Today in the economy

[Kirkland Laing]

Retail sales are given a big statistical adjustment in February as it's quietest month of the year. No telling if they're goosing the numbers.

But the big retail spending problem is this.

It's 70% of us GDP, 70% of the economy.

The US consumer has for decades been the engine of economic growth, buying the world's products and growing the global economy.

But since 1980 median wages have been static but living costs have risen, forcing the US consumer to go into debt to finance their lifestyles.

Over the past decade that debt has been secured on their houses, something that was rising in value and looked to be an ATM machine.

But now those houses are falling to half their value so the US consumer is now heavily indebted with no increase in earnings and can't borrow any more as their assets have halved in value.

So how is the economy going to pick up? It will do at some point but it'll probably be a dead cat bounce when it does, it's hard to see what's going to drive substantial future growth right now.

[Kirkland Laing]

Kirkland in the 1990's the economy was on the rise and not on the decline.....do we not need people to invest in these companies that are having troubles? Not all of them deserve their low prices.....I may just sink a couple hundred bucks in GE right damn now

You do know that after the IPO of a stock new monies in DO NOT go to fund the company, right?

A catastrophic global financial meltdown is the only time ever investors don't care about how much tax they pay on their gains. What with them losing half their wealth in the last year and a bit they don't have much in the way of gains taxes to pay right now. They're scred right now and all they want to do is not lose any more of their wealth. The capital gains tax is the least useful tax cut that the government could make as it would have zero effect whatsoever on the current situation, it'd just be another multibillion dollar giveaway to the wealthiest 1% to go with the all the others that there have been since 1980. But that's why the GOP want it! It doesn't matter what the economic situation is, their answer to everything is always to cut CGT and income tax.

And the facts and the evidence show that tax cuts since 1980 have progressively severely damaged the US economy. The reason the economy is so screwed right now is that far too much of the economic pie goes to a small number of people who don't spend it, something that would create economic growth for everyone, but invest it, causing bubbles to form in bloated capital markets. And then burst. The last time wealth was so concentrated at the top as it is now was 1929. Go figure.

Right now the GOP don't even believe in cutting CGT. when it was obvious the economy was slipping into recession in 2008 Bush cut taxes as a stimulus but he only sent a cheque to people making 50K or less. That's because they'd spend it, pumping money into the economy unlike GCT whose recipients would save or invest it. When his back was against the wall Bush didn't cut CGT or income tax he mailed a cheque to Americans who most needed it, what Obama is getting criticised for now. But that's what needs to happen right now. A massive redistribution of wealth from the wealthy to everybody else in America.

[CGM]

OK this is a little more like it. The first three articles do a fairly good job of describing "Positive effect on nation's currency", because it really is the foreign component, investment and exports, which drives up exchange rates.

The last one, about an increase in retail sales in New Zealand having a positive effect on the nation's currency, is a bit of a stretch though. Sure you could argue that an increase in retail sales has an upward effect on inflation which leads to an upward effect on interest rates, which has an upward effect on foreign demand in risk free investments, which as an upward effect on exchange, but it don't mean it's gonna happen. For example, one could just as easily argue that the apparent increase in spending power would also lead to an increase in demand for foreign goods, which would have a downward effect on currency.

Perhaps we should just take a step back instead of analyzing the nation's currency effect. Since I get this from a Forex site it will certainly be focused on currency exchange and speculation based off of that. If anyone can tell me where to get a more general focus economic calender, I would greatly appreciate it.

Looking at these numbers I am very suprised to see the US core retail sales in positive territory. I fully expected with the amounts of layoffs and foreclosures that people would be padlocking their wallets. I understand that they aren't huge numbers, but there aren't any spending spree months coming up either.

Fair enough. I'll just make one final observation about currency. Very often the value of a nation's currency relative to another's is held up as a barometer to the health of that nation's economy, but it ain't quite so simple. For example, you could argue that a fall in the exchange rate of your country in and of itself in some ways will have a positive effect on the economy, in that it makes foreign goods more expensive, thus encuouraging domestic consumption, while at the same time making your own products more attractive to foreign purchasers. Oh wait, increased exports will then drive the exchange rate back up.

It's all a bit complicated, ain't it. Equilibrium is a very interesting topic.

[killersheep]

OK this is a little more like it. The first three articles do a fairly good job of describing "Positive effect on nation's currency", because it really is the foreign component, investment and exports, which drives up exchange rates.

The last one, about an increase in retail sales in New Zealand having a positive effect on the nation's currency, is a bit of a stretch though. Sure you could argue that an increase in retail sales has an upward effect on inflation which leads to an upward effect on interest rates, which has an upward effect on foreign demand in risk free investments, which as an upward effect on exchange, but it don't mean it's gonna happen. For example, one could just as easily argue that the apparent increase in spending power would also lead to an increase in demand for foreign goods, which would have a downward effect on currency.

Perhaps we should just take a step back instead of analyzing the nation's currency effect. Since I get this from a Forex site it will certainly be focused on currency exchange and speculation based off of that. If anyone can tell me where to get a more general focus economic calender, I would greatly appreciate it.

Looking at these numbers I am very suprised to see the US core retail sales in positive territory. I fully expected with the amounts of layoffs and foreclosures that people would be padlocking their wallets. I understand that they aren't huge numbers, but there aren't any spending spree months coming up either.

Fair enough. I'll just make one final observation about currency. Very often the value of a nation's currency relative to another's is held up as a barometer to the health of that nation's economy, but it ain't quite so simple. For example, you could argue that a fall in the exchange rate of your country in and of itself in some ways will have a positive effect on the economy, in that it makes foreign goods more expensive, thus encuouraging domestic consumption, while at the same time making your own products more attractive to foreign purchasers. Oh wait, increased exports will then drive the exchange rate back up.

It's all a bit complicated, ain't it. Equilibrium is a very interesting topic.

It is an interesting and very complicated topic, there is definately a reason I don't dabble in Forex. I picture it as an abacus that is infinately long and all the scales move independently and constantly, but sometimes together Each scale is based on a different variety of vastly complex economic systems.

[Kirkland Laing]

American International Group Inc. will pay $450 million in bonuses to employees in its financial products unit. That division was at the heart of AIG's collapse last fall, which compelled the U.S. government to provide $173.3 billion in aid to keep it running.
Chief Executive Edward Liddy told Treasury Secretary Timothy Geithner in a letter dated Saturday that the next payments to employees of the financial products unit -- whose woes caused massive losses at the giant insurer -- are due on Sunday, and added "quite frankly, AIG's hands are tied."


AIG to Pay $450 Million in Bonuses - WSJ.com

[killersheep]

American International Group Inc. will pay $450 million in bonuses to employees in its financial products unit. That division was at the heart of AIG's collapse last fall, which compelled the U.S. government to provide $173.3 billion in aid to keep it running.
Chief Executive Edward Liddy told Treasury Secretary Timothy Geithner in a letter dated Saturday that the next payments to employees of the financial products unit -- whose woes caused massive losses at the giant insurer -- are due on Sunday, and added "quite frankly, AIG's hands are tied."


AIG to Pay $450 Million in Bonuses - WSJ.com

I hate Liddy

[Kirkland Laing]

The stock market has jumped a little in the last week or so. That's because this was informally announced a week ago :

The Financial Accounting Standards Board, pressured by lawmakers to change the fair-value rule blamed for worsening the financial crisis, proposed permitting companies to use “significant judgment” in valuing assets......

Fair-value, also known as mark-to-market accounting, requires companies to set values on most securities every quarter based on market prices. Wells Fargo & Co. and other companies argue the rule doesn’t make sense when trading has dried up because it forces banks to write down assets to fire- sale prices.

FASB Moves Toward Giving Banks More Flexibility on Fair-Value - Bloomberg.com

The rule was brought in after various banking/accounting scandals involving banks making up ficticious values for their dodgy assets. It now appears that part of the plan to get us out of the current mess is to again let banks ignore the shit-like quality of assets they own on their balance sheets and make up ficticious values for them. Hey presto, the banks become solvent again! Then it looks like they plan to try and reinflate the bubble that just burst. This is all going to end in tears.

[Hunter]

The Financial Accounting Standards Board, pressured by lawmakers to change the fair-value rule blamed for worsening the financial crisis, proposed permitting companies to use “significant judgment” in valuing assets......

Haha - I cant believe this.......Talk about putting a band aid on the problem...

[Kirkland Laing]

“We are a country of law”...... “There are contracts. The government cannot just abrogate contracts."

Lawrence Summers
Obama Chief Economic Advisor on AIG bonuses
March 15, 2009




The UAW announced Tuesday that it reached the tentative agreement with General Motors Corp., Chrysler LLC and Ford Motor Co. over contract concessions, as GM and Chrysler sent plans to the Treasury Department asking for a total of $39 billion in government financing to help them survive.
Concessions with the union are a condition of the $17.4 billion in government loans that the automakers have received so far.


AP
February 18th, 2009

[Kirkland Laing]

But until we get that [the financial system] stablilised and working normally, we're not gonna see recovery. But we do have a plan. We're working on it. And I do think that we will get it stabilized, and we'll see the recession coming to and end probably this year.

Ben Bernanke
Federal Reserve Chairman
March 15th, 2009





Some observers have expressed concern about rising levels of household debt, and we at the Federal Reserve follow these developments closely. However, concerns about debt growth should be allayed by the fact that household assets (particularly housing wealth) have risen even more quickly than household liabilities............

House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals, including robust growth in jobs and incomes, low mortgage rates, steady rates of household formation, and factors that limit the expansion of housing supply in some areas.

Ben Bernanke
Federal Reserve Chairman
March 8th, 2005







Given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited.............

Importantly, we see no serious broader spillover to banks or thrift institutions from the problems in the subprime market; troubled lenders, for the most part, have not been institutions with federally insured deposits.

Ben Bernanke
Federal Reserve Chairman
May 17th, 2007

[Kirkland Laing]

In our fury over the bonuses at AIG, we should not forget the PIGs there who pocketed millions while endangering the global economy.


One at the top of the list is 54-year-old Joseph Cassano, a Brooklyn cop's kid made good who went oh so bad.



As head of the Financial Products unit, Cassano racked up billions of losses while assuring investors it was nearly impossible for his unit to lose.
"It is hard for us, without being flippant, to even see a scenario within any kind of [rhyme] or reason that would see us losing one dollar in any of those transactions," he told investors.



Before he was finally fired last March, Cassano pocketed $280 million in cash and an additional $34 million in bonuses.



Under a "retirement" agreement marked "confidential," Cassano also got a $1 million-a-month "consulting fee."................




Joseph Cassano started out at Drexel Burnham Lambert under Michael Milken, "the Junk Bond King." Drexel imploded in 1990 and Milken landed in prison.



AIG promptly hired a team of Drexel people to start a Financial Products unit, Cassano among them. Cassano became the head and began dealing in securities known as "credit default swaps" out of one office in Wilton, Conn., and another in England, dubbed "the London casino."............................




Company auditor Joseph St. Denis became concerned about the Financial Products unit, but Cassano barred him from checking.



St. Denis later quoted Cassano as saying, "I have deliberately excluded you ... because I was concerned that you would pollute the process."

New York Daily News
March 17th 2009






According to a "brokercheck report" put out by the financial regulatory agency FINRA, the Justice Department in 2004 criminally charged Cassano's unit with helping another firm, PNC Financial Services, to conceal certain assets from its books. In the end, AIG came to a settlement with DOJ and SEC, in which it paid a fine -- $80 million. Had the SEC come down harder on Cassano and AIGFP, it's conceivable that the agency could have helped stop the practices that would ultimately destroy AIG and that contributed to the current financial crisis.

Wall Street Journal
March 18th, 2009












In Securities and Exchange Commission filings, AIG acknowledges that it is under federal scrutiny for possible fraud, and notes that it is cooperating with the government's probe.

Investigators are looking at statements from company leaders, who sometimes painted a sunny picture, even in the months and weeks before financial implosion.


ABC News
March 17, 2009








Despite my position and FSD',s and AP's interest in the issue, I had no
involvement with eiforts to value AIGFP's SSCDS portfolio. This was, in my
understanding, due to the actions of Mr. Cassano to exclude me from the SSCDS valuation pro..rr. During the final week of September of 2007, the final week of my employment at AIGFP, in a meeting with Mr. Cassano, the newly hired CFO of AIGFP and the AIGFP quantitative risk expert, Mr. Cassano made the following statement to me:

"I have deliberately excluded you from the valuation of the Super Seniors because
I was concemed that you would pollute the process."

My belief is that the "pollution" Mr. Cassano was concerned about was the
transparency I brought to AIGFP's accounting policy process.


Statement by Joseph St. Dennis, AIG chief auditor, to the Senate Banking committee inquiry.
October 4th, 2008





AIGFP chief Joseph Cassano

[El Kabong]

#1 the bonuses AIG paid out were less than what Merrill Lynch paid out earlier #2 The amount paid out was less than 1/10 of 1% of the bailout money.

This bonus mess is just a red herring....and Chris Dodd (DEMOCRAT) and Tim Geithner (DEMOCRAT) put it in the Omnibus bill that companies that were bailed out could keep giving bonuses. Calling in the GOVERNMENT APPOINTED CEO of AIG and berating him infront of Congress wasn't too smooth either.

I don't like the bonuses as they are in poor taste but people screaming for them to just seize those bonuses scare me....I don't want the government to get the idea that they can just take shit that people own not for taxation but "just because"


As always the Democrats talk a good game for the people but they NEVER deliver anything but higher taxes which they don't even fucking pay

[killersheep]

#1 the bonuses AIG paid out were less than what Merrill Lynch paid out earlier #2 The amount paid out was less than 1/10 of 1% of the bailout money.

This bonus mess is just a red herring....and Chris Dodd (DEMOCRAT) and Tim Geithner (DEMOCRAT) put it in the Omnibus bill that companies that were bailed out could keep giving bonuses. Calling in the GOVERNMENT APPOINTED CEO of AIG and berating him infront of Congress wasn't too smooth either.

I don't like the bonuses as they are in poor taste but people screaming for them to just seize those bonuses scare me....I don't want the government to get the idea that they can just take shit that people own not for taxation but "just because"


As always the Democrats talk a good game for the people but they NEVER deliver anything but higher taxes which they don't even fucking pay

Lyle, why are you defending AIG's actions?
Why are you blaming Democrats for AIG's actions?
Since we've seen two weeks of positive gains in the market does that mean the market is reacting positively to Obama's actions or do you only hold that view when the markets decline?
Furthermore, why are you forwarding a political agenda in a case of free markets misallocating funds?

[El Kabong]

I am not defending what they did, I am defending their right to do that if they so choose. It's not the government's place to say anything about bonuses....AIG is a scapegoat, if they really cared about where the money went #1 Everyone would have been up in arms over Merrill Lynch's bonuses and #2 CONGRESS PUT IT IN THE BILL (Democrat Chris Dodd and Tim Geithner specifically) THAT AIG COULD GIVE BONUSES......in the immortal words of Former DC mayor Marion Berry "Bitch set me up!"

I just want the government to ease up a bit...all companies aren't evil corporations looking to screw over the populus and if they were then what better role model do they have to look up to than the US Government?

[killersheep]

I am not defending what they did, I am defending their right to do that if they so choose. It's not the government's place to say anything about bonuses....AIG is a scapegoat, if they really cared about where the money went #1 Everyone would have been up in arms over Merrill Lynch's bonuses and #2 CONGRESS PUT IT IN THE BILL (Democrat Chris Dodd and Tim Geithner specifically) THAT AIG COULD GIVE BONUSES......in the immortal words of Former DC mayor Marion Berry "Bitch set me up!"

I just want the government to ease up a bit...all companies aren't evil corporations looking to screw over the populus and if they were then what better role model do they have to look up to than the US Government?

Lyle you are defending what they did, those were not profits that their company earned. I notice that you are using the Fox buzzword Omnibus bill, please show something like a direct link to the verbage that states the money could be used for bonuses. What Merrill Lynch did was no better and you have a perfect right to be up in arms about that as well.
Link to the bill's verbage please.