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Date Posted: 01:04:55 04/15/10 Thu
Author: Paul Davis
Subject: Hate to say it, but what I expect
In reply to: Shirley 's message, "Re: Campaign finance report quarterly is in." on 07:21:16 04/08/10 Thu


Most didn't realize it, but there's a little clause in that TARP law that says the Treasury can continue "needed" bailouts until October. There's a ton of those "smart" loans coming due for reset before then. The TYPICAL reset on those things will pump the monthly payment on em' from 1500$ or so up to about 5K. You will have a breaking wave of bankruptcies, or a breaking wave of jingle mail. Either way, the banks who've been paying out all these huge bonuses will be right back at the trough, and they know it won't ever be approved by Congress or passed by the Administration again, so they'll jump it just before the time runs out, if they can't get a buddy to slip in an extension to February, so they can get one more bonus season before people start hunting them with pitchforks and torches.

Then there is Greece. Or, rather, the PIIGS. That's Portugal, Ireland, Italy, Greece and Spain. They are all, each and every one, in a serious world of hurt. Those countries will default, starting with Greece.

"Oh, but Greece has a bailout". No, they don't. They've got a lot of NOISE about a bailout, but what's actually been done is to promise to CONSIDER a bailout if Greece formally requests it. And any such bailout will fail in Germany, because their constitutional authorities have already said they can't do it. Not to mention the people of Germany are so against it that they'd change governments in a heartbeat if it happened, and the government knows that. What government will volunteer to fall for the benefit of another government, and at high cost to their own people? The idea is crazy. There's no bailout coming for Greece. Germany would have to provide half the money, and they aren't going to do it, they'd have to start a PR campaign right now to sell the idea a year from now, and (AFAIK) they haven't.

So, OK, we got Greece going bankrupt, followed shortly by several others, possibly including Britain. Plus another round of banks screaming for money.

And then, there is the jobs thing. Oh, but we increased jobs last month, right? Yeah, and nearly half were temp jobs for the census. Moreover, I've seen not a single one of the talking heads get it right about jobs. You take jobs added, subtract jobs lost, subtract retirees, and that's the total of NEW JOBS ADDED. You never get that figure.

Also, the average work week in the US is down to about 33 hours now. That's because actual production facilities are idling three days a week to keep all their employees, remember? They voted in many cases to do this instead of letting their friends go and lose everything. That's going to be a LOT closer to 40 before there is real hiring going on.

You want the good news? The good news is this, during this kind of mess, very similar to the mess during the great depression, being in the black is no help. Germany owed more money than any other country, and came back quicker than any other from the depression. The US was the world's banker, and we came out of it very late. China won't be the big winner.

Incidentally, China's "growing" economy is based on building buildings they don't need for anything. Occupancy rates are at 50% in much of China. That's not going to go on forever. And when it stops, China will go into civil war as the people demand jobs. And when China has civil war, they start an outside war to distract the revolutionaries. Might be Taiwan, more likely India. But that's to look forwards to.

The US will pull through, but it's going to be a mess. And we aren't going to like it.


>There were varied and plentiful reasons for getting us
>where we are today. I was astounded yesterday to hear
>Alan Greenspan defend his support for variable
>mortgages. Those mortgages introduced prospective
>home buyers to no-money-down mortgages and put off
>paying the piper. Goldman Sachs happily doled out
>money for those mortgages but then turned around and
>insured them with AIG, knowing AIG didn't have the
>money.
>
>As for banks (or consumers) giving up on credit cards,
>I don't see that happening on a large scale. Credit
>card companies are always going to find a way to
>increase their profits, just as we saw them raise
>rates even for good customers. Big Business will
>spend millions finding loopholes in any new laws and
>more often than not, they'll do it in advance of the
>new law taking effect. We saw it with the drug
>companies who increased the cost of drugs that would
>be discounted under PSD three months in advance of the
>law taking effect. Credit companies raised rates in
>advance to a new law going into effect in Feb.
>Although a lot of people learned the lessons, I think
>there will always be a segment of society refusing to
>give up their plastic.
>
>If insurance companies hadn't been so greedy in
>raising rates far beyond keeping a healthy bottom
>line, there wouldn't have been the push for health
>care reform which both parties agreed had to take
>place. And whether Wall St., drug companies,
>insurance companies, banks, CEO salaries and golden
>parachutes are completely out of whack and they know
>it but none are willing to give that up, even though
>in some cases it certainly wasn't earned but rewarded
>failure.
>
>Lastly, Jeff, I have read and listened to so many
>economists, the vast majority of whom have said
>without the measures enacted, it would have been much
>worse and would have taken years to pull ourselves
>out. As it is, there are some signs that we're
>recovering some--the stock market is up, consumer
>confidence is up 6% over the previous month and
>unemployment is gradually going down, not fast enough
>for some folks but it's moving in the right direction.
>
>The important think to remember is that practices
>tried in the past and failed to solve the problem
>can't be used again and expect a different outcome.

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