30 reasons for Great Depression 2 by 2011
I don’t agree with many of the conclusions reached by the author of this article and I most assuredly hope he is wrong about another Depression looming on the horizon. I posted this as a FYI about what some market opinion makers are thinking.
~~John Cronin~~
http://www.marketwatch.com/news/story/Well-Great-Depression-2-2011/story.aspx?guid={B28B49B5-EFD1-4941-B57E-A2BA1545BA09}
New-New Deal, bailouts, trillions in debt, antitax mindset spell disaster
ARROYO GRANDE, Calif. (MarketWatch) – By 2011? No recovery? No new bull? “Hey Paul, why do you keep talking about a bigger crash coming by 2011?” Readers ask that often. So here’s a sequel to my predictions of 2000 and 2004, with a look three years ahead:
First. Dot-com crash
We pinpointed the dot-com crash at its peak, in a March 20, 2000 column: “Next crash? Sorry, you won’t see it coming.” Bulls-eye: The dot-com bubble popped. The economy went into a 30-month recession. The stock market lost $8 trillion. And today, over eight years later, the market is still roughly 40% below its 2000 peak. See previous Paul B. Farrell.
Factor in inflation and the average stock has lost well over 50% of its value. Stocks have proven to be a very big loser, a bad investment for Americans, thanks to Wall Street’s selfish greed, plus the complicity and naiveté of politicians, press and public.
Second. Subprime meltdown
We reported on warnings of another crash coming as early as 2004, wrote a sequel, also titled “Next crash? Sorry, you won’t see it coming.” Yes, we were early, but in good company. We wrote many more warning columns. Few listened.
Subsequent events, notably former Fed Chairman Alan Greenspan’s admission of his failures in congressional testimony, prove that if he and other Reaganomic ideologues weren’t so myopic and intransigent about proving their free-market deregulation theories, they could have acted earlier and prevented today’s colossal mess. Instead, their ideology kept the bubble blowing, delayed the pop, making matters worse.
So once again, as history proves over and over, ideology trumps common sense, reality and the facts. Greed drives ideologues to blow bubbles. They pop. Crashes happen. The public is collateral damage.
Third. Megabubble cycles
We also detailed the broader, accelerating macroeconomic sweep of cycles last summer in columns like “20 reasons new megabubble pops in 2011.” We summarized a long list of major warnings from financial periodicals — Forbes, Fortune, the Wall Street Journal, Economist — and from the voices of Warren Buffett, Bill Gross, a sitting Fed governor and a former Commerce secretary. Multiple warnings “hiding in plain sight,” beginning with a Fed governor warning Greenspan in 2000 about subprime risk.
But the big shocker came from the new Treasury secretary two years before the meltdown: Bloomberg News reports that shortly after leaving Wall Street as Goldman Sachs’ CEO, Henry Paulson was at Camp David warning the president and his staff of “over-the-counter derivatives as an example of financial innovation that could, under certain circumstances, blow up in Wall Street’s face and affect the whole economy.”
Yes, they knew. And still both Paulson, a Wall Street insider, and Greenspan’s successor, Ben Bernanke, a Princeton scholar of the Great Depression, stayed trapped in denial and kept happy-talking the public for months after the meltdown began in mid-2007. Get it? While they could have put the brakes on this meltdown years ago, our leaders were prisoners of their distorted, inflexible views of conservative Reaganomics ideology.
As a result, once again the “best and the brightest” failed America and now they and their buddies in Washington and Corporate America are setting up the Crash of 2011.
November 18th, 2008 at 10:10 am
http://bloggingheads.tv/diavlogs/15940?in=37:59&out=38:57
David Frum and Brink Lindsey discuss libertarianism and conservatism, Reganism, etc. and the current state of the Republican Party.
How Harvard Law schoolmates Brink and David grew apart (08:20)
Ronald Reagan and the beginning of the conservative era (05:22)
The hazy, crazy ‘70s: when the left went wrong (11:08)
David drives down Memory Lane—in a Gremlin (03:48)
Sarah Palin and the end of the conservative era (06:31)
David tries to win back a forlorn Brink (07:18)
November 18th, 2008 at 10:13 am
The derivatives market is a ticking time bomb in my opinion. The total worth of derivatives far exceeds the value of all underlying assets, and that can’t keep up forever. This subprime mess was piece of that, it wasn’t the mortgages so much as it was all of the packaged financial products that were made with the bad mortgages as the underlying assets. Once people realize that the underlying asset isn’t worth the products, these derivatives will crash.
November 19th, 2008 at 5:42 am
“IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye.” - Mitt Romney
http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=1
November 19th, 2008 at 9:22 am
Points to ponder…
Heresies and Other Truths
by Kathleen Parker
Wednesday Nov 19, 2008
http://townhall.com/columnists/KathleenParker/2008/11/19/heresies_and_other_truths
WASHINGTON — As Republicans sort out the reasons for their defeat, they likely will overlook or dismiss the gorilla in the pulpit.
Three little letters, great big problem: G-O-D. I’m bathing in holy water as I type.
To be more specific, the evangelical, right-wing, oogedy-boogedy branch of the GOP is what ails the erstwhile conservative party and will continue to afflict and marginalize its constituents if reckoning doesn’t soon cometh.
Simply put: Armband religion is killing the Republican Party. And, the truth — as long as we’re setting ourselves free — is that if one were to eavesdrop on private conversations among the party intelligentsia, one would hear precisely that.
The choir has become absurdly off-key, and many Republicans know it. But they need those votes!
So it has been for the Grand Old Party since the 1980s or so, as it has become increasingly beholden to an element that used to be relegated to wooden crates on street corners.
Short break as writer ties blindfold and smokes her last cigarette.
Which is to say, the GOP has surrendered its high ground to its lowest brows. In the process, the party has alienated its non-base constituents, including other people of faith (those who prefer a more private approach to worship), as well as secularists and conservative-leaning Democrats who otherwise might be tempted to cross the aisle.
Here’s the deal, ‘pubbies: Howard Dean was right.
It isn’t that culture doesn’t matter. It does. But preaching to the choir produces no converts. And shifting demographics suggest that the Republican Party — and conservatism with it — eventually will die out unless religion is returned to the privacy of one’s heart where it belongs.
Religious conservatives become defensive at any suggestion that they’ve had something to do with the GOP’s erosion. And, though the recent Democratic sweep can be attributed in large part to a referendum on Bush and the failing economy, three long-term trends identified by Emory University’s Alan Abramowitz have been devastating to the Republican Party: increasing racial diversity, declining marriage rates and changes in religious beliefs.
Suffice it to say, the Republican Party is largely comprised of white, married Christians. Anyone watching the two conventions last summer can’t have missed the stark differences: One party was brimming with energy, youth and diversity; the other felt like an annual Depends sales meeting.
With the exception of Miss Alaska, of course.
Even Sarah Palin has blamed Bush policies for the GOP loss. She’s not entirely wrong, but she’s also part of the problem. Her recent conjecture about whether to run for president in 2012 (does anyone really doubt she will?) speaks for itself:
“I’m like, OK, God, if there is an open door for me somewhere, this is what I always pray, I’m like, don’t let me miss the open door. Show me where the open door is. … And if there is an open door in (20)12 or four years later, and if it’s something that is going to be good for my family, for my state, for my nation, an opportunity for me, then I’ll plow through that door.”
Let’s do pray that God shows Alaska’s governor the door.
Meanwhile, it isn’t necessary to evict the Creator from the public square, surrender Judeo-Christian values or diminish the value of faith in America. Belief in something greater than oneself has much to recommend it, including most of the world’s architectural treasures, our universities and even our founding documents.
But, like it or not, we are a diverse nation, no longer predominantly white and Christian. The change Barack Obama promised has already occurred, which is why he won.
Among Jewish voters, 78 percent went for Obama. Sixty-six percent of under-30 voters did likewise. Forty-five percent of voters ages 18-29 are Democrats compared to just 26 percent Republican; in 2000, party affiliation was split almost evenly.
The young will get older, of course. Most eventually will marry, and some will become their parents. But nonwhites won’t get whiter. And the nonreligious won’t get religion through external conversion. It doesn’t work that way.
Given those facts, the future of the GOP looks dim and dimmer if it stays the present course. Either the Republican Party needs a new base — or the nation may need a new party.
November 19th, 2008 at 9:52 am
Palin in trouble once again…
http://www.adn.com/news/alaska/story/594143.html
November 19th, 2008 at 2:34 pm
A must read for anyone that is a Mitt supporter and wants to see Huckabee get slammed!!
http://townhall.com/columnists/DouglasMacKinnon/2008/11/19/huckabee_was_the_inspiration_for_the_twisted_character_in_my_novel
November 19th, 2008 at 4:07 pm
Way to go Mitt!!
http://www.bostonmagazine.com/boston_daily/2008/11/19/mitt-romney-rises-above-the-fray/
November 19th, 2008 at 5:38 pm
Let Detroit Go Bankrupt
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By MITT ROMNEY
Published: November 18, 2008
Boston
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Ronald J. Cala II
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Times Topics: Auto Industry Bailout
Times Topics: Mitt RomneyReaders’ Comments
“The federal government needs to rethink its priorities. Let’s spend our money wisely and invest in ‘America’ first.”
Dr. Arnold Wolf, Sterling Heights, Mich.
Read Full Comment »
IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.
Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.
I love cars, American cars. I was born in Detroit, the son of an auto chief executive. In 1954, my dad, George Romney, was tapped to run American Motors when its president suddenly died. The company itself was on life support — banks were threatening to deal it a death blow. The stock collapsed. I watched Dad work to turn the company around — and years later at business school, they were still talking about it. From the lessons of that turnaround, and from my own experiences, I have several prescriptions for Detroit’s automakers.
First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.
That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.
Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.
The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”
You don’t have to look far for industries with unions that went down that road. Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th. This will mean a new direction for the U.A.W., profit sharing or stock grants to all employees and a change in Big Three management culture.
The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.
Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. Invest in truly competitive products and innovative technologies — especially fuel-saving designs — that may not arrive for years. Starving research and development is like eating the seed corn.
Just as important to the future of American carmakers is the sales force. When sales are down, you don’t want to lose the only people who can get them to grow. So don’t fire the best dealers, and don’t crush them with new financial or performance demands they can’t meet.
It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.
But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.
The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.
In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.