News What is wrong with the US economy? Part 2

[mheslep]

True, but as your country wants resouces, who will guaratee that they will be given ,you will have to fight more and more for them ,who will gurantee that the USA will be given preference?

Wolram - I am curious, could you lay a finger on a particular news source or group (e.g. Guardian, Times?) on which you construct these views? That is, the view that the US is running out of resources, that 'terrorism' or even defense spending in general is the majority of US spending, and so on?

 

[misgfool]

Wolram - I am curious, could you lay a finger on a particular news source or group (e.g. Guardian, Times?) on which you construct these views? That is, the view that the US is running out of resources, that 'terrorism' or even defense spending in general is the majority of US spending, and so on?

I think it's part of a more general antipathy against the US in Europe. Additionally the US has made a lot of decisions in this decade which have lead to a clear decline in it's reputation. Especially unfortunate has been tolerance towards torturing.

 

[wolram]

Wolram - I am curious, could you lay a finger on a particular news source or group (e.g. Guardian, Times?) on which you construct these views? That is, the view that the US is running out of resources, that 'terrorism' or even defense spending in general is the majority of US spending, and so on?

Look to history books, no nation will be eternally the super power, i just think the reasons i have given will be a factor in the fall of the US.

 

[mgb_phys]

Looking on the bright side "US trade deficit at five-year low"
http://news.bbc.co.uk/2/hi/business/7826651.stm

 

[mheslep]

I think it's part of a more general antipathy against the US in Europe. Additionally the US has made a lot of decisions in this decade which have lead to a clear decline in it's reputation. Especially unfortunate has been tolerance towards torturing.

Well that's one thing. For that matter, one doesn't have to have much of any reason at all to dislike another country, but Wolram say's '...I love you guys', as in we're on the road to ruin and he mentions some some reasons why.

Look to history books, no nation will be eternally the super power, i just think the reasons i have given will be a factor in the fall of the US.

Well I venture that most American's don't forever want to be the only super power, rather, they generally want to be prosperous, free, secure, and have the opportunity for happiness. If that could be insured with half or a quarter of the present defense budget, the budget would go there, with some yelling and gnashing of teeth from the industry but decline it would. Personally I could care little about the US being a super power if the other conditions were met.*

I was more interested in the immediate reasons why Wolram might think a US collapse is near. If it is, it is clearly not because the US is starved of physical resources or needs to go fight for them, we have ample within our economic means (if intelligently managed), and in the list of stresses on our government spending, defense spending is not the big problem, entitlements are - the 'structural deficit' being the phrase currently favoured by the President - elect.

* One of the measures that would help allow the US retire the super power crown is for the EU to step up and carry more of the military load for NATO.

 

[Astronuc]

Well I venture that most American's don't forever want to be the only super power, rather, they generally want to be prosperous, free, secure, and have the opportunity for happiness. If that could be insured with half or a quarter of the present defense budget, the budget would go there, with some yelling and gnashing of teeth from the industry but decline it would. Personally I could care little about the US being a super power if the other conditions were met.*

I was more interested in the immediate reasons why Wolram might think a US collapse is near. If it is, it is clearly not because the US is starved of physical resources or needs to go fight for them, we have ample within our economic means (if intelligently managed), and in the list of stresses on our government spending, defense spending is not the big problem, entitlements are - the 'structural deficit' being the phrase currently favoured by the President - elect.

* One of the measures that would help allow the US retire the super power crown is for the EU to step up and carry more of the military load for NATO.

This seems to reflect my experience as well.

Meanwhile Nortel Networks has filed Chapter 11 bankruptcy.
http://news.yahoo.com/s/nm/20090114/ts_nm/us_nortel

. . . .
According to the court filing in U.S. bankruptcy court for the district of Delaware, Nortel's major creditors include Bank of New York Mellon, with claims valued at nearly $4 billion.

Nortel's shares have tumbled along with the company's fortunes, sinking into penny-stock territory in recent months. In mid-2000, at the zenith of the company's success, they were worth more than C$1,100 each, adjusted for a stock consolidation that took place in late 2006.

"It's obviously a remarkable transformation from where it was as the largest company in Canada worth about 35 percent of the TSX in 2000," said Gavin Graham, director of investments at BMO Asset Management.

"But this is a reflection of the way that the telecommunications industry has changed."

Nortel has faced intense competition from North American and European rivals such as Alcatel-Lucent, as well as low-cost Asian vendors such as Huawei Technologies.
. . . .

Retail sales plummet 2.7 percent in December
http://news.yahoo.com/s/ap/20090114/ap_on_bi_go_ec_fi/economy

And the Dow30 were down about 2.8% in the first hour of trading, and has been down as much as 300 pts this morning.

 

[misgfool]

Well that's one thing. For that matter, one doesn't have to have much of any reason at all to dislike another country,

Ehh.. well no need to give any more reasons.

Well I venture that most American's don't forever want to be the only super power, rather, they generally want to be prosperous, free, secure, and have the opportunity for happiness. If that could be insured with half or a quarter of the present defense budget, the budget would go there, with some yelling and gnashing of teeth from the industry but decline it would. Personally I could care little about the US being a super power if the other conditions were met.*

I bet the romans felt the same way. But they couldn't get prosperity, freedom, secury etc. So they satisfied with the second best thing, which was the greatness of Rome.

I was more interested in the immediate reasons why Wolram might think a US collapse is near. If it is, it is clearly not because the US is starved of physical resources or needs to go fight for them, we have ample within our economic means (if intelligently managed), and in the list of stresses on our government spending, defense spending is not the big problem, entitlements are - the 'structural deficit' being the phrase currently favoured by the President - elect.

I can't see any immediate catastrophic collapse ahead, but Wolram is right in saying that all empires of the past have fallen.

* One of the measures that would help allow the US retire the super power crown is for the EU to step up and carry more of the military load for NATO.

NATO isn't only a burden. NATO is the worlds biggest weapons fair. It's a marketing subsidy to the US military industry by the US government. And the US isn't a superpower because of NATO. It's those 5000+ nukes.

 

[edward]

The Ascent OF Money.

In THE ASCENT OF MONEY, Niall Ferguson traces the evolution of money and demonstrates that financial history is the essential back-story behind all history.

http://www.pbs.org/wnet/ascentofmoney/featured/watch-full-program-the-ascent-of-money/24/

This is a 2 hr documentary broken up into short segments. a good watch if you have the time.

 

[mheslep]

NATO isn't only a burden. NATO is the worlds biggest weapons fair. It's a marketing subsidy to the US military industry by the US government. And the US isn't a superpower because of NATO.

Eh? You misread me, I didnt say NATO was a burden, and I didn't say (the opposite) NATO makes the US a super power. I say that NATO is insufficient. The US need not be, would not want to be a superpower if the EU part of NATO stepped up.

It's those 5000+ nukes.

Since they have not been used in the post WWII world and realistically can't ever be used outside of an all out of a civilization ending WWIII, one would have to say its the often used conventional aspect of the US military that makes it 'super.'

The three parts of US superpower status per N. Ferguson:
1. Military
2. Economic. ~1/5 of world GDP.
3. Cultural. English language, etc.

 

[misgfool]

Eh? You misread me, I didnt say NATO was a burden, and I didn't say (the opposite) NATO makes the US a super power. I say that NATO is insufficient. The US need not be, would not want to be a superpower if the EU part of NATO stepped up.

Even if EU would assume more responsibility in NATO, what would prevent the US of claiming that NATO was not doing it's duties and campaigning on it's own?

Since they have not been used in the post WWII world and realistically can't ever be used outside of an all out of a civilization ending WWIII, one would have to say its the often used conventional aspect of the US military that makes it 'super.'

I don't doubt the firepower that the US has, but you can't say that the adversaries since WWII have been the toughest on the planet.

 

[mheslep]

Even if EU would assume more responsibility in NATO, what would prevent the US of claiming that NATO was not doing it's duties and campaigning on it's own?

Because, I assert, the US people don't want a large military if its not necessary. We're not Rome.

 

[Astronuc]

Dow 30 is down about 800 pts so far this year

More job cuts are on the way

Motorola to cut 4,000 more jobs in 2009
http://news.yahoo.com/s/ap/20090115/ap_on_bi_ge/motorola_cuts

Microsoft may lay off as many as 15,000
http://news.yahoo.com/s/ap/20090115/bs_nm/us_microsoft

 

[misgfool]

Because, I assert, the US people don't want a large military if its not necessary. We're not Rome.

You didn't answer my question. The way I see it stepping up in NATO would only bring costs to EU while the US would operate in the world as usual. So why bother?

I agree that the US is not Rome, although a part of it is inherited. However, in practice the US has a large military. What evidence do you have to back you assertion?

 

[mheslep]

You didn't answer my question.

Yes I did, directly, though it was just an assertion on my part, just as you are doing here w/ 'the way I see it'

The way I see it stepping up in NATO would only bring costs to EU while the US would operate in the world as usual. So why bother?

Even if you are correct about US intentions, the EU&Canada still have an obligation to meet for NATO in areas like Afghanistan, as Sec. Gates makes clear, diplomatically, nearly every time he speaks on the subject.

What evidence do you have to back you assertion?

The US military and its industry have always lobbied to increase themselves in size and budget, but historically the US electorate has repeatedly demonstrated a wariness of its military. In the 20th century the US government drastically and repeatedly cut the size of its armed forces after the public concluded some threat or other was essentially vanquished or contained. In the first month after WWI the Army released 650k personnel and 3.25 million within nine months. The Army again became a volunteer force at a little over 5% of its WWI peak. In the 1920s Congress cut the small volunteer force by a third again. After WWII military spending was cut seven fold, as a percent of GDP, and the peak of nearly 10 million personnel in the WWII armed services was cut within a year to several hundred thousand; similar but smaller reductions were made after the Korean conflict in ~1955-56, after the Vietnam war, and again in the early 1990s (the 'peace dividend') after the collapse of the Soviet Union. The US has cut its nuclear arsenal by more than half of its cold war peak.
There has been a security cost to most of these sharp reductions, as the US military was clearly outmatched at the beginning of WWII by the far better equipped and trained Nazi Germany, began the Korean conflict with rusting WWII equipment, and so on. Still my view is that the sense of the US people to reduce the military was wise, even if the execution of those reductions was poor.
http://www.truthandpolitics.org/military-relative-size.php#gdp-graph
http://www.history.army.mil/books/amh/amh-19.htm
http://www.history.army.mil/books/amh/AMH-20.htm

 

[misgfool]

Yes I did, directly, though it was just an assertion on my part, just as you are doing here w/ 'the way I see it'

I have no problems with assertions, but you do have to provide some reasoning that lead you to that conclusion.

Even if you are correct about US intentions, the EU&Canada still have an obligation to meet for NATO in areas like Afghanistan, as Sec. Gates makes clear, diplomatically, nearly every time he speaks on the subject.

The US still has the option to do as it pleases whether EU/Canada likes it or not. So I can't see any reason to invest more resources than "necessary" to NATO.

The US military and its industry have always lobbied to increase themselves in size and budget, but historically the US electorate has repeatedly demonstrated a wariness of its military.

US military spending as a proportion of the global military spending is substantial (47% 2003 [1]). Still you may be right, I guess we will just have to wait and see.

In the 20th century the US government drastically and repeatedly cut the size of its armed forces after the public concluded some threat or other was essentially vanquished or contained.

However, you don't seem to be too concerned of the endless supply of threats or others which require military solutions.

[1] http://en.wikipedia.org/wiki/Military_budget_of_the_United_States

 

[Astronuc]

Stock rallied during the afternoon as the next installment of $350 billion was approved, and the Congress seemed to have reached some agreement on the next bailout package, which is somewhere between $775-825 Billion.


Meanwhile - Band of America (B of A) looks to be in some trouble too
http://marketplace.publicradio.org/display/web/2009/01/15/pm_b_of_a/

KAI RYSSDAL: Bank of America. For the past couple of months it's been one of the good banks. In good enough shape to buy the failed mortgage lender Countrywide last summer. Big enough to not need money from the TARP.

But CEO Ken Lewis took $15 billion anyway just to make everybody else feel OK about it. Healthy enough to buy Merrill Lynch when it was going under back in September. And oh, by the way, getting Merrill's $10 billion in TARP money as a sweetener.

Now we know all was not as it seemed. Even before the books were closed on 2008, B of A went back to the Treasury to report problems with that Merrill deal.

From New York, Ashley Milne-Tyte reports.

. . . .

Christopher Whalen: Primarily it's been used for absorbing losses. You know, all three of the top banks have different problems but they all are seeing loss rates for both securities and loans going up.

He says the government shouldn't extend any further largesse to the bank.

Whalen: If we keep putting money into big banks where we're essentially just covering operating losses, but we're not dealing with the solvency issue, we're just buying time.

But Jamie Peters, an equity analyst at Morningstar, says the government will pony up the extra funds.

Jamie Peters: We've seen in this series of bailouts that the government doesn't want these too-large-to-fail institutions to actually fail. And so stepping in and bailing out Bank of America is pretty much the only option.

. . . .
Peters: Bank of America's dividend, probably going to go away, . . . .

Bitter cold hits hard because of economic meltdown
http://news.yahoo.com/s/ap/20090115/ap_on_re_us/winter_weather

ST. LOUIS – William Davis has lived on the streets since the recession cost him his job as a commercial painter. Over the last eight months, he's made it through heat waves, wind storms, rain, snow and ice.

But the 51-year-old finally sought help at a homeless shelter Thursday after enduring a night shivering alongside a downtown wall in temperatures that bottomed out at zero — the coldest reading here in eight years.
. . . .
Ray Redlich, assistant director of New Life Evangelistic Center in St. Louis, said the homeless population has changed as the financial crisis has grown worse. Now it includes more people like Davis who just months ago were working for a living.
. . . .
Matt Ivey, who was driving a AAA tow truck to jump start stalled cars, said many automobiles were in rough shape. "Because of the economy, people don't really have enough money to repair their vehicles," he said.
. . . .

 

[Astronuc]

The economy is still shaky.

Bank of America posts first loss in 17 years
http://news.yahoo.com/s/nm/20090116/bs_nm/us_bankofamerica

NEW YORK (Reuters) – Bank of America Corp (BAC.N), posted its first quarterly loss in 17 years on Friday and slashed its dividend, hours after winning a multibillion-dollar lifeline from the U.S. government to help absorb Merrill Lynch, which lost a record $15.31 billion in the quarter.

The dismal results came as the largest U.S. bank faced mounting pressure from investors who questioned how well it will absorb a tidal wave of soured loans in an economy showing no signs of escaping a deep recession. Bank of America cut its quarterly dividend to a penny from 32 cents.

"It is difficult to focus on what is going right at this time," a clearly downbeat Chief Executive Kenneth Lewis said on a conference call. "The economy and subsequently the credit markets literally hit a wall starting in September and culminating late in December, with the greatest impact of my almost 40 years in banking."

Shares of Bank of America fell 7 cents to $8.25 in morning trading.

Hours after it obtained $20 billion in new capital from the government's $700 billion Troubled Asset Relief Program (TARP), the bank reported a quarterly loss of $1.79 billion, or 48 cents per share, compared with a year-earlier profit of $268 million, or 5 cents.

Lewis sought government help after it became clear that Merrill's credit losses were far higher than expected, and had threatened last month to scrap the $19.4 billion takeover without government help.
. . . .

Absorbing Merrill Lynch wasn't the best for B of A, but it rescued ML.

Citigroup capped a devastating 2008 by announcing Friday that it would split into two entities and that it had posted an $8.29 billion loss for the fourth quarter. Citigroup’s rival, Bank of America, also posted a loss, just hours after receiving a new infusion of government support, The New York Times’s Matthew Saltmarsh and Eric Dash reported.
. . . .
Bank of America’s earnings were released just after the government agreed early Friday to provide an additional $20 billion infusion of capital into the bank and to cover the bulk of up to $118 billion in losses, largely arising from the bank’s Merrill acquistion.

I have to wonder if there is a decimal point (order of magnitude) off here.

Overall for 2008, Bank of America posted a net profit of $4.01 billion compared with net income of $14.98 billion a year earlier.

It said earnings were driven reflected “the deepening economic recession and extremely challenging financial environment, both of which significantly intensified in the last three months of 2008.”

Bank of America’s net revenue during the quarter rose 19 percent to $15.98 billion from $13.45 billion a year earlier. The bank also said it would pay a dividend of just 1 cent for the first quarter.

B of A itself seems to be doing well. I believe the management declared not bonuses for 2008, even though they made a profit.

 

[The Dagda]

Dow 30 is down about 800 pts so far this year

More job cuts are on the way

Motorola to cut 4,000 more jobs in 2009
http://news.yahoo.com/s/ap/20090115/ap_on_bi_ge/motorola_cuts

Microsoft may lay off as many as 15,000
http://news.yahoo.com/s/ap/20090115/bs_nm/us_microsoft

Is that 50,000 Microsoft workers, or 50,000 schlubs they palm off their Vista/7.0 beta versions on because I'm ok with that either way?

 

[Astronuc]

Circuit City to liquidate remaining US stores
http://news.yahoo.com/s/ap/20090116/ap_on_bi_ge/circuit_city_bankruptcy

Bankrupt Circuit City Stores Inc., unable to work out a sale of the company, said Friday it will go out of business — closing its 567 U.S. stores and cutting 30,000 jobs.

The nation's second-biggest consumer electronics retailer is the latest casualty of an unprecedented pullback in consumer spending that has driven other brands such as KB Toys, Mervyns LLC and Linens 'N Things into bankruptcy. Experts believe there will be more to come.

"This is the only possible path for our company," Circuit City's acting Chief Executive James A. Marcum said in a statement. "We are extremely disappointed by this outcome."

The company had been seeking a buyer or a deal to refinance its debt, but the hobbled credit market and consumer worries proved insurmountable. Negotiations for an acquisition went past midnight on Thursday, a Circuit City lawyer said in court.

. . . .
Employees were being notified Friday that they would lose their jobs and, if a judge gives final approval to the liquidation, stores would begin the closing process as early as Saturday.
. . . .

2009 is starting out rather badly.

 

[mgb_phys]

It's tough on the people involved - but a lot of the victims of this recession should have gone under 10years ago, they have just survived because of the boom.
Nortel, Circuit city, Linens 'n things, Woolworths, even chrysler - none of these are exactly best of breed in their markets.

 

[turbo]

It's tough on the people involved - but a lot of the victims of this recession should have gone under 10years ago, they have just survived because of the boom.
Nortel, Circuit city, Linens 'n things, Woolworths, even chrysler - none of these are exactly best of breed in their markets.

I have to agree with all of those choices. Chrysler in particular has been designing body-styles that go 100% against safe engineering. Look at some of their sedans with their high trunk heights and tiny rear windows. How many people are going to back over their own children/grandchildren just because they cannot be seen out the back of the vehicle? My brother-in-law is the chief mechanic for the local Chrysler dealership, and he is really ticked off at some of these design flaws. He has grandchildren that love to play in his gravel driveway with toy trucks and tractors, and he is keenly aware of such shortcomings.

As he puts it "why design poor rear-visibility into a car when you know it will cost lives?" Chrysler's take on "style" sure isn't worth that cost.

 

[OmCheeto]

Circuit City to liquidate remaining US stores
http://news.yahoo.com/s/ap/20090116/ap_on_bi_ge/circuit_city_bankruptcy
2009 is starting out rather badly.

Not if you never shopped there in the first place.

Now when Radio Shack goes under, I'm cutting my wrists.

 

[Count Iblis]

http://americanmemories.us/americanmemories/ebay/MUSIC/supertramp-crisis-1.jpg

 

[Astronuc]

Crime of the Century might have been more appropriate.

Supertramp = Crime of the Century
https://www.youtube.com/watch?v=CVPhVV1dYd0

 

[OmCheeto]

Crime of the Century might have been more appropriate.

Supertramp = Crime of the Century
https://www.youtube.com/watch?v=CVPhVV1dYd0

Hey!

...Who are these men of lust, greed, and glory?
Rip off the masks and let's see.
But that's no right - oh no, what's the story?
There's you and there's me
That can't be right

We are the men of lust, greed, and glory!

I was so impressed with the album that I purchased 3 different pressings, culminating in a MFSL UHQR pressing for $50 back around 1982.

I sold the album about 15 years ago for $10 when my turntable went TU. I see now that it's worth close to $700. Hmmm... Shoulda kept all that old vinyl after all...

I still have a metal cassette tape recording though. It still sounds incredible, even with my hearing loss from having listened to it at well over 120 db about a hundred too many times.

 

[turbo]

I have about 300 albums in my collection. Maybe I can make up for some of my IRA losses and my wife's 401K losses. Nah!

 

[OmCheeto]

I have about 300 albums in my collection. Maybe I can make up for some of my IRA losses and my wife's 401K losses. Nah!

The UHQR's are going for a much as $1700 a piece. You might make up some.

Perhaps this is a new business opportunity for someone. I'd personally like to see them come out with a new format of cd that had a sample rate above the abysmally slow 45kb/sec. I laughed when I heard that. "Oh, but there's no more popping and clicking". Yah right. And there's no more sonic excellence either. A bunch of digital crap as far as I'm concerned. Thank god I'm going deaf, or I'd really be pissed.

No wonder the economy's gone to crap, it's because we've settled for buying it.

 

[turbo]

The UHQR's are going for a much as $1700 a piece. You might make up some.

Perhaps this is a new business opportunity for someone. I'd personally like to see them come out with a new format of cd that had a sample rate above the abysmally slow 45kb/sec. I laughed when I heard that. "Oh, but there's no more popping and clicking". Yah right. And there's no more sonic excellence either. A bunch of digital crap as far as I'm concerned. Thank god I'm going deaf, or I'd really be pissed.

No wonder the economy's gone to crap, it's because we've settled for buying it.

I have quite a number of the remastered high quality pressings, and some rarities like Buckingham and Nicks's first album (before they were assimilated by the remnants of Fleetwood Mac) and a couple of copies of the eponymous "Pure Prairie League" that I don't think have ever been re-released in other formats. Killer album! "Tears" and "Take it Before You Go" are the best road songs ever.

 

[Astronuc]

It will be interesting to see how the US stock indices respond to Obama's inauguration.

The Asian markets are down about 3% in early afternoon trading (Jan 20).


Apparently the additional banking problems are worrisome to the markets:

Banking fears grip European markets despite latest British bailout
http://finance.yahoo.com/news/Banking-fears-grip-European-apf-14096348.html

RBS expects full-year loss up to 28 billion pounds
http://finance.yahoo.com/news/RBS-expects-fullyear-loss-up-apf-14097594.html

Rescue efforts show difficulty of fixing bank woes
US, British rescue plans shows difficulty of forcing banks to lend as credit crisis mushrooms
http://finance.yahoo.com/news/Rescue-efforts-show-apf-14097543.html


Investment Outlook
Bill Gross | January 2009
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2009/IO+Gross+Jan+09+Andrew+Mellon+vs+Bailout+Nation.htm

Apparently Gross did pretty well in his investing during the 4thQ 2008 - when the markets lost 30+% and some equities lost 90+% of their value.

 

[OmCheeto]

It will be interesting to see how the US stock indices respond to Obama's inauguration.

The Asian markets are down about 3% in early afternoon trading (Jan 20).

Gads! I've never seen a logarithmic scale to measure a stock markets drop.

http://finance.yahoo.com/echarts?s=^N225#symbol=^N225;range=my

35,000 to 8,800. But that's old news I guess. (1990-2009)

But if the Dow had followed the Nikkei over the same period it would be at 2000 instead of 8200.

Wow. Maybe McCain was right. Maybe there is nothing wrong with our economy.