My second week blogging and here come the neobots already! Propaganda must be shared at all cost, I guess…
"Gee wizzz buddy calm down.
Just because the market falls 20% after Obama is elected and non of the bail money has been released doesn't mean Obama is the cause.
(ok I am laughing over that)
Of course he is responsible, good grief the sell off is to avoid his increases in cap gains tax you idiot.
from Cindy "
But to answer my charming guest's puzzlement at the recession, let's use simple drawings: see the chart above, Cindy dear? That's the Dow's average index for June 2008 to November 2008.
Do you see what we could call a trend , maybe? Kind of like money getting out of one pocket and into oblivion type of thingy? And that - yes, yes, - even before Obama even won the election? But your guy was there remember? On permanent vacation…
But do not take my word for it, Cindy dear. Here's a professional putting it in professional terms:
"UP AND DOWN WALL STREET DAILY
Uncle Sam's Credit Line Running Out?
By RANDALL W. FORSYTH
NOVEMBER 11, 2008
The yield curve and credit default swaps tell the same story: the U.S. can't borrow trillions without paying a price.
WHAT ONCE WAS UNTHINKABLE has come to pass this year: massive bailouts by the Treasury and the Federal Reserve, with the extension of billions of the taxpayers' and the central bank's credit in so many new and untested schemes that you can't tell your acronyms or abbreviations without a scorecard.
Even more unbelievable is that some of the recipients of staggering sums are coming back for a second round. Or that the queue of petitioners grows by the day.
But what happens if the requests begin to strain the credit line of the world's most creditworthy borrower, the U.S. government itself? Unthinkable?
American International Group which originally had to borrow what was a stunning $85 billion from the Fed to keep it from cratering in September, upped the total Sunday to $150 billion.
Monday, Fannie Mae reported a $29 billion third-quarter loss, far in excess of forecasts, raising the specter that the mortgage giant may need more money after the Treasury pledged to inject $100 billion in preferred stock financing in September.
Meanwhile, American Express received Fed approval to convert to a bank holding company, joining the likes of Morgan Stanley and Goldman Sachs, that have a direct pipeline to borrow from the Fed or the Treasury's TARP, the $700 billion Troubled Assets Relief Fund.
And, of course, Detroit is looking for a credit line from Washington. General Motors (GM) Friday warned it could run out of cash next year without a government loan. GM plunged another 23% Monday, to 3.36, as several analysts helpfully recommended selling shares of the beleaguered automaker that already had lost more than 85% of their value.
Visiting the White House Monday, President-elect Obama pressed President Bush to support emergency aid for GM and other automakers. The prospect for federal aid for GM ironically weighed on its shares as one bearish analyst said the price of the bailout could be a wipeout of common holders.
Be that as it may, it's all adding up. If the late Sen. Everett Dirkson were around today, he might comment that a trillion here, a trillion there and pretty soon you're talking about real money.
Trillions are no hyperbole. The Treasury is set to borrow $550 billion in the current quarter alone and $368 billion in the first quarter of 2009. "Near-term pressures on Treasury finances are much more intense than we had thought," Goldman Sachs economists commented when the government announced its borrowing projections last week.
It may finally be catching up with Uncle Sam. That's what the yield curve may be whispering. But some economists are too deaf, or dumb, to get it...
Cutting through the technical jargon, the yield curve and the credit-default swaps market both indicate the markets are exacting a greater cost to lend to Uncle Sam. And it's not because of anticipated recovery, which would reduce, not increase, the cost of insuring Treasury debt against default.
All of which suggests America's credit line has its limits.
Oh, and he added:
The most important chart is the 12 month moving average of the changes in US non-farm payrolls directly below.
It should have been apparent to any economist, as it was to us, that the US was falling into recession at the end of 2007. The actual start of the recession is a formality, but no dating for the start past June 2008 seems justifiable, especially when all the other coincident non-jobs indicators are consulted."
In other words, the war and all those tax cut for your boss and the bosses' boss took a toll, Cindy. The government is quasi-bankrupt. I know, I know… Your media Republican gurus told you that we could run a deficit forever and call it small government, but, well, how could I put this: they lied to you.
Bush, the guy you voted for, took a budget surplus and run it to the ground. Then, since September at least, he added a last parting gift to his "homey" in the shape of a big fat Christmas bonus checks. And now the Chinese would like their money back, thank you very much. You know, our lenders…
Investors had lost faith in the American stock exchange way before Obama. But Bush unwillingness to address the problem by any other means than blank checks to defaulting companies - all while consumer consumption was down or stagnant and unemployment rampant - was the nail in the proverbial coffin. Of course, we'll share that coffin in a spirit of bipartisanship, Cindy. Don't worry...