yup 53 tril
i believe
The $700 billion bailout plan has been passed! (aka America is screwed)
-
-
Shit.
That's all I can really say. 53 trillion dollars in debt, and it's going to get worse. We need one heck of a new president to make it better. -
I don't see how having a new president could solve any economic problems might've have worked for FDR but things are different now.
-
@Mr.:
Shit.
That's all I can really say. 53 trillion dollars in debt, and it's going to get worse. We need one heck of a new president to make it better.lmfao i remember that part of the game
Knuckles lookin like a confused mofoA new pres (the right one: OBAMA) is a step in the right direction but yeah it wont be completely resolved in 4 yrs
Bush fucked up for 8 yrs now were gonna probably have to fix it for 18 :getlost:
-
I still haven't heard an argument about whats so bad about a state debt. It never hurts a country with a sound financial policy. Also there are several states who (as a percentage of GDP) have a higher debt then the US and dont see it as a problem:
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.html
Of course, in that graph you shouldn't compare your own country with the likes of Zimbabwe or other third world countries, but countries like Germany. State loans are definitely the best solution for this crisis, and wont be too much of a problem in the future if your government isn't filled with complete retards.
-
cant even imagine such amount of money
it is about 35 times bigger then the budget of my country
but you know, in russia things are much worse then in america and many people are already fired and banks are all screwed and market reduced by 18 percent during 1 day. -
Dow plunges more than 678 to fall below 9,000
NEW YORK (AP) – Stocks plunged in the final minutes of trading Thursday, sending the Dow Jones industrials down more than 675 points, or more than 7 percent, to their lowest level in five years after a major credit ratings agency said it was considering cutting its rating on General Motors Corp. The Standard & Poor's 500 index also fell more than 7 percent.
The sell-off came as Standard & Poor's Ratings Services put GM and its finance affiliate GMAC LLC under review to see if its rating should be cut. GM has been struggling with weak car sales in North America.
The action means there is a 50 percent chance that S&P will lower GM's and GMAC's ratings in the next three months.
S&P also put Ford Motor Co. on credit watch negative. The ratings agency said that GM and Ford have adequate liquidity now, but that could change in 2009.
GM led the Dow lower, falling 31 percent, while Ford fell 58 cents, or 22 percent, to $2.08.
"The story is getting to be like that movie Groundhog Day," said Arthur Hogan, chief market analyst at Jefferies & Co. He pointed to the still-frozen credit markets, and Libor, the bank-to-bank lending rate that remains stubbornly high despite the Fed's recent rate cut.
"Until that starts coming down, you'll be hard-pressed to find anyone getting excited about stocks," Hogan said. "Everything we're seeing his historic. The problem is historic, the solutions are historic, and unfortunately, the sell-off is historic. It's not the kind of history you want to be making."
According to preliminary calculations, the Dow fell 678.91, or 7.3 percent, to 8,579.19. The blue chips hadn't fallen below the 9,000 level since Aug. 6, 2003.
Broader stock indicators also tumbled. The Standard & Poor's 500 index fell 75.02, or 7.6 percent, to 909.92, while the Nasdaq composite index fell 95.21, or 5.47 percent, to 1,645.12
Wow, just….wow!
Edit: States That Can't Pay for Themselves
Wednesday, October 8, 2008provided byBusinessWeek
The Golden State, which recently scrambled to fill a $15 billion budget gap, still may not be able to meet its payroll without help.
California is going to Washington, D.C., to ask for $7 billion to cover its budget shortfall. Otherwise it won't be able to pay for its teachers, cops, firemen, and other essential services. Unfortunately, California won't be alone. A number of other states are experiencing a huge dive in tax revenue and could be going cap in hand to Uncle Sam alarmingly soon. How bad could it get? The potential cost for all the 31 states facing both major and minor shortfalls could be as much as $53.4 billion.
The data is based on a study by the Center on Budget and Policy Priorities released at the end of September and shows the states that have seen the biggest shortfalls in tax revenue in their fiscal 2009 budgets.
California
Budget gap (as a % of the total budget): 22%
Gap: $22.2 billionCalifornia
Wikipedia: Public DomainCalifornia Governor Arnold Schwarzenegger warned this week that the state might need to borrow $7 billion from the federal government, if credit markets don't ease, to pay for salaries and other operating costs. The state, which has been battered by falling home prices and foreclosures, enacted a budget that imposed cuts to the state's health insurance program for the poor and other social service programs.
Arizona
Budget gap (as a % of the total budget): 19.9%
Gap: $2 billionArizona was hit hard by the subprime crisis, and its economy has slowed significantly since mid-2006. Lawmakers, who had to make up a $2 billion budget shortfall for fiscal 2009, reduced the Medicaid rolls, put a freeze on hiring, and cut funding for community health centers and state universities.
Florida
Budget gap (as a % of the total budget): 19.9%
Gap: $5.1 billionThe Florida housing slump is one of the worst in the nation and only appears to be getting worse. The $66 billion Florida budget for the coming year is about $6 billion less than the one approved the previous year. It includes a $332 million reduction in public school spending and cuts to state hospitals, nursing homes, and various social programs.
Nevada
Wikipedia: Public DomainNevada
Budget gap (as a % of the total budget): 16%
Gap: $1.2 billionNevada has the worst foreclosure rate in the nation, and its economy has slowed dramatically this year. The governor capped the state's children's health program and increased children's health-care premiums, and cut funding for K-12 education, higher education, and welfare.
Rhode Island
Budget gap (as a % of the total budget): 13.1%
Gap: $430 millionRhode Island's economy has been weakened by its housing market, one of the worst in the nation. Lawmakers are trying to make up for a $430 million shortfall in their budget with proposed cuts to the public college system and aid for municipalities, as well as tighter limits on welfare benefits.
New York
Budget gap (as a % of the total budget): 9.8%
Gap: $5.5 billionNew York, which had a $4.9 billion budget gap, faced an additional $630 million shortfall after the budget was enacted. The state made cuts to the health insurance program for low-income families, froze hiring, and enacted tax and fee increases.
Alabama
Anivron: WikipediaAlabama
Budget gap (as a % of the total budget):
9.5%
Gap: $784 millionAlabama closed some corporate tax loopholes, and made cuts to colleges and universities.
Georgia
Budget gap (as a % of the total budget): 8.7%
Gap: $1.8 billionThe state's economy has been impacted by a slowing housing market. The governor has asked state agencies to cut 4% to make up an expected shortfall in the $21 billion budget for the coming fiscal year.
New Jersey
Budget gap (as a % of the total budget): 7.7%
Gap: $2.5 billionThe state's economic slump is due to the weak housing market and rising inflation. The state legislature passed a $32.8 billion budget that is $600 million less than last year's budget. New Jersey plans to trim the budget by offering early-retirement incentives for state employees and through attrition.
Maryland
BobDrzyzgula: WikipediaMaryland
Budget gap (as a % of the total budget): 7.2%
Gap: $1.1 billionMaryland enacted a $1.35 billion tax increase in late 2007, which (along with $277 million in budget cuts passed by the General Assembly) is designed to help address the state's deficit. However, a continuing economic weakness has led to an additional $270 million gap, which is likely to be addressed by further spending cuts.
http://finance.yahoo.com/loans/article/105909/States-That-Can%27t-Pay-for-Themselves
Click on the "See a slide show of the states with the biggest budget shortfalls" link to see the rest of the states.
-
Checking the news everyday for the latest stock plunge is like playing a game of limbo; I just don't know how low it can go.
-
U.S. May Take Ownership Stake in Banks
@The:
WASHINGTON — Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system, according to government officials.
“We will use all the tools we’ve been given to maximum effectiveness,” Treasury Secretary Henry M. Paulson Jr. said, “including strengthening the capitalization of financial institutions.”
Readers' CommentsTreasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it. Such a move would quickly strengthen banks’ balance sheets and, officials hope, persuade them to resume lending. In return, the law gives the Treasury the right to take ownership positions in banks, including healthy ones.
The Treasury plan was still preliminary and it was unclear how the process would work, but it appeared that it would be voluntary for banks.
The proposal resembles one announced on Wednesday in Britain. Under that plan, the British government would offer banks like the Royal Bank of Scotland, Barclays and HSBC Holdings up to $87 billion to shore up their capital in exchange for preference shares. It also would provide a guarantee of about $430 billion to help banks refinance debt.
The American recapitalization plan, officials say, has emerged as one of the most favored new options being discussed in Washington and on Wall Street. The appeal is that it would directly address the worries that banks have about lending to one another and to other customers.
This new interest in direct investment in banks comes after yet another tumultuous day in which the Federal Reserve and five other central banks marshaled their combined firepower to cut interest rates but failed to stanch the global financial panic.
In a coordinated action, the central banks reduced their benchmark interest rates by one-half percentage point. On top of that, the Bank of England announced its plan to nationalize part of the British banking system and devote almost $500 billion to guarantee financial transactions between banks.
The coordinated rate cut was unprecedented and surprising. Never before has the Fed issued an announcement on interest rates jointly with another central bank, let alone five other central banks, including the People’s Bank of China.
Yet the world’s markets hardly seemed comforted. Credit markets on Wednesday remained almost as stalled as the day before. Stock prices, which had plunged in Europe and Asia before the announcement, continued to plummet afterward. And stock prices in the United States went on a roller-coaster ride, at the end of which the Dow Jones industrial average was down 189 points, or 2 percent.
The gloomy market response sent policy makers and outside experts on a scramble for additional remedies to stabilize the banks and reassure investors.
There is no shortage of ideas, ranging from the partial nationalization proposal to a guarantee by the Fed of all lending between banks.
Senator John McCain, the Republican presidential candidate, on Wednesday refined his proposal — revealed in a debate with the Democratic nominee, Senator Barack Obama, the night before — to allow millions of Americans to refinance their mortgages with government assistance.
As Washington casts about for Plan B, investors are clamoring for the Fed to lower interest rates to nearly zero. Some are also calling for governments worldwide to provide another round of economic stimulus through expensive public works projects.
Yet behind the scramble for solutions lies a hard reality: the financial crisis has mutated into a global downturn that economists warn will be painful and protracted, and for which there is no quick cure.
“Everyone is conditioned to getting instant relief from the medicine, and that is unrealistic,” said Allen Sinai, president of Decision Economics, a forecasting firm in Lexington, Mass. “As hard as it is for investors and jobholders and politicians in an election year, this crisis will not end without a lot more pain.”
One concern about the Treasury’s bailout plan is that it calls for limits on executive pay when capital is directly injected into a bank. The law directs Treasury officials to write compensation standards that would discourage executives from taking “unnecessary and excessive risks” and that would allow the government to recover any bonus pay that is based on stated earnings that turn out to be inaccurate. In addition, any bank in which the Treasury holds a stake would be barred from paying its chief executive a “golden parachute” package.
Treasury officials worry that aggressive government purchases, if not done properly, could alarm bank shareholders by appearing to be punitive or could be interpreted by the market as a sign that target banks were failing.
At a news conference on Wednesday, the Treasury secretary, Henry M. Paulson Jr., pointedly named the Treasury’s new authority to inject capital into institutions as the first in a list of new powers included in the bailout law.
Well this is…...quite surprising! :blink:
-
General Electric posted below-average quarterly sales results; since GE is reputed to be the "safest investment this side of federal treasury bonds" this is going to be BAD for today's market. It will scare a lot of people.
-
Here's what Peter Schiff, president of Euro Pacific Capital Inc and author of "Crash Proof: How to Profit From the Coming Economic Collapse" had to say on the subject back in 2006, which goes a long way in explaining this whole mess seeing as he successfully predicted it. This guy has an amazing track record of being bang-on.
Here's Peter predicting the US economic collapse with unbelievable accuracy:
LfascZSTU4o
Nov 2006 Mortgage Bankers Speech:
6G3Qefbt0n4 8hFmoTjljpw
qBk4PhdhCFQ xNKs8lBnd2U
MoSwkCog-Ro IrpPsOvHUU8
DVtT6spfffI xgRgGKxXbCw
Schiff on "Crash Proof":
6NvjrfC6i0I
I'd like to hear some arguments why this crisis isnt the result of business cycles, and why the government bailout is bad. Read my previous post.
to make it as simple as possible:
[qimg]http://welkerswikinomics.com/blog/wp-content/uploads/2008/01/businesscycle_1.jpeg[/qimg]
This is a simple business cycle. It is an inevitable part of free market economies.
The "business cycle" is created by the Fed and easy money. There's nothing natural about it.
Any move to stop a recession will backfire and make the problem much worse in the long run.
We should have had a recession after the dot com bubble. but thanks to 1% interest rates and subprime mortgages we didn't get one. Now the beast has grown to ugly proportions and they're desperately trying to stave it off even longer and make it that much worse down the road.
The reason the business cycle/Fed are bad is because they are what cause great depressions; to their own admission, I might add.
"Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again."
- Ben Bernanke, Federal Reserve Chairman
And they're about to do it again.
Business cycles are bad for same reason why cocaine breakfasts are bad. You get an artificial high and then a major crash. The larger the high, the bigger the crash. It would be better to just have a stable economic system that existed within its means so we wouldn't have to have hyperinflationary economic collapses which see people go from middle class to homeless and eating boiled shoe leather on the corner.
-
@Golgo:
The "business cycle" is created by the Fed and easy money. There's nothing natural about it.
Any move to stop a recession will backfire and make the problem much worse in the long run.
We should have had a recession after the dot com bubble. but thanks to 1% interest rates and subprime mortgages we didn't get one. Now the beast has grown to ugly proportions and they're desperately trying to stave it off even longer and make it that much worse down the road.
The reason the business cycle/Fed are bad is because they are what cause great depressions; to their own admission, I might add.
"Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again."
- Ben Bernanke, Federal Reserve Chairman
And they're about to do it again.
Business cycles are bad for same reason why cocaine breakfasts are bad. You get an artificial high and then a major crash. The larger the high, the bigger the crash. It would be better to just have a stable economic system that existed within its means so we wouldn't have to have hyperinflationary economic collapses which see people go from middle class to homeless and eating boiled shoe leather on the corner.
Wow thats a very Kalecki-Marxian view of economics. However, it is virtually impossible to have a western, especially, American, free market economy without a business cycle. This is because the nature of the free market allows for fluctuations in capita and labour, which determines eventual output and consumption and thus the overal economy. Capita and labour are greatly influenced by bad weather, increase in price of important energy sources, like coal or oil, innovations which increase productivity, stricter environmental and safety regulations from governments, war etc. In a society where the government has virtually no economic control you cant avoid a real business cycle. Of course its created by corporations, but you try having a society without corporations that provides any standard of living we've all grown accustomed to.
Again, can someone give me an argument why the bail-out is bad? Without it, and hopefully more similar actions in the future, we're all fucked. We might still be in trouble, but in a lesser state of rape-victim because of it.
-
It's not private corporations that create the business cycle, it's the Fed's reckless monetary actions that finance these huge monstrous bubbles that would have never existed in the first place under sane fiscal management. This sub prime disaster was another disaster created to bail out the dot com disaster which should have popped back in 2000 that the Fed itself also created via. excess credit. We're experiencing the compounding consequences of easy money policies. All the money has to go somewhere, which creates these megabubbles that generate huge sucking vortexes when they implode under the weight of their own unsustainability, as all bubbles inevitably do. The bailout will simply compound these consequences even further, making them even worse and the consequences more dire. All they're doing is trying to preserve and extend the bubble.
Sooner or later the piper is going to have to be paid. Better to pay it now rather than letting it compound until it drags the global economy to hell.
They are called malinvestments for a reason - there isn't anything to support them. They are inherently unsustainable and thus must be liquidated sooner or later. The longer we wait and the more the government and Fed try to interfere with the natural market correction, the worse the outcome.
It's like dealing with a morbidly obese person that eats too much and switching them from cheesecake to pie. There is absolutely no mechanism by which it could solve the problem. The only solution is to go on a strict diet. Yes, it will be painful, but better to suffer harsh consequences now than walk the path of absolute ruin later.
Without it, and hopefully more similar actions in the future, we're all fucked.
We're fucked anyway.
Total Fed Credit went up by another staggering $253.6 billion last week. A quarter of a trillion dollars in one week!
This is the magical stuff from which credit in the banks instantly appears, at the literal push of a button at the literal whim of the Federal Reserve, as the Fed makes all the money that the government wants to spend. And this credit in the banks is the miracle stuff from which money will be multiplied by the banks a hundred times over, a thousand times over, a million times over, all of it used to make new loans, all courtesy of the fraud known as fractional-reserve banking, which means that the Fed has, in the last two weeks alone, created over half a freaking trillion dollars' worth of new credit, which is turned into unknown trillions of dollars when the banks get finished multiplying it through insane degrees of fractional-reserve banking.
And it is not just American banks, either. The Federal Reserve, on behalf of the people of the United States, is giving hundreds of billions of dollars to foreign central banks to bail them out as well.
And then those selfsame foreign central banks used this money to buy $43 billion of U.S. government and agency debt last week.
This is insane.
The Federal Reserve, in case you did not realize it, is not federal, in that it is a private bank owned and it has no real reserves, but can create money anytime it likes, like last week, as the Fed created some money and then used the money to buy government bonds for itself. The Fed's stash of government bonds rose last week by $8.27 billion!
To show you that the Federal Reserve should instead be called the Government Slush Fund, the government borrowed most of this new money, as we realize when we see that Treasury Gross Public Debt went up by an eye-popping $336 billion last week, reaching the staggering total of $10.124 trillion.
In fact, in the last year alone, the national debt went up by $1.062 trillion! Gaah! We're freaking doomed! Not only is the federal budget a mind-blowing $3 trillion in the $14 trillion American economy, but the Congress is now spending an average of $88 billion per month more than the government's revenues, which is 30% more than what they budgeted! Insane, incompetent morons!
And all of this money created by the Federal Reserve - all those stupefying trillions and trillions of new dollars and credit - increases the money supply, which will increase prices in a persistent, grinding inflation, getting worse and worse, which will destroy America as it has destroyed every other idiotic country that tried such a recklessly insane and idiotic thing.
"Paper money eventually returns to its intrinsic value - zero."
- Voltaire
In other news, the Fed doubles its balance sheet instantly with one announcement, the creation of a $900 billion term auction facility. Honestly, if Bernanke has the balls to do this kind of stuff it really makes all that drama surrounding the Congress bailout bill look pretty trivial by comparison.
-
Well, you know what I think?
You can't solve money problems with money. It just causes more problems.
-
@Golgo:
This guy has an amazing track record of being bang-on.
Is he brilliant, or merely a product of the old subscription scam?
@Golgo:
It's not private corporations that create the business cycle, it's the Fed's reckless monetary actions that finance these huge monstrous bubbles that would have never existed in the first place under sane fiscal management.
I agree that the Fed is directly responsible for causing/delaying/hastening business cycles but you can't blame this crisis solely on it. The inevitable recession was amplified in severity due to the mortage meltdown and deficit spending which falls under the dominion of the Bush administration and Congress.
-
Is he brilliant, or merely a product of the old subscription scam?
Watch the videos I posted. Compare what he said in 2006 with the situation we find ourselves in now. Specifically the Mortgage Bankers Speech.
He was right, and for the exact reasons that he detailed.
I agree that the Fed is directly responsible for causing/delaying/hastening business cycles but you can't blame this crisis solely on it. The inevitable recession was amplified in severity due to the mortage meltdown and deficit spending which falls under the dominion of the Bush administration and Congress.
All these mortgages that melted down wouldn't have even existed if the Fed hadn't created all the excess credit to finance the thing. The problem here comes in when people blame individual mortgage lenders and people taking on teaser rate mortgages that they can't afford when the rates adjust as being the root of the problem. You cannot expect these people to act responsibly with money. Every bubble that has ever existed all throughout history is due to people being reckless with excess money and credit that the Fed created. As long as the excess credit doesn't exist then neither will the bubble, which eliminates the entire problem at the core.
Since the individuals will never be responsible with money, it's up to the Fed to tightly regulate the money supply so that there isn't so much going around that people will set up the next financial nuclear bomb bubble waiting to explode, which they have consistently failed to do, which is why we have artificial highs and massive market corrections (crashes/recessions/depressions). All the Fed has to do is quit with the easy money bullshit that finances these bubbles and it won't happen any more. Unfortunately the Fed is just as insane at issuing the credit as the people are at using it, which is why this is not the first time something like this has happened and certainly won't be the last.
-
@Golgo:
Here's what Peter Schiff, president of Euro Pacific Capital Inc and author of "Crash Proof: How to Profit From the Coming Economic Collapse" had to say on the subject back in 2006, which goes a long way in explaining this whole mess seeing as he successfully predicted it. This guy has an amazing track record of being bang-on.
Here's Peter predicting the US economic collapse with unbelievable accuracy:
LfascZSTU4o
Nov 2006 Mortgage Bankers Speech:
6G3Qefbt0n4 8hFmoTjljpw
qBk4PhdhCFQ xNKs8lBnd2U
MoSwkCog-Ro IrpPsOvHUU8
DVtT6spfffI xgRgGKxXbCw
Schiff on "Crash Proof":
6NvjrfC6i0I
Damn, this guy IS good! :blink:
And I agree with you that with or without the bailout, we're all fucked regardless. Its just that now thanks to that sorry ass excuse of a plan, we are now screwed even more! :getlost:
-
Peter Schiff on why the bailout is bad:
5_NhLRNsxFE
-
That newscaster is right.
You can't solve money problems with money. The Govt. should've voted against the Bail out, since all it'll do is speed up the credit crunch.
Leap, Kaku. LEAP!!
-
Oh FDR, where are you when we need you?
-
The bailout has happened already. Stop bitching and post stuff on why its bad. Im sure no one likes it. Instead of posting whining bitchy stuff about why its bad post some positive stuff on why its good because its already passed and you need to move forward also
no point of looking back
-
I just hope that the people in america will be able to pay the taxes to save the banks/institutes/people that did all this shit. I also hope that this 700 billion paket will be enough. Now europa is also becoming crazy … Were will all this end ...
-
The only thing the government has to fund this is a printing press.
It won't be payed via. direct taxation, but rather through inflation.
So when you see the price of everything around you shooting up, you won't have to ask why. You'll already know it's everyone paying for the bailout plan and the Fed's easy money policies.
-
@Golgo:
The only thing the government has to fund this is a printing press.
It won't be payed via. direct taxation, but rather through inflation.
So when you see the price of everything around you shooting up, you won't have to ask why. You'll already know it's everyone paying for the bailout plan and the Fed's easy oney policies.
You mean the prices of everything shoot up but your loan stays at the same level? So the governement gets more money in through the sale taxes?
-
They're printing the money that they're giving to those fucktards. it didn't actually exist before.
Which, in turn, lowers the value of the money already in circulation.
Think of it like pouring more water into a bottle of dish soap to make it last longer. You might have more, but the actual effect is heavily diluted.
この世に悪があるとすればそれは人の心だ。
-
Think of it like pouring more water into a bottle of dish soap to make it last longer. You might have more, but the actual effect is heavily diluted.
Nice comparison.
-
Whoah whoah whoah. What's this?
-
Yibis One Piece Fansubs
-
Ahahahaha! That's too funny.
-
it's kind of funny, last week we were facing the biggest economic crisis in history and then BOOM, the stock skyrockets!
-
Yeah, I admit that is kinda funny in sort of a way.
-
it's kind of funny, last week we were facing the biggest economic crisis in history and then BOOM, the stock skyrockets!
Some of the biggest 1-day gains in the market were during the great depression.
@_Meh_:I'd settle for Roddy Piper in a pair of sunglasses.
Fuck yeah.
-
Article 1: How Treasury's Plan Will Affect Consumers
@Yahoo!:
It looks like the Treasury Department won't just be buying bad mortgage debt with that $700 billion–it's going to be pumping big bucks directly in the banking system. Like $250 billion. And Uncle Sam is also going to insure ginormous bank deposits. Hey, that's great for Wall Street, but what about Main Street? What about consumers? Here are four ways the government's action will affect you:
-- Banks may offer loans more easily. Over the past several weeks, anyone in the market for a car loan or mortgage found it difficult to find a bank willing to lend to them. Credit card companies cut credit limits and banks tightened lending standards–meaning anyone with less-than-stellar credit had trouble borrowing money. But the Treasury Department says that with more access to capital, banks will once again begin lending, both to each other and to consumers.
-- But the credit crunch may not be totally over for consumers. Banking consultant Bert Ely says banks aren't lending to consumers because they worry that worsening economic conditions will lead to higher default rates, not because they lack capital. While Treasury can hand over money, it can't fix the entire economy overnight, so Ely expects banks to continue to hesitate when lending to consumers.
– Megabank accounts are now insured. The FDIC had already recently raised the amount of money it insured in bank accounts from $100,000 to $250,000 as a result of the $700 billion rescue package. Tuesday, the FDIC announced a new program that insures full-coverage–with no upper limit--on noninterest-bearing deposit accounts. While most consumers don't have more than $250,000 in their accounts, many small businesses do, and the FDIC hopes this eases their concerns about the safety of their money, including cash that's used for payroll transactions. The unlimited insurance expires at the end of 2009.
-- Consumers with strong credit scores will continue to borrow without problems. Over the last few weeks, as credit markets seized up, consumers with high credit scores of 720 or above–about 1 in 4 consumers--were able to continue to borrow, even as banks restricted lending to those with a history of payment problems. Banks, which are, after all, in the business of lending money, were eager to work with consumers they deemed trustworthy. Because many consumers are plagued by errors on their credit reports that drag their scores down, requesting a free credit report at AnnualCreditReport.com and correcting any mistakes can make it easier to take out loans at reasonable interest rates.
Article 2: Candidates put forward a host of new ideas to deal with the economy
@Yahoo!:
With job losses growing, housing prices falling and the stock market on the ropes, the presidential candidates are working as fast as they can to gin up new policies to appeal to anxious voters. And if all these ideas happen to tack a few more billion onto our already gigantic budget deficit, so be it. Here is the breakdown of what John McCain and Barack Obama are proposing.
Housing
Obama: As part of a broader initiative to address the faltering economy, Obama on Monday proposed a 90-day moratorium on foreclosures for banks that receive capital from the government's new bailout initiative. It would apply to borrowers that make "good faith efforts" to pay their mortgages, The Washington Post reported.
The moratorium could enable the government to buy time until its acquisitions of mortgage securities and bank equity puts it in a better position to rework the troubled loans. Stephen Stanley, the chief economist at RBS Greenwich Capital, says such a plan could be beneficial to certain troubled borrowers. "If you've lost your job and you are going to get a new job in a few months and you've got an income stream prospectively going forward than that's the sort of situation where [the 90-day moratorium] could really help," Stanley says. "[But] if you just can't afford the house no matter what—and there are people that are in that situation—then I'm not sure what the government can do."
McCain: Last week, McCain announced a $300 billion plan calling for the government to purchase mortgages from troubled borrowers and exchange them for less-expensive, fixed-rate loans backed by the Federal Housing Administration. The program would be limited to primary residences. Homeowners must also be able to prove that they were creditworthy borrowers when they first obtained the loan. Funds from the $700 billion bailout will go towards this program. Susan Wachter, a professor of real estate at the University of Pennsylvania's Wharton School, said that while the initiative may indeed help distressed borrowers avoid foreclosure, its costs could end up exceeding initial estimates. "Three hundred billion does not sound like it's nearly enough," she said, partly because plan would be open to a wide swath of troubled borrowers. "The way it reads here, tomorrow we should all be lining up [to participate]," she said.
Retirement
Taking a distribution from your retirement account this year when retirement balances are at historic lows isn't good for anyone's retirement future. Under current law, everyone age 70 1/2 or older with a traditional IRA must take what is known as an annual required minimum distribution, or RMD, which is taxed as income. Both Barack Obama and John McCain have recently circulated proposals to temporarily suspend the required withdrawals for seniors over age 70 ½. Here's how the candidate's proposals stack up.
Obama: In addition to waving the RMD for those age 70 ½ or older, Obama will exempt any withdrawals made up to the required minimum amount from taxation. Those younger than age 59 ½ who need access to their retirement stash usually have to pay a 10 percent early withdrawal penalty under current law. Obama proposes penalty-free hardship withdrawals of 15 percent up to $10,000 from IRAs and 401(k)s in 2008 (including retroactively) and 2009, although still subject to normal taxes.
McCain: After exempting seniors age 70 1/2 or older from the RMD, McCain will tax withdrawals from tax preferred accounts at the 10 percent rate up to the first $50,000 withdrawn. Both Obama and McCain's plans will offer some relief to flailing nest eggs by allowing savers to avoid selling low. But for retirees who actually need to spend their nest eggs for living expenses this year, Obama's proposal offers tax free required minimum distributions, while you'll have to pony up 10 percent of your withdrawal to Uncle Sam under McCain's plan. Additionally, Obama's plan gives younger savers penalty free access to their cash for immediate expenses, although they must still pay taxes on it.
Investing
McCain: His pledge to slash the top tax rate on the capital gains rate by half—from 15 percent to 7.5 percent in 2009 and 2010—looks squarely focused on the investor class. McCain also plans to lower the tax penalty for withdrawing fees from IRA and 401(k) plans to 10 percent up to $50,000 gives Americans struggling to pay bills another option to stay afloat.
Obama: Obama's plan looks more geared toward shoring up the economy directly, with tax credits for job creation and mortgage help. He's for penalty-free withdrawals on 401(k)s and IRAs in 2008 and 2009 up to $10,000, and letting them delay required withdrawals. Obama has also hinted at more government aid to the auto sector, possibly doubling $25 billion already in place. McCain's a boon for investors who held on through the market's September crash but may need to sell during the next couple of years. Obama's plan is more focused on Main Street, but his support for aid to automakers could help shares of some of the more beaten-up sectors of the market.
-
Wall Street plunges, giving Dow its 2d biggest point loss, after reports point to recession
NEW YORK (AP) – Investors agonizing over a faltering economy sent the stock market plunging all over again Wednesday after a stream of disheartening data convinced Wall Street that a recession, if not already here, is inevitable. The market's despair propelled the Dow Jones industrials down 733 points to their second-largest point loss ever, and the major indexes all lost at least 7 percent.
The slide meant that the Dow, which fell 76 points on Tuesday, has given back all but 127 points of its record 936-point gain of Monday, which came on optimism about the banking system in response to the government's plans to invest up to $250 billion in financial institutions.
Wednesday's sell-off began after the government's report that retail sales plunged in September by 1.2 percent -- almost double the 0.7 percent analysts expected -- made it clear that consumers are reluctant to spend amid a shaky economy and a punishing stock market.
The Commerce Department report was sobering because consumer spending accounts for more than two-thirds of U.S. economic activity. The reading came as Wall Street was refocusing its attention on the faltering economy following stepped up government efforts to revive the stagnant lending markets.
Then, during the afternoon, the release of the Beige Book, the assessment of business conditions from the Federal Reserve, added to investors' angst. The report found that the economy continued to slow in the early fall as financial and credit market problems took a turn for the worse. The central bank's report supported the market's belief that difficulties in obtaining loans have choked growth in wide swaths of the economy.
"Even though the banking sector may be returning to normal, the economy still isn't. The economy continues to face a host of other problems," said Doug Roberts, chief investment strategist at ChannelCapitalResearch.com. "We're in for a tough ride."
Fed Chairman Ben Bernanke offered a similar opinion, warning in a speech Wednesday that patching up the credit markets won't provide an instantaneous jolt to the economy.
"Stabilization of the financial markets is a critical first step, but even if they stabilize as we hope they will, broader economic recovery will not happen right away," he told the Economic Club of New York.
Analysts have warned that the market will see continued volatility as it tries to recover from the devastating losses of the last month, including the nearly 2,400-point plunge in the Dow over the eight sessions that ended Friday. Such turbulence is typical after a huge decline, but the market's anxiety about the economy was also expected to cause gyrations in the weeks and months ahead.
Selling accelerated in the last hour of trading, a common occurrence during the eight days of heavy declines. One reason for the heavy selling: Mutual funds need to unload stock to pay investors who are bailing out of the market.
Investors apparently have come to believe that Monday's big rebound over the banking sector was overdone given the problems elsewhere in the economy.
"It really doesn't come as a shock after Monday's gains were, I think, a little bit excessive," said Charles Norton, principal and portfolio manager at GNICapital, referring to the market's pullback.
He contends that the government has taken so many steps to help the financial system that investors must now wait for some of the actions to help steady the economy.
"It seems like all the tools in the tool chest have mostly been used now and now it's back to reality," he said. "We're still faced with the fact that the economy is slowing and earnings aren't very good."
Doubts about the economy were already surfacing in Tuesday's session, when investors halted an early rally and began collecting profits from stocks' big Monday advance. Wednesday's data confirmed the market's fears that the economy is likely to remain weak for some time, and that corporate profits are likely to suffer.
Mark Coffelt, portfolio manager at Empiric Funds, said moves by European and U.S. government officials to begin investing directly in banks are easing worries about credit. But the steep pullback in stocks that began last month after the credit markets lurched to a near standstill has now created worries that consumers will spend less after seeing the value of their retirement accounts and other investments drop.
"Markets abhor uncertainty and so we got a lot of that resolved this weekend and we got the reward Monday but now people are saying 'OK, now what is the economy going to do?'"
"We're definitely going to get a slowdown from the terror of going through that," Coffelt said.
The Dow ended down 733.08, or 7.87 percent, at 8,577.91. On Monday, Sept. 29, the Dow had its largest point drop 777.68. Wednesday's percentage drop was the biggest since the 8.04 percent of Oct. 26, 1987, which followed Black Monday, the Oct. 19 crash that sent the blue chips down 22.6 percent in a single session.
The Dow's massive decline Wednesday marks its 20th triple-digit move in 23 sessions.
Broader stock indicators also skidded. The Standard & Poor's 500 index fell 90.17, or 9.03 percent, to 907.84, and the Nasdaq composite index fell 150.68, or 8.47 percent, to 1,628.33.
It was the lowest close for the Nasdaq since June 30, 2003, when the index finished at 1,622.80. The Dow and the S&P 500 are also at mid-2003 levels.
The Dow is down 39.4 percent from its Oct. 9, 2007 closing high of 14,164.53. The S&P is down 42 percent from its high at the same time of 1,565.15. The Nasdaq's record high was 5,048.62, during the dot-com boom that swelled the index to levels it has not come close to regaining after the high-tech bubble burst.
U.S. stock market paper losses came to $1.1 trillion Wednesday, according to the Dow Jones Wilshire 5000 Composite Index, which represents nearly all stocks traded in America.
Wednesday's losses came as investors were hoping the market would recover from last week's terrible run, which erased about $2.4 trillion in shareholder wealth and brought the Dow to its lowest level since April 2003. The tumble occurred amid a seize-up in lending stemming from a lack of trust among institutions in response to the bankruptcy of investment bank Lehman Brothers Holdings Inc. and the failure of Washington Mutual Inc., which had been the nation's largest thrift.
The credit markets have been showing tentative signs of recovery, though they remain strained, and demand for safe assets remains high. The three-month Treasury bill on Wednesday was yielding 0.21 percent, down from 0.22 percent on Tuesday. Overall yields remain low, showing that demand is so high that investors are willing to earn meager returns as long as their principal is preserved.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.98 percent from 4.03 percent late Tuesday.
About 350 stocks advanced at the New York Stock Exchange, while about 2,800 declined. Volume came to 1.68 billion shares.
The Russell 2000 index of smaller companies fell 52.54, or 9.47 percent, to 502.11.
Light, sweet crude fell $4.09 to settle at $74.54 per barrel on the New York Mercantile Exchange.
In Asian trading, Hong Kong's Hang Seng Index lost nearly 5 percent after rising more than 13 percent the previous two days. Markets in Australia, South Korea, China, India and Singapore also sank. Japan's Nikkei 225 index, however, ended up 1.1 percent after soaring 14 percent in the previous session.
In Europe, Britain's FTSE 100 fell 7.08 percent, Germany's DAX index fell 6.49 percent, and France's CAC-40 fell 6.82 percent.
Now we're back down again! Why am I not surprised. :getlost:
-
Maybe I should invest in Winchester and Bubblicious, so that when the time to kick ass and chew bubble gum arrives, I can at least make a solid buck.
