Friday, November 14, 2008

The Shape of the Economy

While channel surfing through the various news and business channels, I heard the argument that we should not work on bailing out the auto industry. The argument was, since every one is hurting and 3/4ths of the jobs come from small business we should be helping small business. I had heard that 1/6th of the jobs are related to the auto industry. So it seems to be suggesting that you help in the area where more jobs exist. It made me wonder what is the shape of the economy.
I am not talking about the physical health (i.e. strong or weak) but what it looks like. Is the economy a pyramid or a table. Pyramid shape would mean that a lot of small businesses and the 3/4ths of jobs it provides are supporting the larger industries, which provide fewer jobs. Or is it a table? The legs represent industries providing fewer jobs but supports the table top (i.e. small businesses which provide 3/4ths of the jobs in America). Or maybe the table is holding that pyramid, and as we get higher on the pyramid we find ourselves reaching back to the legs of the table. A very strange looking object! In the economy there may be no true bottom. If one part is hurting all other parts are going to be hurting.

Consumers need to change

The purpose of the bailout money was to get money flowing again. But money given to lending institutions did not result in an increase in a willingness to borrow money. This freezing of credit is causing a huge slow down in the economy.

So even if a lending institution received an influx in money it did not solve the overall problem. Would there be investors who would purchase securities for the loans? It seems lending institutions felt that it would not get investors to purchase the securities. So unless the U.S. government continues pumping money into these lending institutes, the loaning of money will stop.
Consumers need to change
As consumers we want to get the item now and pay for it later. We will go make the purchase, sign up for the no payments no interest for x number of months, and then not pay back in the time allowed so the consumer pays more in order to get the item now. Consumers should work on saving up money. Set up a Christmas fund. If you purchase something on credit you would have to make payments. Start making the payments to yourself before you get the item. If you are paying rent for an item now that is needed (i.e. housing, laundry), then paying for it on credit is fine. You’re developing equity, and may be saving money on your laundry. Getting a student loan allows you to acquire the knowledge that you need to get a good paying job in the future.
The ease of getting loans tends to let consumers to get in over their head. How many people got home loans with an Adjusted Rate Mortgage (ARM)? When their rate increase homeowners are not able to pay their monthly payment. To try to refinance at a lower fixed rate becomes difficult as lending institutions became more careful in borrowing money. They now apply a standard that would not have not let you borrow the money in the first place. You try to sell the home but its value has gone done and you’re not able to have enough money to pay back the loan.

Exhaustive process

Looking through the article “For a Washington Job, Be Prepared to Tell All” NY Times November 12, 2008

We see that the Obama transition team is attempting to look very closely at the people who may be working for his administration. Many times someone working for or being considered for a job in an administration must be removed due to wrong doing? What question is then asked? Why didn’t they look into the matter when they were considering them for the job? It tends to be considered a basic question. This list seems to be an exhaustive list. Covering many areas that have been problems for past members of past administrations. They are learning from history, and making sure that history does not repeat its self.
As Obama said in the press conference “And I think it's very important in all these key positions, both in the economic team and the national security team, to -- to get it right and -- and not to be so rushed that you end up making mistakes”
Some argue that this is too much. But if you want to argue that it’s too much, you have to argue that NO ONE has ever caused a controversy in any of these areas. Sure you want someone to have as few problems as possible. By having so much information your able to find out the ones with the least amount of problems and also be ahead of any controversy. They will have to evaluate these and try to reduce the problems to the minimum and be prepared to deal with what problems that will occur. If you are filling out this questionnaire, keep a copy. Make sure they don’t later claim you did not fully disclose information, when a problem comes up. It would not be that they covered up something, as some would suggest. It would be simply mean some things were not enough to warrant not being hired. The way it’s reported may give the impression that it’s something huge but it would just be getting blown out of the water.

Wednesday, November 12, 2008

Give Obama a break

A theme has popped up in Obama’s speeches, and statements, is that things will take time. In his acceptance speech Obama said, “The road ahead will be long. Our climb will be steep. We may not get there in one year or even in one term. But, America, I have never been more hopeful than I am tonight that we will get there. I promise you, we as a people will get there. There will be setbacks and false starts”
In his press conference he said, “: It is not going to be quick, and it is not going to be easy for us to dig ourselves out of the hole that we are in.”

Check out this article from the New York Times

U.S. / Politics
Obama Aides Tamp Down Expectations
Published: November 6, 2008
President-elect Obama and his aides are looking to temper hopes that he would be able to solve the nation’s problems or reverse Bush administration policies quickly and easily.

Give Obama a break.
What ever President Obama does is going to take time.
I look at the article “Belief that country heading in right direction is at all-time low” November 10, 2008 at The poll reveals “Two-thirds of all Americans have a positive view of what he [Obama] has done since he was elected president, and three-quarters think he will do a good job as president.” But in the same article we see that 60% don’t have a clear idea what President Obama will do.

I don’t think Obama had a clear idea what he was going to do either. Look at his economic meeting he had the Friday after the election. With that many people giving their view, he still would not have a clear idea what to do. Obama supporters will need to sit back cross your fingers and hope he does something helpful. He is going to need keep high approval ratings in order to have a chance to keep an over exuberant congress from getting out of control. If people jump ship because he delays tax increases for the highest income earners, he will have to veto legislation by congress, or cave in to the congress. Rahm Emanuel is not just chief of staff but is also going to be helping to keep the House under control while Biden will be working with the Senate. A sharp dive in Obama’s approval rating will not help Biden and Emanuel do these jobs.
4 Ways to Turn a Recession Into a Depression September 18, 2008 gives some ideas of what Obama should not be doing.

A good strong economy can handle tax increases. Now is NOT the time to increase taxes on anyone. It would be good to name a Treasury Secretary some time soon. Having a good strong voice will help to stabilize Wall Street. By delaying it seems as if he is hoping for the stock market to hit bottom, so when he does something at the same time as the markets start to rise he could claim responsibility. But it may just continue to take a dive until he can assure the nation that tax cuts will be for all Americans. Obama has read Lincoln but it would be good to look at some of Kennedy’s speeches.

“The final and best means of strengthening demand among consumers and business is to reduce the burden on private income and the deterrents to private initiative which are imposed by our present tax system; and this administration pledged itself last summer to an across-the-board, top-to-bottom cut in personal and corporate income taxes to be enacted and become effective in 1963.”

“Corporate tax rates must also be cut to increase incentives and the availability of investment capital.”

John F Kennedy Address at the Economic Club of New York, December 14, 1962

A speech by Obama to the Economic Club of New York that spells out a wiliness to cut taxes would be a good start. To continue to “kick the can done the road” on this issue of taxes will just allow the economy to sink more. Obama supporters need to allow him the room to do the right thing. That mean an across-the-board, top-to-bottom cut in personal and corporate income taxes to be enacted and become effective in 2010.

Why Blog?

I would like place where i could record my views. Conversations one day are soon forgoten. Blogging is a great way to record your views.