News Can the market alone fix the economy?

[Astronuc]

But don't worry...we're going to export "clean" energy. I guess that means we're going to construct a power grid across the Atlantic?

Somehow the Obama administration thinks that the US will develop 'green' technology, and then the US will export. Perhaps he's not aware that the US is somewhat behind several other nations, e.g. China, who have moved ahead and are now starting to export their green technology. In some cases, foreign corporations are selling green technology in the US.

China has an extensive clean coal technology program, as well as aggressive nuclear program. They have managed to buy technology from around the worlds, at a fraction of the cost it would require from scratch.

Vestas (from Denmark) is the apparent leader in wind turbines, although GE has the capability, while other smaller manufacturers have the capability for small units.

 

[Ivan Seeking]

Apparently the cost of shipping wind turbines makes domestic production a sure thing. Also, while we might have to catching-up to do, there is no reason why we can't be competitive in green technologies. The biggest problem that I've seen is that US companies have must more restrictive environental laws than does China, for example. You can't compete with companies that don't have to play by the same rules.

 

[Ivan Seeking]

Has Obama been listening to Hannity?
http://www.bloomberg.com/apps/news?pid=20601087&sid=aJsSb4qtILhg&refer=worldwide

"Obama Says U.S. Long-Term Debt Load ‘Unsustainable’ (Update2)

By Roger Runningen and Hans Nichols

May 14 (Bloomberg) -- President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.

“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”

Holders of U.S. debt will eventually “get tired” of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. “It will have a dampening effect on our economy.”

Earlier this week, the Obama administration revised its own budget estimates and raised the projected deficit for this year to a record $1.84 trillion, up 5 percent from the February estimate. The revision for the 2010 fiscal year estimated the deficit at $1.26 trillion, up 7.4 percent from the February figure. The White House Office of Management and Budget also projected next year’s budget will end up at $3.59 trillion, compared with the $3.55 trillion it estimated previously.

Two weeks ago, the president proposed $17 billion in budget cuts, with plans to eliminate or reduce 121 federal programs. Republicans ridiculed the amount, saying that it represented one-half of 1 percent of the entire budget. They noted that Obama is seeking an $81 billion increase in other spending."

Is he concerned about his own policies?

He has said this from the beginning - that we cannot continue on the current fiscal path indefinitely. Again this gets back to people not listening. The legitimate point of contention is how reduce the deficit. Obama is following a plan that seeks to reduce debt by maximizing GDP growth. A flat growth curve with no government spending could be more damaging than massive spending now aimed at ensuring long-term growth.

Anyone who thinks the Obama team is not well aware of the threat of inflation and excessive debt, is living with their head in the sand.

Also, China cannot allow us to fail - we are too big to fail! They need our purchasing power as much as we need their loans.

 

[mheslep]

Somehow the Obama administration thinks that the US will develop 'green' technology, and then the US will export. Perhaps he's not aware that the US is somewhat behind several other nations, e.g. China, who have moved ahead and are now starting to export their green technology. In some cases, foreign corporations are selling green technology in the US.

China has an extensive clean coal technology program, as well as aggressive nuclear program. They have managed to buy technology from around the worlds, at a fraction of the cost it would require from scratch. ...

I don't think these US/China claims are supportable: 'the US is somewhat behind... China, who have moved ahead'. Behind only in annual growth percentage perhaps, not any absolute sense. The US is the largest generator of kWh in the world of both nuclear and wind, and pulling away in wind kWh. Edit: And China's clean coal effort is mostly in terms of coal plant efficiency, newer plants are more efficient, naturally. It does not refer to CO2 sequestration from coal plants, which is what US environmentalists mean when they say 'clean' coal, and which nobody does on a practical basis yet, though there are some demonstration plants here.

 

[edward]

Apparently the cost of shipping wind turbines makes domestic production a sure thing.

The equipment in the link below was made in India.

If you get stuck behind trucks hauling massive cylinders up the interstate over the next few days, relax. It's progress.
Once constructed, the cylinders will become 425-foot-high towers for wind-powered generators at a Northern Arizona wind farm, said Michelle Montague, a spokeswoman for India-based Suzlon Energy Ltd., the manufacturer.
The tower parts arrived at the Port of Tucson earlier this week and were switched from rail to truck. The blades alone on each tower will weigh 7 tons.

http://www.azstarnet.com/allheadlines/282135.php

 

[CRGreathouse]

Apparently the cost of shipping wind turbines makes domestic production a sure thing.

Not nearly. There's a very large wind farm being constructed in my area (not the one edward mentions), and none of its turbines are manufactured domestically.

 

[turbo]

Not nearly. There's a very large wind farm being constructed in my area (not the one edward mentions), and none of its turbines are manufactured domestically.

Same here. There's a wind-farm going up in Eastern Maine and the turbines came into Eastport (sea-port) by ship. They were manufactured by a foreign division of GE.

 

[mheslep]

Same here. There's a wind-farm going up in Eastern Maine and the turbines came into Eastport (sea-port) by ship. They were manufactured by a foreign division of GE.

No doubt they came in by ship to E. Maine, but are sure they were manufactured outside the US? To my knowledge GE Wind sources nearly all of the major turbine components for US installations collectively out of Tehachapi,Ca; Pensacola, Fa; and Erie, Pa.

 

[turbo]

No doubt they came in by ship to E. Maine, but are sure they were manufactured outside the US? To my knowledge GE Wind sources nearly all of the major turbine components for US installations collectively out of Tehachapi,Ca; Pensacola, Fa; and Erie, Pa.

They were manufactured in Brazil. If US companies and contractors are hoping for subsidies for "green power", it would be nice if the taxpayers that pay for the subsidies are also the ones being employed.

http://www.renewbl.com/2009/05/04/first-turbine-blades-delivered-to-eastport-in-maine.html

 

[Astronuc]

US manfucturing is probably less expensive than European manufacturing, especially when adding international shipping charges, but then US manufacturers have discovered places like Brazil.

We've recently done some work with US suppliers (of energy systems), but the engineering analyses were done in Brazil, Korea, Spain and other countries.

 

[WhoWee]

He has said this from the beginning - that we cannot continue on the current fiscal path indefinitely. Again this gets back to people not listening. The legitimate point of contention is how reduce the deficit. Obama is following a plan that seeks to reduce debt by maximizing GDP growth. A flat growth curve with no government spending could be more damaging than massive spending now aimed at ensuring long-term growth.

Anyone who thinks the Obama team is not well aware of the threat of inflation and excessive debt, is living with their head in the sand.

Also, China cannot allow us to fail - we are too big to fail! They need our purchasing power as much as we need their loans.

This is the first time I've heard Obama give this speech...do you have a previous link? His spending makes Bush look like a piker.

 

[mheslep]

They were manufactured in Brazil. If US companies and contractors are hoping for subsidies for "green power", it would be nice if the taxpayers that pay for the subsidies are also the ones being employed.

http://www.renewbl.com/2009/05/04/first-turbine-blades-delivered-to-eastport-in-maine.html

Yes, thanks. Its not clear how much role GE had in manufacturing. Apparently the turbines are the standard 1.5MW design, but GE says it has an agreement with Brazilian company EDP to make make a couple hundred turbines. GE claims its wholly owned manufacturing is in Germany, Spain, China, Canada, US.
http://www.ge-energy.com/about/press/en/2007_press/102307.htm

 

[turbo]

Yes, thanks. Its not clear how much role GE had in manufacturing. Apparently the turbines are the standard 1.5MW design, but GE says it has an agreement with Brazilian company EDP to make make a couple hundred turbines. GE claims its wholly owned manufacturing is in Germany, Spain, China, Canada, US.
http://www.ge-energy.com/about/press/en/2007_press/102307.htm

The point is that at some time (not too far from now) manufacturers will be looking for some sort of federal subsidies, and they should NOT be granted unless the manufacturing (not just assembly of foreign-made components) is done in the US.

 

[mheslep]

The point is that at some time (not too far from now) manufacturers will be looking for some sort of federal subsidies, and they should NOT be granted unless the manufacturing (not just assembly of foreign-made components) is done in the US.

Yes I understand your point.

 

[WhoWee]

Yes, thanks. Its not clear how much role GE had in manufacturing. Apparently the turbines are the standard 1.5MW design, but GE says it has an agreement with Brazilian company EDP to make make a couple hundred turbines. GE claims its wholly owned manufacturing is in Germany, Spain, China, Canada, US.
http://www.ge-energy.com/about/press/en/2007_press/102307.htm

Between green energy, healthcare, the "smart grid' and GE Capital (TARP) it seems GE is well positioned with the Obama administration. Maybe there is a legitimacy to the complaints that NBC is pro-Obama?

 

[WhoWee]

In the context of a tax incentive consulting project, I met with 3 unrelated manufacturing companies in western PA this week that are shutting down...about 5,000 workers. A fourth manufacturer was scheduled...but their phone was disconnected.

The first has 3 plants and sells to GM, the second manufacturers electrical controls and the third (surprisingly) makes industrial molds and last year geared up to focus on parts for wind turbines. They received a good deal of press and political pats on the back (visits to the plant by prominent politicians), but the strategy didn't work.

Also worth mentioning, about 1/2 of the manufacturers interviewed (about 50 total) are European based. They bought plants in the Rust Belt to take advantage of tax incentives...a few have implied that it might be time to re-think the overall investment strategy.

 

[WhoWee]

The United Auto Workers are obviously more important (to Obama) than owners of dealerships (small businesses with large at risk investments) and their employees (that outnumber UAW workers).

http://finance.yahoo.com/news/UAW-says-it-has-reached-deal-apf-15318645.html

50% of GM will be set aside for the UAW

"GM has about 61,000 hourly workers in the U.S. but plans to take that number down to 40,000 by 2010."

 

[WhoWee]

Quinn and Rose are always "fun" in the AM (Pgh based).
http://www.warroom.com/sample.mp3
This clip is from 5.20.09 and basically covers this topic (The Cloward/Piven Strategy of Economic Recovery) as it relates to Obama and the economy:

http://www.americanthinker.com/2009/02/the_clowardpiven_strategy_of_e.html
or
http://www.washingtontimes.com/news/2008/oct/15/the-cloward-piven-strategy/
or this (although I'm not sure WHO actually posted this?)
http://cloward-piven.com/

What was Arsinio Hall's line..."things that make you go hmmm"?

 

[B. Elliott]

Just ran across this on Yahoo News.

To cover both wars, Senate passes $91.3B bill

WASHINGTON – The Senate is backing President Barack Obama's efforts to ramp up the war in Afghanistan, granting his request for $91.3 billion for military and diplomatic operations there and in Iraq.

The spending bill, approved on an 86-3 vote Thursday night, goes to congressional negotiators to work out a compromise with a similar measure the House passed. Lawmakers expected to present a bill for Obama's signature next month.

http://news.yahoo.com/s/ap/20090522/ap_on_go_co/us_congress_war_funding

 

[mheslep]

Just ran across this on Yahoo News.

To cover both wars, Senate passes $91.3B bill

http://news.yahoo.com/s/ap/20090522/ap_on_go_co/us_congress_war_funding

I thought the President's plan was to now roll all the war spending into the main budget bill so that the budget reflected all spending. This is a separate bill?

 

[Astronuc]

I thought the President's plan was to now roll all the war spending into the main budget bill so that the budget reflected all spending. This is a separate bill?

I'm wondering that as well - it doesn't seem to be under the normal Defense Appropriations bill, so I expect it may be supplemental, especially since it's mid year.


And - Obama's Stimulus Projects Won't Amount to Major Infrastructure Overhaul
http://news.yahoo.com/s/usnews/obamasstimulusprojectswontamounttomajorinfrastructureoverhaul

Describing the $787 billion stimulus package, President Obama evokes the 1950s construction of the interstate system, conjuring images of highways, bridges, and orange cones. "Throughout our history, there have been times when a generation of Americans seized the chance to remake the face of this nation," he said last month. "And that's what we're doing today: building a 21st-century infrastructure." [Read Grading Obama's Stimulus Gamble]

This stems from the law's main purpose: creating jobs quickly. It prioritizes projects that will be completed within three years. Major highway construction typically takes 13 years from start to finish, reports the Federal Highway Administration.

However, it would appear that rather than creating new jobs, the stimulus bill simply maintains current jobs. So what happens to those jobs once the money is spent?

So more than three quarters of the approved highway projects' funds will go to repaving and widening roads, while less than 6 percent will pay for new construction, according to the investigative nonprofit ProPublica. Other reports show that smaller, rural projects, like bridges, often receive funding priority over those that might get more traffic, largely because they can be launched more quickly.

But as projects are chosen, it's becoming clear that the program may amount to little more than an infrastructure face-lift. Owing to the need for speed and to institutional obstacles, most stimulus transportation projects are small and localized. "Here and there, people will notice things," says Robert Poole, director of transportation policy at the libertarian Reason Foundation. He cites repaired potholes and new streetlights. "But I don't think the country as a whole will say, 'Wow, transportation is so much better,' " Poole says.

That doesn't necessarily make the spending ineffective. One quarter of major urban roads, for example, are in poor condition and would benefit from repairs. But it does mean that few projects will have sweeping effects.

I imagine the Stimulus funding will be largely short term. A major restructuring of the economy seems necessary.


Meanwhile - Job Losses Push Safer Mortgages to Foreclosure
http://www.nytimes.com/2009/05/25/business/economy/25foreclose.html

. . . .
With many economists anticipating that the unemployment rate will rise into the double digits from its current 8.9 percent, foreclosures are expected to accelerate. That could exacerbate bank losses, adding pressure to the financial system and the broader economy.

“We’re about to have a big problem,” said Morris A. Davis, a real estate expert at the University of Wisconsin. “Foreclosures were bad last year? It’s going to get worse.”

. . . .
Economy.com expects that 60 percent of the mortgage defaults this year will be set off primarily by unemployment, up from 29 percent last year.

. . . .

The statistics are troubling.

. . . .
From November to February, the number of prime mortgages that were delinquent at least 90 days, were in foreclosure or had deteriorated to the point that the lender took possession of the home increased more than 473,000, exceeding 1.5 million, according to a New York Times analysis of data provided by First American CoreLogic, a real estate research group. Those loans totaled more than $224 billion.

During the same period, subprime mortgages in those three categories increased by fewer than 14,000, reaching 1.65 million. The number of similarly troubled Alt-A loans — those given to people with slightly tainted credit — rose 159,000, to 836,000.

Over all, more than four million loans worth $717 billion were in the three distressed categories in February, a jump of more than 60 percent in dollar terms compared with a year earlier.

. . . .

 

[Astronuc]

GM bankruptcy may spell relief, not upset, for stocks
http://www.marketwatch.com/story/gm-bankruptcy-might-spell-relief-for-stocks

SAN FRANCISCO (MarketWatch) -- A bankruptcy filing by General Motors Corp., which approaches a key deadline with bondholders late Tuesday, may incur more relief than distress among stock investors, some analysts say.

"My feeling is that the market will welcome a bankruptcy filing by GM," said David Joy, chief market strategist at Minneapolis-based RiverSource Investments, which manages $128 billion.

The likelihood of a bankruptcy by the nation's largest automaker, buckling under unmanageable debt levels and sinking car sales, has increased in recent weeks.

. . . .

Consumers' confidence surges on brighter jobs view, BUT
U.S. home prices still falling at record pace

Unemployment is expected to worsen, but at a slower rate.

G.M. Bankruptcy Would Need Army of Advisers
http://www.nytimes.com/2009/05/26/business/26auto.html

DETROIT — The decline of General Motors may be putting thousands of auto workers and managers out of work, but it will be putting a lot of lawyers to work.

How many lawyers will end up working on G.M.’s expected bankruptcy case still is not clear, but in legal circles, the joke is that there may not be enough experienced bankruptcy lawyers available to handle the filing.

In part, that is because so many top lawyers are already running up lots of billable hours working on the Chrysler bankruptcy case, while others have been hired by the government, which is financing the way through bankruptcy for Chrysler and, presumably, G.M.

It is not just lawyers who will be busy handling a G.M. bankruptcy filing, which would be perhaps the biggest and most-watched in legal history. Because of its size and scope, the bankruptcy would be the most complicated that any American company has gone through — more complex than those of Chrysler and Lehman Brothers, two other notable bankruptcy cases now making their way through the system.

The G.M. filing, which is expected to occur by June 1 as part of a restructuring orchestrated by the federal government, will generate so much economic activity — like hotel bookings, restaurant dining and expanded office rentals — that Detroit is hoping that the case will be filed in the local bankruptcy court.

That is unlikely, however, as bankruptcy cases are typically handled in New York or Delaware, where many business are incorporated and the bankruptcy courts have more experience handling complex filings.

For law firms, big bankruptcies can be very lucrative. Weil, Gotshal & Manges, the New York firm handling the Lehman case, recently sought approval for billings for $55 million for just three months’ work from the bankruptcy court in that case. Weil Gotshal is one of the firms that will represent G.M., almost certainly ensuring tens of millions more in fees to represent the automaker.

. . . .

Now's a great time to be a bankruptcy lawyer.

 

[misgfool]

I find it unconfortable that the bombs don't appear to have been defused yet and the new accounting practises are obfuscating the picture. It's like we were in a free fall and then the government said stop, so everyone stopped. Now it's very very unclear what is going to happen next.

Inflation is already lurking behind the door as the oil price is going up. The increasing money supply (dollars) may be showing in prices of raw materials even if the currency values are not weakening rapidly. What is most concerning is the unemployment rate and it's sharp climb. It's beginning to be quite clear that the economy is not doing as well as it was predicted in the stress scenarios.

http://www.clevelandfed.org/research/trends/2009/0509/02banfin.cfm

Originally I was in favor of the US bailouts, but I don't like the way they are being directed. And it is starting to look like a bailout frenzy. So far there has been very few positive signs like the stock markets, but when and with what exactly is the US going to rebound?

 

[Astronuc]

Oil Is Plentiful, Demand Weak. Why Are Gas Prices Going Up?
http://news.yahoo.com/s/time/20090529/wl_time/08599190144600

Storage tankers across the globe may be brimming with oil that no one is buying because of the global economic downturn, but the traditional laws of supply and demand don't always apply to oil prices. Drivers have faced rising prices at the gas pump in recent months, as investors and oil-producing countries hoard supplies in anticipation of a global economic recovery later this year.

The 12 member countries of the OPEC cartel voted in Vienna on Thursday to maintain output at current levels rather than increase supplies in order to bring some relief to consumers, particularly in the gas-guzzling West. The OPEC oil ministers, whose countries account for about 40% of the world's entire crude-oil supply, also renewed their commitment to stick to their agreed quotas, rather than ship extra oil, as they began doing last April when several members ignored their agreed output limits. OPEC leaders, many of whose economies are heavily dependent on oil exports, have struggled to stabilize prices at a level that suits their own economic needs amid falling demand and rising supplies. Prices had rocketed to a record level of $147 a barrel last July before plummeting to $30 just five months later and beginning a new climb. (See pictures of South Africa's oil-from-coal refinery.)

Oil analysts believe OPEC's decisions on Thursday could help push oil prices even higher; oil futures on the New York Mercantile Exchange have risen 36% in just two months, to about $63.46 a barrel on Thursday. And that appears to be on track to achieve targets set by OPEC leaders. Saudi Oil Minister Ali al-Naimi - OPEC's key power player - said Wednesday that oil prices ought to rise to between $75 and $80 a barrel by the end of the year. "Demand is picking up, especially in Asia," he told reporters puffing alongside him as he jogged through the streets of Vienna. "The price rise is a function of optimism that better things are coming in the future."

. . . .

Rising energy prices will slow economic recovery. All the more reason to invest in domestic energy sources, including non-petroleum and renewable sources, and more efficient transportation and other products.

 

[misgfool]

Why is the US government handing taxpayer funds to GM creditors? Do they have too much money?

http://www.reuters.com/article/businessNews/idUSTRE54S4JX20090529?feedType=RSS&feedName=businessNews

 

[Astronuc]

Why is the US government handing taxpayer funds to GM creditors?

I don't believe that is necessarily the case. The US government gets equity in the 'new' GM, UAW (autoworkers) get some, and the creditors get some.

It is my understanding that -

The creditors (investors) are the one's who loaned the money to GM - in good faith. Some creditors are ordinary people who invested for a reasonable return, and in some cases, the bonds represent their retirement.

Those same creditors/investors are the one's who will finance GM in the future, and perhaps buy GM products, so the the government can recover the taxpayers investment. If the plan fails, and people desert the new GM, the government will lose some of the money already invested.

 

[bleedblue1234]

Whoever beleives the US economy is in any shape to recover is, I'm sorry to say... crazy. We are facing some of the worst inflationary periods we have faced in the past ~80-100 years with all of this excess debt piling up on the government and the tin can of the consumer economy we have.

If you want to look for sustainable REAL growth of industry in the next 10-20 years... look no further than China, Brasil, and India. These countries and others will be the heart of the global economy as the US is deemed less important..

 

[misgfool]

The creditors (investors) are the one's who loaned the money to GM - in good faith. Some creditors are ordinary people who invested for a reasonable return, and in some cases, the bonds represent their retirement.

Those same creditors/investors are the one's who will finance GM in the future, and perhaps buy GM products, so the the government can recover the taxpayers investment. If the plan fails, and people desert the new GM, the government will lose some of the money already invested.

I understand that, but shouldn't there be a risk in investing? If GM becomes viable in the future, it will attract money since eventually greed will overcome fear.

 

[Astronuc]

I understand that, but shouldn't there be a risk in investing? If GM becomes viable in the future, it will attract money since eventually greed will overcome fear.

While some might be motivated by greed, many other people simply want to save their money and loan it out at a reasonable interest rate so that they will have more money in future when they cannot work as hard. I heard of one bond holder who had pretty much invested his life savings in GM - that was his his retirement - and he stands to lose much of it.

If a person puts his or her money in the bank - that's called savings. The bank may loan it out at 10% or higher, but pay only 2, 3 or 4% interest on the savings account.

The greed part comes in where financiers earn more (with commissions and fees) from other peoples' monies, than the people who own the money. The people are taking a greater risk than the financier, but earn less.

 

[misgfool]

While some might be motivated by greed, many other people simply want to save their money and loan it out at a reasonable interest rate so that they will have more money in future when they cannot work as hard. I heard of one bond holder who had pretty much invested his life savings in GM - that was his his retirement - and he stands to lose much of it.

Is that fair towards those who have been more prudent in their investments?