Friday, April 17, 2009

May I get paid in Yuans, por favor?

President Obama is trying to apply Band-Aids to the gaping wounds that Bush and his criminal conspiracy inflicted upon our relations with Central and South America. But Obama is being outflanked by China who has been passing out billions in foreign aid to offset the damage the current economic collapse has inflicted on our nearest neighbors.

In a new twist China is giving 10 billion dollars' worth of currency to Argentina. Notice I said "10 billion dollars' worth"; it’s not in dollars; it’s in Chinese currency. This will get Argentina out from under the thumb of US banking interests that have ruined their economy.

In return China is securing access to all manner of raw materials that it needs and it is leaving the US dollar behind. Obama will have an uphill battle explaining to these countries why they should continue to trade with the US. China makes all the manufactured goods we have to trade and will buy everything South America produces. China also offers the added benefit of not trying to overthrow their governments.

Drug lords will probably continue to do business with the US but they will probably start wanting to be paid in Chinese currency. Hell, even economic correspondents want to be paid in Chinese currency.

Thursday, April 16, 2009

Layoffs dipped last week but there is little comfort in this as the number is still at a level that seems good only compared to recent weeks. Worse still; the total number of unemployed continued to climb; setting an all time record. Foreclosure numbers have skyrocketed and we are yet to get into the big numbers as the ARM resets expected from the glut of really bad sub prime mortgages from two years ago start to kick in. Add to this the millions of people who have lost their middle class jobs and are coming to terms with having burned through their savings and have no real prospect for a decent paying job.

President Obama should have a good understanding about the cause of this mess; as a community organizer before going to law school he worked to find jobs and retraining for people laid off because of the outsourcing of the US steel industry. Most of those people he went to bat for have been retrained four or five times since then as job after job is sent offshore or they have settled for a service sector job at a fraction of their former wages. Their prospects for retirement gone, health care iffy at best, savings and pensions gone. If they managed to hang on to their homes they may now find them worth less than they owe on them.

In short, the people whose plight inspired Obama to go to law school so that he could fight for them are much worse off now than they were then. This is because the outsourcing didn’t stop with industries like steel the way the conservative Democrats and Republicans assured us it would. But President Obama has surrounded himself with economic advisors that still maintain "free trade" is ultimately good for American workers. Obama says he wants better trained workers; there would be more slots open in trade schools if workers weren’t constantly being retrained for jobs that won’t last as long as the training.

The conservatives have always said America needs to be run like a business and that philosophy would fix everything. China is winning big time while we lose because they run their business like a country. Business in China serves the nation and more or less serves the people. In America the nation and its people serve business and we are being consumed by it. Obama needs to find advisors who have figured this out while there is still time.

Wednesday, April 15, 2009

A chicken in every pot, if you raise it in the backyard

The many right wing teabag tax protesters who are low income must realize how they don't really pay that much tax but they have been brain washed into thinking that they are low income because the rich are being overtaxed. If corporations didn't have to pay any taxes their wages would be higher. The reality of course is that few corporations pay any taxes and some even make a net gain from the public trough.

They also believe that someday they might be rich, not grasping the reality that they have half the chance of upward mobility of somebody born in socialist Sweden. They also believe that the rich would invest more if they didn’t have to pay any taxes. The really rich only pay an average of 17% income tax and no fica taxes. These morons are paying more on every dollar than the super rich now.

They should be protesting, they have every right to be angry. The protesters just don’t have a clue who they really are. They think that they are the upper class that is being repressed by the liberals in government. If the liberals would just go away then they would have the income they deserve.

And now the bad news:
March economic numbers indicate that Deflation is here with the first year to year drop in consumer prices since 1955. Some of this can be attributed to cheaper gas but this has not inspired Americans to drive more and they aren’t spending the gas savings with retail sales dropping sharply.

Manufacturing output fell in the first quarter by 20% with the factories that still remain in the US now operating at 69% of capacity. This is the worst number since the government started keeping track in the sixties. Increasingly companies are making no secret of the fact that they have no plans to bring back the jobs they are eliminating in the US.

The Federal Reserve Beige Book Report tried valiantly to paint a rosy picture of things but the best they could come up with was that home sales were up slightly in a few cities. Foreclosures are picking up dramatically with the end of the moratoriums that some of the large mortgage companies had in place.

Farm equipment manufactures that were a bright spot in the economy are laying off large numbers of workers with the flattening out of farm prices. Exports of farm equipment are drying up as the major US companies bring large factories on line in Brazil. Brazil is putting millions of acres into production that will replace US farm exports to China. A massive highway and bridge building project across Peru will allow Brazil to move a truck load of grain to Pacific ports every 17 seconds.

The only thing that everybody agrees on is that things will get worse before they get better, but nobody is really talking about the things that must be done to make things better. I saw an ad for a prefab chicken coop that you can put up in your back yard. It’s disguised to look like a cluster of garbage cans so that the neighbors won’t notice that you have something to eat. www.prairie2.com

Tuesday, April 14, 2009

A Better Grade of Sand

The economy took a big dip in March after a relatively good report for February. Retail sales dropped sharply reflecting month after month of crippling job losses. Wholesale prices took an unexpected downturn which raises fears that deflation is taking a grip on the economy.

President Obama gave a long speech on the economy today that demonstrated he’s been reading his briefing book but not that he really understands it. He is focused on the bringing the banks back on line because he thinks that banks create a "multiplier effect". He’s been told that "a dollar of capital in a bank creates eight or ten dollars in new lending". That’s true Mr. President, but only because the Federal Reserve will in turn loan banks ten to one new money that they, the Federal Reserve, created out of thin air. That’s how we got in this mess. Sad to say he doesn’t get it or he is not sharing with us the knowledge if he has it.

He did say that having 40% of corporate profits coming from trading derivatives and other instruments of no real value was no way to run an economy. He’s got that right, but he doesn’t seem to realize that corporations began doing this with the blessing of the Federal Reserve as well as the Bush Adm. They did this in order to postpone the current Great Depression. For the past year; the Fed along with Congress and Bush and now Obama have been propping everything up by creating trillions and trillions of new money. This is unsustainable and Obama is giving no indication that he understands what to do about this.

Obama threw in the Bible verse about not building your house on a pile of sand. That’s great but he isn’t offering any actual rocks. He wants to fix the banking system, rather the Treasury Dept. should charter new banks and the Justice Dept. round up people who ran the old ones. He wants more education so that we can compete better in the World, ask Ireland how that works. They have the most educated work force in Europe and have no jobs, all the corporations abandoned Ireland for cheaper labor. He wants health care reform, that’s great and it would help the economy some, but you can’t build an economy on taking each other’s temperature.

He says we have to save more and borrow less; people have been borrowing because it was Fed policy to have easy credit to offset low wages. Obama says we need to consume less and export more; but that’s what really poor third world countries do instead of having their own industrial base and they have no middle class. With Wall Street discredited and no plans to increase consumer spending, that means business will have to drive the recovery but with no export market and no domestic market how exactly will that work? We’re just moving up to a better grade of sand.

Monday, April 13, 2009

Plant your bubble garden

Two different versions of reality are circulating in the mainstream media. One version is the "news" dutifully read on air from press releases put out by the large banks. From what is being read from the TelePrompTers you would think that there wasn’t any problem with the banks and after the slight hiccup in the economy they are making billions again and ready for business as usual.

The other version is coming out in drips and drabs in the print media. People who attended White House meetings with bankers say that the encounters have been heated with Banking Regulators in favor wholesale firings and a crack down on executive pay. The bankers want to continue collecting billions in salary and perks from banks that are losing, well, billions, and not just investors money (that’s long gone) but now taxpayer money as well.

The bankers contend that they are solvent but to make that claim they are valuing their toxic assets at 91% of original value. Nobody will give them anything like that and never will, but when your weekly salary is measured in millions you must be smarter than everybody else. Right? (yeah right) They are really operating like any other chronic gambler who is sure that if they just keep going back to the table they will win it all back. Of course they aren’t gambling with their money; it’s our farm they are betting on an inside straight; they win no matter how much we lose.

But that’s the "free market", right? How dare Obama and a bunch of bureaucrats at the Treasury Dept. interfere in the "free market". Just keep printing the money and handing it to them and everything will be all right. Just keep repeating: everything will be all right, we just need to keep printing money, printing money, printing, printing....

The bankers are creating the public illusion that the "free market" is working everything out and the Government is putting undo burdens on them. This may make it difficult for Obama to convince Congress to authorize further action. If they prevail and are able to just go back to business as usual, then what we will get is another bubble. This one won’t take long to run its course and when it bursts things really will get bad. Everybody should follow the President’s example and plant a garden. www.prairie2.com