Ahira's Hangar

Things continue to trend downwards. Citigroup announced 50,000 more layoffs yesterday. the internatinal markets sank so low yesterday that they were calling it Monster Monday. The three big American automakers are in Washington today, begging for bridge loans so they can stay in business - if they fail millions of people will lose their jobs - not only for the Big Three, but in all sorts of parts plants, steel workers, plastics workers, etc. Supposedly a car dealer in Oak Park, Illinois, is offering a buy a new one get a slightly used one for just $1 deal right now.

Yes, it'll be scary if the Big Three automakers go down...don't know how the economy would handle such a massive labour force suddenly out of work.

I watched last week's American Experience episode about the market crash of 1929. The eerie aspect of that crash was that it was preceded by wild fluctuations in the market - various "false" rallies happened before the big meltdown. It's eerie because that almost parallels what's happening now, with all the crazy fluctuations going on. I just hope history won't repeat itself...

Unfortunately the inter-connectedness of todays global economy means that it won't just be the countries where the mistakes were made that feel the consequences.

--A

At least - for now - what I honestly believe to be the underlying reason the government wanted that huge bailout bill has worked. I think that what they were actually aiming for was to pump enough confidence and liquidity into the system to prevent a huge run on banks and a huge crash of the entire US banking system. Yes, some banks - and big ones - have failed. The system is shakey. But no huge runs on banks and a crash of the entire system, ala the Great Depression.

Good point Duchess.

--A

More frightening bad economic news over the last couple of days.

More people in the US than live in the state of Oregon filed for unemployment insurance for the first time in 2008 - huge numbers of them especially in September and October. Yeah - we're talking millions of people filing new claims. So that doesn't count people already unemployed as of last Jan. 1 and still have not been able to find a job.

The worst news yet - in October prices of pretty much everything supposedly went down across the board.

Deflation in an economy like this one is a really really bad sign.

It means that no one is buying anything so retailers are dropping prices.

It means that a lot more layoffs - from manufacturers to retail - are probably coming.

And that means fewer people will be buying anything, so things could cycle down and down and down, with more jobs lost all the time.

Prolonged deflation is a possible marker for a depression.

Another huge bailout today with Citigroup.

I can understand not wanting a bank that large to fail, even though they brought it onto themselves with - was it billions??? - in bad mortgages.

Letting a bank that big fail would undermine any confidence left in the economy, and perhaps lead to runs on banks and catastrophic failure.

And you certainly do not want that many jobs to be lost.

But it burns me, precious. It burns me that the very companies who led us into this subprime mess are being bailed out with only a few strings (with a few examples left out to hang like Lehman), and few hard questions while the auto industry - which actually produces a real product - is left hanging.

If the Big Three go down, that is something like 1.3 millions jobs directly. And the estimate is another 2 million jobs in associated industries like auto parts plants, plastics, steel workers, auto dealers, auto parts suppliers, and little party stores that are near the plants, etc. etc.

The Big Three are badly run companies - the fact that they are currently trapped with no ready to go plans to produce small fuel efficient vehicles proves that (you get that big and nimbleness is difficult if not impossible to achieve) - but I cannot even imagine the economic devastation in states like Illinois, Michigan, Indiana, Ohio, and Missouri to lose all of those jobs at once - and to have all of those people go from tax and mortgage paying citizens to people on unemployment in one fell swoop.

Steven Pearlstein in the Washington Post today wonders whether Citigroup is too big to *succeed*.

http://www.washingtonpost.com/wp-dyn/co ... id=topnews

Basically he's saying that the company is too unwieldy to manage effectively. Plus, regulators have been lax in their oversight of the company's penchant for getting involved in questionable investment practices.

I am watching all this with some personal interest. A couple of years ago, I had a lovely, trouble-free checking account with Netbank, an Internet-only bank out of Georgia. Netbank was one of the first casualties of the financial mess; they were bought out by ING Direct, another Internet-only bank. ING Direct offers checking accounts *but* they don't use paper checks at all -- every transaction is electronic. Not the most practical situation for me. So I "went local" and opened a checking account with a small credit union near my house. A credit union employee gave me an incorrect checking account number, which I used to order checks, and gave to my employer in order to set up direct deposit of my paycheck. Needless to say, a whole bunch of stuff bounced, and I was *not* happy with the response from their alleged customer service department. So I changed banks *again*. To Citibank. I am really, really hoping that I don't end up having to change banks again. Buying paper checks ain't cheap....

I had considered opening an account at ING Direct a few times in the past, but ultimately I didn't feel comfortable enough with an "internet-only" bank. Currently my account is with a bank that is right across the street.

Isn't ING also having difficulties? I seem to recall hearing about the Dutch government having to bail out ING, to some degree.

I'm also hearing that, at least with respect to Canadian consumers, certain kinds of retail are seeing a surge in business. It seems that in bad times, people will still shop, but only for personal little luxuries that won't cost too much. For instance, lipstick is selling very well, while shoes...not quite so much. Yes, they're talking about female shoppers. Hey, I'm not generalizing, I'm just reporting what I heard on the news.

There's also the phenomenon of "cocooning." Families might not be willing to go out for expensive entertainment, but they don't mind getting that new TV they've had their eye on. According to a spokesperson for London Drugs, sales of HDTV's are "through the roof."

Helping the sale of HDTVs in the US is the fact that analog over-the-air broadcasts go away in February. The gummint is giving out $40 coupons to offset the cost of a converter box for the older TVs, but many folks may be deciding to upgrade to the "new hotness" instead.

Yeah, same thing is happening here...without the coupons.

--A

Here in the US, it's important that the masses have their opiate uninterrupted.

One good thing about the economy is that people can now afford to buy things they could not have had previously. Two of the girls I work with have bought condos in the past year once area home prices started tumbling, and one bought a house.

And today I got some great news! A friend at work is buying a house only six houses up the road from me! A year ago it would have sold for around $300,000 and he could have never afforded it. Today they accepted his bid for $188,000.

So I get a great new neighbor. We are already making car pool plans!

And since he has a gourmet kitchen with two ovens, three of us are planning on heading over there as soon as he settles in and having a cookie baking party. He does not mind.

That sounds fabulous, duchess!

Nearly two million jobs lost in the US in the last three months alone. The two houses of the Congress wrangle over an economic stimulus package. Here in Michigan the unemployment rate is over 10%. Things are not looking good, and supposedly we have not even gotten close to the bottom yet.