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re: New World Market Economic Bubbles; and a Future Economic Reality Difficult to Accept for Most

cartoon — Mon, 14 Dec 2009 17:02:01 GMT

Karla: I don’t know what to think of the economy anymore. Jobless claims are down and new home sales have come up. Could this by an omen of a possible recovery?

Lyla: I am skeptical, meanwhile unemployment remains high demand will be low and the economy will fail to show substantial growth. Besides the assistance program for new home buyers of $8,000 dollars will end around April of 2010 and that will likely slow down a possible economic recovery.

Karla: Obama’s economic stimulus plan is insufficient. On November 19 of this year in the New York Times Paul Krugman mentioned that “the A.I.G. rescue was part of a pattern: Throughout the financial crisis key officials -- most notably Timothy Geithner, who was president of the New York Fed in 2008 and is now Treasury secretary -- have shied away from doing anything that might rattle Wall Street. And the bitter paradox is that this play-it-safe approach has ended up undermining prospects for economic recovery. For the job of fixing the broken economy is far from done -- yet finishing the job has become nearly impossible now that the public has lost faith in the government’s efforts, viewing them as little more than handouts to the people who got us into this mess. About the A.I.G. affair: during the bubble years, many financial companies created the illusion of financial soundness by buying credit-default swaps from A.I.G. -- basically, insurance policies in which A.I.G. promised to make up the difference if borrowers defaulted on their debts. It was an illusion because the insurer didn’t have remotely enough money to make good on its promises if things went bad. And sure enough, things went bad.”

Lyla: Yes, I remembered reading that article, Krugman also mentioned: “So why protect bankers from the consequences of their errors? Well, by the time A.I.G.’s hollowness became apparent, the world financial system was on the edge of collapse and officials judged -- probably correctly — that letting A.I.G. go bankrupt would push the financial system over that edge. So A.I.G. was effectively nationalized; it's promises became taxpayer liabilities. But was there any way to limit those liabilities? After all, banks would have suffered huge losses if A.I.G. had been allowed to fail. So it seemed only fair for them to bear part of the cost of the bailout, which they could have done by accepting a “haircut” on the amounts A.I.G. owed them. Indeed, the government asked them to do just that. But they said no -- and that was the end of the story. Taxpayers not only ended up honoring foolish promises made by other people, they ended up doing so at 100 cents on the dollar.”

Karla: Mohamed El-Erian Pimco's director has said that the economic crisis we are witnessing is formidable. It hit the economic core hard and he thinks we are experiencing a sugar rush right now and the markets think that everything is going to be well soon. El -Erian really believes that the slight economic improvement we are experiencing is only “temporal and reversible.”

Lyla: God only knows when the economy will get Better if it ever does. It might improve some, but China is taking away many of our possible new jobs by keeping the Yuan below the dollar and is hard to think that Obama will borrow more funds to give the economy a second jolt since the debt is already huge.

Karla: Many economists believe that there is a bubble in the stock market. The market grew some at first and that was expected since companies’ lay off many workers and improved productivity becoming more efficient. However market growth has continued beyond reasonable expectations. This could be a new bubble that could crash the economy again. Maybe not as strong as the Real Estate bubble, but powerful enough to cause a Great deal of damage.

Lyla: You are right. Bubbles are showing up here and abroad too. One has only to look at China. The Chinese government has invested over a trillion dollars in their stimulus package. A great deal of the Chinese production won’t find markets for their products. Many investors that are so sure about the Chinese economic rebound could end up empty handed. As central bankers around the world put an end to their stimulus programs a new economic world picture will emerge and it won’t look too nice.

re: The Value of Happiness Now-a-days

cartoon — Wed, 09 Dec 2009 22:51:00 GMT

George: My folks are so incredibly happy that you wouldn't believe it, and of course that makes me very, very happy too!

Kathy: Wait, I know! They must have purchased a brand new car!

George: Nope...

Kathy: Let me guess: they are going to Europe!

George: I don't think so.

Kathy: I give up. What could have made them so happy?

George: They got food stamps.

Kathy: They must have been awfully hungry!

re: China is Pulling the U.S. and World Economy Down

cartoon — Wed, 18 Nov 2009 19:23:49 GMT

Anna: I have good news for you, home prices have increased for three consecutive months; I am thrilled!

Karla: Unfortunately I am not so hopeful as you are; artificial low interest rates and a government tax credit are luring buyers but the governmental help will not last too long, indeed it will likely expire rather soon.

Anna: Don’t tell me that! I was so excited about the good news, what a pity. At least the stock market is doing better.

Karla: Companies have cut costs mostly by laying off employees and investors don’t know where to place their money so they go to the stock market as the best possible place. Even if the market doesn’t tell us too much about the economy. You could say that what we are actually witnessing is not actually a bull market but sometimes a bear market too.

Anna: I guess that’s true. Also I heard that some very important banks are still weak; I know that banks are not lending yet and therefore that’s going to be a very important factor negatively impacting in the economic recovery.

Karla: That’s right. I have to say that for me, in the long run, taking into account the worst of all possible factors the one that is going to hurt us the most is China.

While a low dollar helps our exports the Chinese keep indexing the Yuan’s value below the dollar and that will have a terrible effect in our economic recovery.

Anna: Yes I know; a friend has also told me that China’s asset buying in the U.S. helped inflate the housing bubble. By keeping its currency attached to the dollar they are really hurting our chances of growth and economic recovery.

Karla: Indeed they are hurting workers all over the world. Paul Krugman recently wrote an article in the October 22, 2009, New York Times about this issue:

“Chinese officials are, in effect, devaluing their currency against everyone else’s. Meanwhile, productivity in China’s export industries soared; combined with the de facto devaluation, this made Chinese goods extremely cheap on world markets. The result was a huge Chinese trade surplus. If supply and demand had been allowed to prevail, the value of China’s currency would have risen sharply. But Chinese authorities didn’t let it rise. They kept it down by selling vast quantities of the currency, acquiring in return an enormous hoard of foreign assets, mostly in dollars, currently worth about $2.1 trillion. China has been keeping its currency pegged to the dollar which gives them a huge trade surplus and a rapidly recovering economy. China is a country whose currency should be rising in value and is in effect engineering a large devaluation instead. And that’s a particularly bad thing to do at a time when the world economy remains deeply depressed due to inadequate overall demand. By pursuing a weak-currency policy, China is siphoning some of that inadequate demand away from other nations, which is hurting growth almost everywhere. The biggest victims, by the way, are probably workers in other poor countries. In normal times, I’d be among the first to reject claims that China is stealing other peoples’ jobs, but right now it’s the simple truth.”

re: Threat of Inflation and a Weaker Dollar

cartoon — Wed, 18 Nov 2009 18:56:47 GMT

Charles: I’m worried; I believe the banks are using the government’s financial stimulus package to get new capital reserves so they can strengthen their financial status.

Scott: I figured that a long time ago. Banks in general are not giving loans and that has a direct negative impact on the demand.

Charles: Right and that is why the economy is not recovering fast enough. Banks aren’t lending and unemployment is very high therefore the demand is not increasing.

Scott: I agree with you but we have to keep our attention in something that could be even more catastrophic; uncontrolled inflation.

Charles: Right. If the feds continue to feed the economy with more dollars, that will be a big problem. However, a great deal of the stimulus package went to the large banks and they have invested that money in Certificates of Deposits for their own security. Nevertheless because of the size of the stimulus package we could have uncontrolled inflation any how.

Scott: The problem is that if the rate of inflation starts to grow out of pace and the feds raise interest rates to slow it down the economic recovery will be threatened. Therefore interest rates will have to remain low in order to insure continuous economic growth, while at the same time inflation could really harm the economy even further.

Charles: An increase in inflation definitely represents a threat to the dollar’s value.

We’re going to get a weaker dollar and eventually another reserve coin might take the dollars place. A dollars fall means a real danger to globalization and international commerce.

Scott: I think the dollar will have a heavy price to pay too. However I believe inflation is inevitable given the way things are going with the economy. The feds opened dollar line swaps with other Central Banks around the world. If that money comes back to our country to buy American assets we are going to have a worse inflationary problem in our hands and of course a weaker dollar too as you mentioned.

re: Obamas Nobel Peace Prize: Europe's Peace message to the World

kurt — Sun, 25 Oct 2009 01:43:21 GMT

This is the best explanation of how Obama came to win the Nobel Peace Prize I have seen. Some believe he was given the prize because of phenomenon where the masses attribute unearned characteristics to Obama, a type of hero warship.

re: If You Don't Want to be Dumped Then You Better Learn the Rules of Love

cartoon — Mon, 19 Oct 2009 16:19:16 GMT

Lisa: Charles dumped me and I don’t know why. I care so much for him and the fact that I don’t even know why he left me makes me feel crazy.

Elizabeth: Let’s go through a list that might yield some insights about why he left you.

Number one: Were you too dependent on him? Did you try to please him all the time? Did you say yes to almost everything thing he wanted? For example did you always say yes to any movie he wanted to see?

Lisa: Well I did try to please him. Perhaps I relied too much on him I needed to tell him about almost everything that was going on in my life. I felt he understood me and when he approved of my decisions then I felt confident that I was doing the right thing.

Elizabeth: You know when you are too dependent on someone else you become an extension of that person and then he or she starts feeling lonely since their partner doesn’t have a point view of their own. Many times those that feel alone while in a relationship start getting depressed.

Lisa: I wonder what else I did wrong.

Elizabeth: Well I can see you gaining weight and although I personally think that a person should be accepted unconditionally in spite of the way they look physically, the truth is that at the beginning of a relationship in a large percentage of cases men and women want their partner to be reasonably attractive.

Lisa: Your analysis has helped me. I didn’t realize how many things I was doing wrong. I see now that I didn’t take good care of the relationship probably because I wanted unconditional love and acceptance and expected I was going to get my needs fulfilled magically; I can see now that it's hard to get that other person to behave like an accepting and loving parent especially at the beginning of a relationship. I guess I felt he was going to be there for me no matter what.

I also made mistakes as for instance by letting him go out with his friends Fridays and Saturdays night while I stayed with my sister. He probably felt safe knowing where I was meanwhile he had the freedom to meet other women at a party or bar. No wonder he drifted emotionally away from me.

Elizabeth: Yes a relationship needs a certain amount of discipline and care. Also we have to realize that our partners are not the loving parents we will like them to be, although at times they can play that role. We have a tendency some times to trust our partners too much and that is a mistake. You know we can say for sure that in a love relationship we really are intimate strangers.

re: High Unemployment, Poor Consumer Spending & a Chinese American Trade War. What Should We Expect from the Economy?

cartoon — Tue, 29 Sep 2009 21:16:24 GMT

Jane: I think it will be very hard for the economy to recover and get better. Consumer spending accounts for 70% of our GDP and unemployment is growing. Working folk’s are afraid of losing their jobs and are not spending like they used to and that is going to keep the economy down.

Chris: This is a terrible situation, we Americans have lost 40% of our wealth in the last 2 years and by the end of this year 4 trillion in credit lines will have disappeared. Unemployment is very high and will get higher; consumers have no extra money to spend.

Jane: You know without consumer spending, the little growth we have experienced will vanish.

Chris: Wall Street would crash again! It looks as is the economy will go through a W shape and only god knows how long is going to take coming back up. Climbing the final W’s leg is going to be difficult besides we are about to go down the small leg before we coming up the tall one. For now we have to expect reaching but on one more time.

Jane: The markets have been up due to the banks recovery but banks by November or before will have to let the public know that next year expectations are poor and that news will bring markets down again.

Chris: Besides the banks still have trillions of dollars in toxic paper and with credit losses their finances are and will be far from solid.

Jane: China’s commodities bubble and the Chinese investment to stimulate their economy is helping our financial markets do better for now, but that won’t last too long. Our commercial deficit can’t keep growing, certainly not with consumer spending way down, and therefore Chinese exports to us should suffer a sharp decline.

Chris: There is also too much money in the markets now, there is a bubble there; the market is over valued. Markets profits will likely drop & the Chinese economy will also sink to more realistic levels. Additionally the new 35% tariff on Chinese tires will negatively affect some of our exports to China, such as chicken for instance due to the Chinese retaliating. In today’s NYT (Sept 21 2009) David Rockefeller wrote an article related to the new tariff pointing out that a rise in protectionism could endanger the global economy. I hope China keeps investing in the U.S., buying American bonds and other financial instruments. A lower rate of Chinese investment could make things even worse than what they are now. We need that money to help cover our twin deficits, commercial and fiscal. Is no good to keep borrowing from ourselves the debt is already very large.

re: Jobless Recovery & its Effect on the Economy

cartoon — Tue, 29 Sep 2009 13:44:52 GMT

Peter: God, this is a tough recovery, I have being trying to get a job for more than a year now with no luck at all.

Matt: Me too. I wonder where are all the green jobs the Obama administration promised? I haven’t seen any yet, I already lost hope. My spirit has turned from green to gray!

Peter: I thought that cash for clunkers created a boom for foreign and American automakers and would help create some new jobs. I am not aware of any meaningful jobs on the market coming from the clunker deal.

Matt: Yes, the manufacturing jobs sector has stalled.

Peter: My wife Gina has been working in the Real Estate business for many years and she hasn’t sold a house for over a year and a half now. She tells me the home sales market is also flat.

Matt: Companies better become lean and aggressive in order to survive the tough times we are living in.

Peter: Right and that’s why they are laying off so many workers. Unemployment is going to reach 10% soon.

Matt: Yes, I agree companies are getting rid of workers in order to keep cost down and remain afloat. However as more workers loose their jobs there will be less demands for goods and the recovery is going to take longer.

re: The Economic Crisis: The Future of the Economy

cartoon — Fri, 18 Sep 2009 19:00:37 GMT

Jane: I am so happy and grateful, finally the economy is recovering, there is light at the end of the tunnel; in the second trimester the economy fell 1.7% that's much better than the first trimester when it had a drop of 5.8%.

Miriam: I don’t think that is so great if you consider that because of the strategies to get out of the crisis and save the economy the deficit went from a planned 1.2 trillion dollars to a 1.5 trillion afterwards. 1.5 trillion is close to 10% of our GDP! A great deal of money was needed to get the economy moving and in spite of all that money we have spent we are still struggling! The economy is just barely coming out of it's free fall.

Jane: Do you mean we are going to have to pay for that debt?

Miriam: That's right. indeed a great deal of that fiscal deficit will have to be paid by the Federal Reserve. The Fed has already spent lots of money in buying toxic bonds (from Wall Street) that were mostly worthless and now they will have to spend 2 more trillion dollars to cover the federal budget. The total could come to 4 trillion in the next couple of years. All that spending could trigger inflation too.

Jane: Well at least the fall in home prices has slowed down considerably and that’s good.

Miriam: Let’s look back 2 years, when affected house owners fell behind their mortgage payments, there was 45% probability that they would recover at that time. However today that rate is only of 6%. This makes it much more likely for a home owner that is having mortgage payment problems to lose their home. With the high unemployment rate we have, home prices will be slow to increase.

Jane: OK but we did save the banks didn’t we?

Miriam: The truth is that we can’t be sure yet. Two weeks ago the FDIC said that the number of banks lacking capital and that were in deep trouble went from 305 in March to 416 in June. As you probably already know we already lost 84 banks.

Jane: Well consumer spending is growing, isn’t it?

Miriam: The stimulus program that has helped consumer spending will only have a temporary result. Consumers are likely to slow spending down in the next few months because they fear losing their jobs. Less spending and cutting down on debt is part of the new consumer plan and it probably will remain that way for a long time. My opinion is that it is going to take several years before our economy recovers.

re: Brain, Mind & Self: Who Controls Who?

cartoon — Mon, 14 Sep 2009 16:04:42 GMT

Robert: What controls the brain?

Lena: The mind.

Robert: What controls the mind?

Lena: The self.

Robert: And what controls the self?

Lena: Almost always itself.

Robert: Then I control myself?

Lena: Not really. I do.

re: U.S. Economic Futures Depends on the Lithium Battery and a Strong Automotive Industry

cartoon — Mon, 14 Sep 2009 15:34:18 GMT

Helen: Did you know the new hybrid cars are going to work with lithium batteries?!

Marlene: Aha! the value of lithium is going to go up like crazy, because of an increased demand.

Helen: If we are going to reduce our dependency on foreign oil we need lithium batteries in order to build hybrid cars.

Marlene: Yep, that’s the future no doubt!

Helen: We need to diminish our oil dependency! Oil reserves around the world are dropping fast and hybrid cars do less damage to the environment.

Marlene: lithium battery power cars will help save the economy and the environment.

Helen: The Japanese have built already the best hybrid car available and are moving quickly forward with their research.

Marlene: We need to catch up with them in order to save our automotive industry and our economy!

re: China Economic Recovery Becoming a Ponzi Scheme

cartoon — Wed, 02 Sep 2009 15:35:34 GMT

Howard: After all the billions of dollars invested by the government and foreign investors as well, the number of loans from China’s central bank has fallen by 80% in the last month.

Pete: China has stopped accumulating raw materials which they purchased for extremely low prices, in relation to their actual market value, hence the Baltic index has dropped 25% since the end of July.

Howard: Yes the incredible amounts of money they injected into their economy didn’t always reach their desired targets and a lot of capital leaked out becoming part of a speculative investment bubble.

Pete: I know; It caused the profits of Chinese companies to go down 30% while the Shanghai index is up 80%.

Howard: It is a huge bubble; China’s Real Estate has being rocketing. It looks a lot alike the Japanese land bubble during the 80´s but considerably larger. There are more than one billion people that are part of this financial catastrophe.

Pete: it will have a horrendous effect not only in China but in the world economy too countries like Chile, Argentine and many others that are depending on the purchase of commodities from China a re going to have an economic downturn. China will likely reduce its yearly investments in the USA and we need that money badly nowadays.

Howard: And China’s world demand of imported goods will diminish considerably having a negative impact in the world’s economy. Undoubtedly the Wall Street Market will be affected considerably by the downfall of the Chinese market.

Pete: The Chinese government is doing everything possible to stop the avalanche that is coming however the outcome looks inevitable. It will probably take place by October and many investors will likely lose their investment. Without a real world demand China should have put its efforts to increasing its internal demand and the growth of its internal markets.

re: The Dark Side of the Unemployment Situation

kurt — Mon, 31 Aug 2009 22:25:46 GMT

I have a number of accountant friends that I know will appreciate this!

re: The Dark Side of the Unemployment Situation

cartoon — Mon, 31 Aug 2009 19:25:08 GMT

Mark: Your money or your life!

Steve: Please don’t kill me! I got a wife and four kids to support!

Mark: I have a wife and kids too and we need to survive!

Steve: For god’s sake have pity on me; I am an accountant from Florida State and lost my job five days ago.

Mark: You’re an accountant from Florida State?!

Steve: That's right.

Mark: I’m an accountant too! What year did you graduate?

Steve: 87', Mark?!, I can’t believe it!. I am so glad to see you!

Mark: Oh my God it's you!, Steve is been so long, I’m so sorry I didn’t recognize you. How are Kathy and the kids?