The economy seems to be sputtering, luckily I have found two experts that know more than I to talk about whats going on. The first is the always interesting Paul Krugman

He thinks our economy has been the beneficiary of a lot of foreign investment:

In particular, third world economies…were shaken by a series of financial crises beginning in 1997…they abruptly switched from being destinations for capital to sources of capital, as their governments began accumulating huge precautionary hoards of overseas assets.

The result, said Mr. Bernanke, was a “global saving glut”: lots of money, all dressed up with nowhere to go…

In the end, most of that money went to the United States. All of this was right, except for one thing: U.S. financial markets, it turns out, were characterized less by sophistication than by sophistry, which my dictionary defines as “a deliberately invalid argument displaying ingenuity in reasoning in the hope of deceiving someone.” E.g., “Repackaging dubious loans into collateralized debt obligations creates a lot of perfectly safe, AAA assets that will never go bad.”

…Directly or indirectly, capital flowing into America from global investors ended up financing a housing-and-credit bubble that has now burst, with painful consequences.

What does this mean for us? After the jump, a different view:

Read the rest of this entry »

Well, it looks like the economy is starting to fall apart. Too much foolishness on too many levels. Profligate government spending, very lax credit standards, “creative” investing and of course a housing bubble. (thank you, ownership society). I don’t know enough to be able to say if this could have been avoided. At this point I suspect that their isn’t much that can be done to stop it.

What will be the consequences? Certainly that will affect the election, it will be very interesting to see how.

Circuit City: made up of assholes.

This is one of the things disturbing me about capitalism as it operates today: a small number of very wealthy people who seem hell bent on making sure their friends stay rich, regardless of the consequences for the rest of us.

See this FoxNews story.. Also, this KARE11 story. These stories each excerpt from a longer statement that was read by polisci grad student, Isaac Kamola. Here’s an earlier draft (written by the umn student strike solidarity group):

We, the students, are here today to express our frustration at the inaccessibility of the administration at our University. We are here to say “no” to the silence and exclusion from the decision making process that affects our whole university community.

Read the rest of this entry »

And lost. So I want the government to bail me out.

White House Says It Will Move Quickly to Replace Wolfowitz

I just finished reading this article. It is by some random financial self-help guru, so I took it with a large grain of salt, but his idea was interesting. He basically argues that the insane housing prices in markets like San Francisco, Boston, Los Angeles, NYC and Chicago are not part of a bubble, which may exist locally in some markets (Las Vegas and the south for example). The reason housing prices have become stratospheric in the author’s opinion is because the rich have gotten so much richer than everyone else. In San Francisco LA and New York the wealthiest people in America congregate and they will be able to afford a mortgage worth much, much, much more than anyone else. So what happens is that regular “middle class” people are priced completely out of the market.

In this vision, which seems plausible, the problem isn’t speculation but the rapidly growing income disparity in this country. A family that makes $150k a year in SF is pretty much priced out of the housing market, even though this would be considered an “upper middle class” income based on the local median. That same family is competing with someone like Kenneth Lewis ( ceo of US Bank) who makes in excess of a hundred million dollars a year.

Do we really want a situation where cities become places that only the impossibly wealthy can live? Because that is what is happening right now.

More in Business Week

This is pretty damn dickish. If you don’t care about the link, here is a summary: circuit city fired their retail employees that made the most (due to performance-based raises) and then generously rehired them at the “market” rate. They saved less then a million dollars doing this. The CEO makes 2.17 million a year.

A year ago Delphi proposed to the union that they accept 39% pay cuts. The CEO who was hired to Delphi around got a three million dollar signing bonus before this move. MORE than the money that would be saved by this kind of pay cut.

The economic gains of the last few years have only benefited a tiny percentage of the population. The distribution of income in the US looks more like feudalism than anything else. But you know, its probably the union’s fault.

Ahh, capitalism. Blogging stocks comments on the candidates and how they would affect the market and economy:

U.S. Senator Barack Obama — Market Impact: Negative, likely higher car MPG requirements, tougher environmental regulations, health care reforms, and other reforms, would weigh on the auto, raw material/mineral, health care, pharma and other sectors. Economic Impact: Neutral to Negative…it seems likely that his health care, education, and energy initiatives would require a substantial tax increase.

Of course, any regulation is bad for the market. Unfettered capitalism is the only way! And of course, any investment in our country is ipso factobad for it. It may be true that unfettered capitalism will, in the short term, increase GDP and will certainly make investors more money. But this “pragmatic” attitude is, in my opinion, incredibly damaging. The result of deregulation, or what this article calls “market-based” solutions advocated by the republicans (all neutral to positive) will be a few rich people, a few rich companies and not much else. What these people call small government is actually cutting taxes for the wealthy and cutting services for the poor…sort of the anti-Robin Hood. And this is what democrats should stand against. We do not want a country where we choose not to provide health care to every person because Wall Street might not like it. Wall Street can suck it as far as I am concerned. We would hate to end up like Sweden, in an economic downward spiral.

What he said:

If the Estate Tax were to be repealed completely, the estimated savings to just one family — the Walton family, the heirs to the Wal-Mart fortune — would be about $32.7 billion dollars over the next ten years.

The proposed reductions to Medicaid over the same time frame? $28 billion.