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Thread: weekend commentary - Throwing In Extra Divisions Pulled from the Eastern Front ?

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    Default weekend commentary - Throwing In Extra Divisions Pulled from the Eastern Front ?

    (snip)"Not too surprisingly the “leadership” is pulling out all the Keynesian stops to plug the holes in the Titanic. Included is a plan to have Fannie Mae lose more money supporting house prices for rich people, as the ceilings are lifted from $417,000 to $729,750. The regulator (OFHEO) is just ignored. The issue of failing fictitious capital has been addressed, but now we have large scale employment layoffs under way. The financial sector has been quickly jettisoning high paid jobs and that’s gathering steam.

    Banks and brokers have eliminated more than 25,000 jobs in the past six months as they racked up $136 billion of writedowns and credit losses tied to mortgage securities. Morgan Stanley, the second-biggest U.S. securities firm, and Lehman Brothers Holdings Inc., the fourth-biggest, are cutting about 1,140 jobs in their latest round of reductions, people familiar with those firms said today.

    Ford to unload more higher paid jobs to continue the Brazilification of America process.

    DETROIT – Ford Motor Co. is expected to offer a new round of buyouts to all of its 54,000 U.S. hourly workers, a move that could trim thousands of jobs and pave the way for lower-wage replacements."(snip)

    (snip)"But the “leadership” promises an “economic stimulus” to offset this. Fortunately for the time being the US can borrow almost free money to conduct this operation. This free money from foreigners is truly like throwing in extra divisions pulled from the Eastern Front into a final desperate gamble. It’s the most bullish thing America has going for it. That is if you think piling up more short duration debt is bullish. Indeed, if you were wondering how markets and fictitious capital seem to move miraculously away from the precipice, look no further than this week’s FCB [ Foreign Central Bank - sic ] purchases. FCBS (or an FCB?) bought $20.9 billion, almost all or $16.4 billion agencies. That makes $55 billion in two weeks, $28.1 billion of which were “federal agencies”. [ i.e. newly issued bonds by the US gov't or US gov't agencies like Fannie Mae, which must be paid for via future tax increases or future additional US dollar devaluation - sic ]

    It looks like the tax refund is enough to cover about two months of negative savings for Americans, which was negative $48.4 billion in November and $30.7 billion in October. Given that interest on savings is about 5% below the real inflation rate, we should not be surprised if they use it to service debt, pay for essentials, and buy more imported goods, and in no particular order. Savings, what’s that? I am not sure how that failed approach passes for policy."(snip)


    The postulate being put forth by Russ Winter is that, with tightening creditworthiness standards and/or exhaustion of consumer credit limits and/or declining housing prices exhausting home re-fi possibilities, the US consumer can no longer come up with the 5% or so in additional borrowed money (a.k.a. negative savings) that they have typically been borrowing and spending for the past few years. So to avoid the 'recessionary' effects of a forced 5% reduction in consumer spending as a result of US consumers no longer being able to borrow and spend that additional money, the US gov't has chosen to serve as a middleman. In other words, to finance this 'stimulus package' the US gov't is in effect going to foreign lenders to borrow additional money, and in turn is handing the borrowed money to Americans earning LESS than $75k per year so they can spend it without repayment obligations in the same way that they had been spending the extra 5% of borrowed money (that they were personally obligated to repay, but can't afford to repay). Those repayment obligations will now fall to Americans earning MORE than $75k per year, in the form of future tax increases or future reductions in rate of return on their savings / investments / retirement funds. Thus the reference to 'extra divisions being pulled from the Eastern Front'.

    ~
    Last edited by Melonie; 01-26-2008 at 07:53 PM.

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