of disadvise and risk taking by management (derivative inspired payment) is now discounted by drawing on Joe The Plummers reserves. In the mean time leaders are still having a party at the first class.

Speculative manias are not twins, but they belong to the same family.

Regarding dollar trading volume vs. GDP (see figure in last link): It is at the highest top in history and the recession and credit tsunami has just started.

[kgun]

Bad. Bad. Breaking news on Cnn. Now the crisis has reached the state level. California the eight largest economy in the world and New York have increased their debt dramatically and may have problems paying their bills:

More ...

Regarding the car industry:

One of the Big Three must go, says bank chief

As an economist, I have come to the same conclusion. The car industry is "informally banks".

Bail them out, merge, reward energy efficiency and green technologies. Like Norwegian banks were taken over by the government for a periode, I see no problems that the government owns the big three, two or one and sell them back when the economy and the market is better. That may even be profitabel to tax payers.

Related:
Auto industry collapse would crush U.S. economy: study

[cw1865]

Bad. Bad. Breaking news on Cnn. Now the crisis has reached the state level. California the eight largest economy in the world and New York have increased their debt dramatically and may have problems paying their bills:

Actually not exactly 'breaking' news. I think the problem is that over in Norway you don't see much that is occuring at the 'state' level. After the bailout was announced, the Democrats began pushing for a second stimulus plan. That stimulus plan focused on shoring up the states.

The problem is that when times are good, the states increase their budgets based on larger tax revenues from sales tax and state income taxes. When times get bad, they are not ready, their tax base decreases while their unemployment compensation claims increase.

Even small towns see it. In NJ, property values went through the roof during the real estate bubble. Well, guess what follows - property tax receipts....our town of 2500 people has brand new police cars, (Some of them SUVs no less), and they built a brand new library (which very few people go to)....Now, they're crying for money....

[kgun]

Actually not exactly 'breaking' news. I think the problem is that over in Norway you don't see much that is occuring at the 'state' level.

What we see is only the top of the iceberg. Something I have personally claimed for weeks.

So I was correct.

[cw1865]

Just in case you're interested:
New York Times, November 18th, 2008
http://www.nytimes.com/2008/10/10/bu...0stimulus.html

When the credit crisis boiled over in September, bringing the financial system to the brink of collapse and leading Congress to pass a $750 billion bailout package, Democrats began to push for a second round of stimulus.
Their new package, which could cost between $150 and $300 billion, called for providing tax relief in some form for families, the goal being to step up their spending, as the rebates were intended to do earlier this year. In addition, unemployment insurance benefits would be extended beyond 39 weeks and the food stamp program would expand. Both would channel money to people who would probably spend every penny to meet their needs. But the biggest chunk, perhaps as much as $150 billion, would go to states and cities to sustain their everyday spending. President Bush and many Republicans opposed the package.
The idea of a second stimulus package got a boost from Ben S. Bernanke, the Federal Reserve chairman, who on Oct. 20 said that such a step would be "appropriate'' in light of the continued weakening of the economy.

Now, of course, they are calling for a larger plan.....

[cw1865]

Facts About the Auto Crisis - GM Facts and Fiction
An interesting website, GM lobbying for the assistance....

[kgun]

An interesting website, GM lobbying for the assistance....

Craig, there you used the correct word "lobbying".

As it has been said:

Energy policy = Sum of all lobby activity.

And there is a relation. I am sure that there is a relationship between energy policy and care engine efficiency. Some important companies are simply not interested in green policies either.