It has been made official, the United States is in a recession. Not that the writing wasn't already on the wall but, this became very obvious when it was reported that 533,000 jobs were cut in the month of November. Based on the estimates December will be lesser, but still expected to lose another 450,000 jobs. All of this is unfortunate, but is a natural part of a recession.
Classmate Gabby Dollinger posted a blog titled, "Life Goes On???" In her post Gabby states that she is upset with large companies being bailed out while the average American can't find a job. She also expresses concern with the companies receiving money from the bailout and still laying off workers. At first glance this does seem odd, but the bailout of the financial institutions was not to save jobs. It was done merely to free up the credit markets. The credit markets are the key to business expansion and economical growth. If businesses no longer have the ability borrow they can't grow or stay afloat in these tough times. The second part of the equation for these companies who received the bailout is expenditure controls. The companies now have money to lend, but they have to cut operating expenses. This means laying off contract and permanent employees and cut back on other unnecessary spending.
Each recession has different factors and the current has several. I believe the more factors, the harsher the recession. Our current recession is believed to have been conceived back in 2007.
The fed injected tons of cash into the system, while keeping interest rates low, ultimately causing inflation to rise. Then combine inflation with relaxed borrowing policies, a weak dollar, high oil prices and war. Sounds like a recipe for failure. You are lending money that is losing value to lots of people who shouldn't be lent to.
Gabby briefly touches on the auto industry stating that the automakers would be in better shape if they cut unnecessary spending and built quality, affordable vehicles. I agree there is no excuse for wasting billions of dollars. Auto manufacturers have known for years that there business plans needed to change. They have always had a history of throwing away money, but have not worried about change while they were turning profits. Now their backs are against the wall and they have to beg Uncle Sam for money and promise to change their ways. Gabby stated that we should stop worrying about companies that will probably fail and start thinking about the American people. If we do exactly this and let the big three fail as well as countless financial institutions we will see unemployment rates at unimaginable numbers. the 533,000 lost jobs will look like a tiny number in comparison. As a country we can not afford for them to fail.
The recession we are in is a serious matter, but one that isn't going to go away quickly with a bailout or stimulus package. It takes time to free up credit markets, and regain investor confidence. Business have to do their part as well cutting wasteful spending. In time the markets will come back, banks will lend again, and oil prices will probably go up. For the time being enjoy the cheap gas and buy stocks, vehicles, and other goods while they are cheap.
Thursday, December 11, 2008
Wednesday, December 10, 2008
Is saving the Big 3 a good idea?
There is finally a bill on the table, but is it still a good idea to save the Big 3? About a month ago I believed so, but will a cash infusion just prolong the death of these giants? On one hand I am concerned about the millions of jobs that will be lost, but we can't continue to pour money into companies that are unwilling to make a real effort at change.
The CNN Money article, House passes Detroit bailout explains what is included in $14 billion auto bailout. The auto bailout which has only been passed by the house thus far, is a strings attached quick fix till the future Obama administration can finalize a permanent solution. GM has stated that they need 4 billion or they will be bankrupt by the end of 2008 and an additional 6 billion to get the through Q1 2009. Chrysler has stated that they will need 4 billion to get them through Q1 2009. Ford has opted not to take part in the bailout. Ford seems to be in better cash shape then its competitors due to financing it has secured the past few years. By accepting the bailout the companies are agreeing to certain terms and controls.
The CNN Money article, House passes Detroit bailout explains what is included in $14 billion auto bailout. The auto bailout which has only been passed by the house thus far, is a strings attached quick fix till the future Obama administration can finalize a permanent solution. GM has stated that they need 4 billion or they will be bankrupt by the end of 2008 and an additional 6 billion to get the through Q1 2009. Chrysler has stated that they will need 4 billion to get them through Q1 2009. Ford has opted not to take part in the bailout. Ford seems to be in better cash shape then its competitors due to financing it has secured the past few years. By accepting the bailout the companies are agreeing to certain terms and controls.
- Limits on executive pay
- "Prohibitions for so called golden parachutes and requirements that automakers get rid of their corporate aircraft"
- No dividend payouts while loans are outstanding
- "The government would receive warrants-the right to buy stake in companies at a certain price-equal to 20% of the loans value"
- The bill provides a presidential appointee, also know as a "car czar" who will oversee the companies restructuring efforts. If the "car czar"finds that the companies have not made progress on cutting costs the loans will be recalled within 30 days, ultimately forcing the companies into bankruptcy.
This bailout seems like a quick fix, a band aid to slow the bleeding. I am normally against government and the business sector mixing, but due to the credit crunch there may not be any other options. The auto industry has begged for this bailout and due to their inability to control cash I think there should be extremely strict controls and requirements included in this bailout. The writing has been on the wall for quite some time. Competitors like Toyota and Honda who build quality, fuel efficient vehicles and manage cash a lot better have been gaining serious ground on the Big 3 for the past decade. Since there are only two options the government has to decide which one is best. Let the companies fail and see millions of Americans lose there jobs or pump cash into poorly operated companies and try to baby sit them. With our country already in an official recession if we choose not to help the Big 3 we may very well spin this recession into the next depression.
Friday, November 14, 2008
Response to Gabby Dollinger's "Stop Already"
We all realize that the world we live in has become sort of a fragile state. Wall Street displays this almost everyday losing or gaining hundreds of points. This is not a time to panic, this is a time where our leaders need to stand tall and put policy in place that makes sense.
In Gabby Dollinger's post, "Stop Already" she expresses that our country is in a troubled state and needs help. She claims that the election has stirred up racial tensions, possible assassination attempts, and increased hatred. The blog "Stop Already" seems like an emotional post, but I was not able to find a lot of info to back up the claims of tension, assassination attempts, and increased hatred. I do however believe that tough economical times can certainly take a toll on people.
Although there needs to be changes made I am not as alarmed as Gabby. Through out the history of our country we have prevailed and bounced back from tough economical times.
Whether the oil crisis in the 70's combined with the Vietnam war or the dot.com bubble bursting, 9/11 attacks, and corporate scandals in 2000/2001 this country is not new to recession.
A recession is defined as contraction phase of the business cycle or a period of reduced economic activity. Like I stated before recessions are not new to our country and have been around since the existence of civilized society. Since our nations birth we have experienced more than 10 recessions. By using all the weapons in our arsenal, like the bailouts, interest rate cuts, and new legislation we will prevail.
In Gabby's blog she had stated the war between the parties was tearing down the country. I think the candidates may have been tearing down each other, but I don't believe that they were tearing down the country. Each party has it own beliefs and agendas. I believe over the past 25 years the gap between Republicans and Democrats has lessened. Gabby stated she wanted someone who would get into office and help the people. I feel the same way. I don't care if they are white, black, republican, or democrat. They need to work for the good of the country and its people. I think that politics as a whole is realizing this and we are beginning to see less of the left or right.
It is important to view a situation in its entirety. We can use lessons of the past to guide us in our current state. We have had economic recessions in the past and have also had earth shattering elections. I believe as citizens we should do everything in our power to aid the country. We should not panic, after all it took time for us side into our current state and will take additional time to rebuild.
In Gabby Dollinger's post, "Stop Already" she expresses that our country is in a troubled state and needs help. She claims that the election has stirred up racial tensions, possible assassination attempts, and increased hatred. The blog "Stop Already" seems like an emotional post, but I was not able to find a lot of info to back up the claims of tension, assassination attempts, and increased hatred. I do however believe that tough economical times can certainly take a toll on people.
Although there needs to be changes made I am not as alarmed as Gabby. Through out the history of our country we have prevailed and bounced back from tough economical times.
Whether the oil crisis in the 70's combined with the Vietnam war or the dot.com bubble bursting, 9/11 attacks, and corporate scandals in 2000/2001 this country is not new to recession.
A recession is defined as contraction phase of the business cycle or a period of reduced economic activity. Like I stated before recessions are not new to our country and have been around since the existence of civilized society. Since our nations birth we have experienced more than 10 recessions. By using all the weapons in our arsenal, like the bailouts, interest rate cuts, and new legislation we will prevail.
In Gabby's blog she had stated the war between the parties was tearing down the country. I think the candidates may have been tearing down each other, but I don't believe that they were tearing down the country. Each party has it own beliefs and agendas. I believe over the past 25 years the gap between Republicans and Democrats has lessened. Gabby stated she wanted someone who would get into office and help the people. I feel the same way. I don't care if they are white, black, republican, or democrat. They need to work for the good of the country and its people. I think that politics as a whole is realizing this and we are beginning to see less of the left or right.
It is important to view a situation in its entirety. We can use lessons of the past to guide us in our current state. We have had economic recessions in the past and have also had earth shattering elections. I believe as citizens we should do everything in our power to aid the country. We should not panic, after all it took time for us side into our current state and will take additional time to rebuild.
Friday, November 7, 2008
Save the Big Three!!!
In today's economy it seems that some of the oldest and largest American staples are not safe from the financial meltdown the country is experiencing. Ford and General Motors announced today that their third quarter losses were bigger than originally anticipated. Not to mention that third largest American vehicle manufacturer, Chrysler has been is serious financial shape with its main investors looking for a buyer. Could this be the end for American motors as we know it? Are we all going to be driving Japanese vehicles in the future?
In GM's announcement today they reported a Q3 loss of 2.5 billion dollars and revenue of 37.9 billion compared to 43.7 billion in Q3 07. With these enormous losses GM also announced that it may be out of cash by the end of this year. Furthermore GM has stopped talks to purchase Chrysler.
In Ford's announcement today they had a Q3 loss of 129 million. Although this number is not as staggering as the GM number, Ford too is running out of cash, stating they can make it through 2009.
Meanwhile it seems that Chrysler is in far worse shape then its two American competitors.
Chrysler, its investors, and the government were all hoping for the GM purchase talks to become a reality. Chrysler has been losing market share with their trendy unreliable vehicles, which never seem to get a passing rating by consumer reports and lets not forget the dreadful merger with Daimler. The only thing left on Chrysler's plate now is major restructuring and Chapter 11.
As for GM and Ford, all hope is not lost. They have both announced to cut thousands of jobs and reduce spending. GM has gone as far as discontinuing employee 401k matches and tuition reimbursement programs. However spending is key, seeing how both companies spent billions over what they earned in Q3. It also seems that the government is going to lend a helping hand including loans up to 50 billion to help the companies stabilize.
As a child my grandfather used to tell me stories about his Ford Fairlane and his fathers Model T. I grew up dreaming about owning a classic muscle car. If our current state is any indication of the future all I will have is dreams and memories of American cars and trucks. The big three need to act now by cutting foolish spending and building efficient and dependable vehicles.
With Chrysler having already having a nail or two in the coffin, the others and our economy can not afford the same.
In GM's announcement today they reported a Q3 loss of 2.5 billion dollars and revenue of 37.9 billion compared to 43.7 billion in Q3 07. With these enormous losses GM also announced that it may be out of cash by the end of this year. Furthermore GM has stopped talks to purchase Chrysler.
In Ford's announcement today they had a Q3 loss of 129 million. Although this number is not as staggering as the GM number, Ford too is running out of cash, stating they can make it through 2009.
Meanwhile it seems that Chrysler is in far worse shape then its two American competitors.
Chrysler, its investors, and the government were all hoping for the GM purchase talks to become a reality. Chrysler has been losing market share with their trendy unreliable vehicles, which never seem to get a passing rating by consumer reports and lets not forget the dreadful merger with Daimler. The only thing left on Chrysler's plate now is major restructuring and Chapter 11.
As for GM and Ford, all hope is not lost. They have both announced to cut thousands of jobs and reduce spending. GM has gone as far as discontinuing employee 401k matches and tuition reimbursement programs. However spending is key, seeing how both companies spent billions over what they earned in Q3. It also seems that the government is going to lend a helping hand including loans up to 50 billion to help the companies stabilize.
As a child my grandfather used to tell me stories about his Ford Fairlane and his fathers Model T. I grew up dreaming about owning a classic muscle car. If our current state is any indication of the future all I will have is dreams and memories of American cars and trucks. The big three need to act now by cutting foolish spending and building efficient and dependable vehicles.
With Chrysler having already having a nail or two in the coffin, the others and our economy can not afford the same.
Friday, October 17, 2008
US Energy Issues
During the past few years most of us Americans have seen and felt the costs of energy skyrocket. This is a major issue for our country and one the next president will have to seriously address. In the Statesman editorial, "McCain, Obama offer no-pain, all-gain energy promise," the author lists the different plans the candidates are proposing and some if the problems with these plans.
In the article the author points out that both candidates recognize the need to reduce energy consumption and reduce our need for foreign oil. Although their plans differ, there seems to be holes in both of them. When the candidates speak about their plans they make is sound almost as easy as flipping a switch. Senator McCain leads towards nuclear power and offshore drilling, while Senator Obama is pushing for fuel efficient vehicles and a windfall profits tax on oil companies. Both candidates feel there is a need for more wind and solar energy production. The author points out that some of the problems with Senator McCain's plan is nuclear waste storage and the cost of offshore drilling, with very delayed results. Although the author failed to point out any problems with Senator Obama's plan I believe that helping car manufacturers to build the efficient hybrid/gas or electric vehicles is great, but can the average American afford these pricey vehicles? Offering a tax credit to individuals who buy them is great, but buying a hybrid/gas vehicle cost upwards of $5000.00 more then buying the equivalent non-hybrid model. Taking into account the tax rebate it will still take years for the fuel saving to catch up to the price jump. The author points out that we have already uncovered the solution to reducing our independence on foreign oil. The solution is higher fuel/gasoline prices, possibly combined with a higher gasoline tax. Just recently when gasoline reached 4.00 per gallon, Americans reduced driving, took more public transportation, and even traded in their trucks and SUV's for more fuel efficient vehicles.
This article was geared towards any American with energy concerns. It is a problem that all of us face and will to continue to face for quite some time. Since the article was listed in the Statesman I expected it to left leaning and sure enough it was. It was obvious that the author favored Senator Obama and his plan. This was made clear more then one time, but most importantly in the final paragraph when the author stated, "an Obama administration."
I believe the author has made a fair argument for a successful solution. It was truly amazing how I changed my own life when gasoline reached 4.00 per gallon. My wife and I reduced additional errands and tried to consolidate them into our drives to and from work. To get some relief at the pump we traded in one of our SUV's for a fuel efficient car. We also felt the crunch when we opened our utility bills, so we made a conscious effort to reduce those resources as well.
I believe that we all play a part in reducing our need for foreign oil and conserving resources. We have proven that we can cut back on energy usage and should continue to do so. I believe that with responsible citizens and smart energy programs we can solve this problem. I think we need to take full advantage of solar and wind energy and do everything in our power to keep American dollars in America.
In the article the author points out that both candidates recognize the need to reduce energy consumption and reduce our need for foreign oil. Although their plans differ, there seems to be holes in both of them. When the candidates speak about their plans they make is sound almost as easy as flipping a switch. Senator McCain leads towards nuclear power and offshore drilling, while Senator Obama is pushing for fuel efficient vehicles and a windfall profits tax on oil companies. Both candidates feel there is a need for more wind and solar energy production. The author points out that some of the problems with Senator McCain's plan is nuclear waste storage and the cost of offshore drilling, with very delayed results. Although the author failed to point out any problems with Senator Obama's plan I believe that helping car manufacturers to build the efficient hybrid/gas or electric vehicles is great, but can the average American afford these pricey vehicles? Offering a tax credit to individuals who buy them is great, but buying a hybrid/gas vehicle cost upwards of $5000.00 more then buying the equivalent non-hybrid model. Taking into account the tax rebate it will still take years for the fuel saving to catch up to the price jump. The author points out that we have already uncovered the solution to reducing our independence on foreign oil. The solution is higher fuel/gasoline prices, possibly combined with a higher gasoline tax. Just recently when gasoline reached 4.00 per gallon, Americans reduced driving, took more public transportation, and even traded in their trucks and SUV's for more fuel efficient vehicles.
This article was geared towards any American with energy concerns. It is a problem that all of us face and will to continue to face for quite some time. Since the article was listed in the Statesman I expected it to left leaning and sure enough it was. It was obvious that the author favored Senator Obama and his plan. This was made clear more then one time, but most importantly in the final paragraph when the author stated, "an Obama administration."
I believe the author has made a fair argument for a successful solution. It was truly amazing how I changed my own life when gasoline reached 4.00 per gallon. My wife and I reduced additional errands and tried to consolidate them into our drives to and from work. To get some relief at the pump we traded in one of our SUV's for a fuel efficient car. We also felt the crunch when we opened our utility bills, so we made a conscious effort to reduce those resources as well.
I believe that we all play a part in reducing our need for foreign oil and conserving resources. We have proven that we can cut back on energy usage and should continue to do so. I believe that with responsible citizens and smart energy programs we can solve this problem. I think we need to take full advantage of solar and wind energy and do everything in our power to keep American dollars in America.
Friday, October 3, 2008
Let's Try It Again
Currently our country is headed into a financial crisis like most of us have never seen and Congress shoots down a Bailout plan because it is not sweet enough. How much irrelevant content will be added to the new bill and how much extra is it going to cost the taxpayers? The USA Today Opinion article titled, Bailout: Good, Bad and Ugly is a well written mostly non-biased writeup of what has happened and what needs to happen.
The author of this article breaks up his opinion of the bailout in three pieces, classifying them the Good, Bad, and Ugly. The Good section highlights the FDIC raising account insurance from $100,000.00 to $250,000.00 giving account holders assurance that there money is safe. The Bad section highlights the Market to Market accounting rules that are used to value assets. With the bailout, regulators will be able to waive these rules, possibly placing unrealistic values on the purchased assets. The Ugly section highlights what it will take to give the bailout a popular or passing vote. Some of these additions have nothing to do with the economic crisis we are facing.
When I read this article I felt that the author was addressing for the most part the general public. He lsits what he belives are the good, bad, and ugly parts of the bailout and states that the bailout should be passed for the good of the economy. Normally the passing of this type of legislature would be considered somewhat left wing, but in this case it almost seemed like a necessity. There were Rebublicans and Democrats alike stepping up to the table to create this piece of legislature to hopefully give our economy a positive spin.
I believe the author is just you average American who is concerned with the state of the economy. He wants something done, but wants a fix that will work and not harm the taxpayers.
Like most Americans I think something has to be done. I'm not sure if throwing $700 billion at a problem will make it go away, but it is a start. I think Congress should have the ability to review and change the bill with the needs of the country. We have to set some sort of regulations on the financial sector. If we don't I belive we will be back in the same position in the future. I am in agreence with the author and believe something needs to be done, but lets cut away some of the fat and just address the problem at hand. It is already a shame that taxpayer dollers are being used to fund this bailout and we need to be certain that the dollars are used wisely and not squandered.
The author of this article breaks up his opinion of the bailout in three pieces, classifying them the Good, Bad, and Ugly. The Good section highlights the FDIC raising account insurance from $100,000.00 to $250,000.00 giving account holders assurance that there money is safe. The Bad section highlights the Market to Market accounting rules that are used to value assets. With the bailout, regulators will be able to waive these rules, possibly placing unrealistic values on the purchased assets. The Ugly section highlights what it will take to give the bailout a popular or passing vote. Some of these additions have nothing to do with the economic crisis we are facing.
When I read this article I felt that the author was addressing for the most part the general public. He lsits what he belives are the good, bad, and ugly parts of the bailout and states that the bailout should be passed for the good of the economy. Normally the passing of this type of legislature would be considered somewhat left wing, but in this case it almost seemed like a necessity. There were Rebublicans and Democrats alike stepping up to the table to create this piece of legislature to hopefully give our economy a positive spin.
I believe the author is just you average American who is concerned with the state of the economy. He wants something done, but wants a fix that will work and not harm the taxpayers.
Like most Americans I think something has to be done. I'm not sure if throwing $700 billion at a problem will make it go away, but it is a start. I think Congress should have the ability to review and change the bill with the needs of the country. We have to set some sort of regulations on the financial sector. If we don't I belive we will be back in the same position in the future. I am in agreence with the author and believe something needs to be done, but lets cut away some of the fat and just address the problem at hand. It is already a shame that taxpayer dollers are being used to fund this bailout and we need to be certain that the dollars are used wisely and not squandered.
Friday, September 19, 2008
$500 Billion Band Aid
As most of you have probably heard the federal government has proposed a very large Band Aid for the US financial system. The cost to bailout the troubled mortgage sector could cost the country upwards of $500 billion. The CNN article "Bailout cost: higher than you think", explains that bailout may be a great temporary fix, but is sending the wrong message to financial institutions. The $500 billion is on top of the $500 plus billion the fed has already spent on the economic stimulus package, Freddie Mac & Fannie Mae, AIG, and guaranteeing money market funds.
This is a serious issue for our county at a time when most Americans are extremely concerned with the state of our economy. Americans should be concerned, after all our tax dollars would be funding the bailout. Like stated in the article; what type of message are we sending to the financial institutions? We are simply telling them that it is ok to be careless and reckless, Uncle Sam will bail you out.
As Americans we need to keep an eye on this continuously growing issue. It seems that the government pours billions of dollars into the system and in return only receives temporary relief.
How much more is it going to cost us and how much longer till we find a real solution?
http://money.cnn.com/2008/09/19/news/paulson.wrong.message.fortune/index.htm?postversion=2008091917
This is a serious issue for our county at a time when most Americans are extremely concerned with the state of our economy. Americans should be concerned, after all our tax dollars would be funding the bailout. Like stated in the article; what type of message are we sending to the financial institutions? We are simply telling them that it is ok to be careless and reckless, Uncle Sam will bail you out.
As Americans we need to keep an eye on this continuously growing issue. It seems that the government pours billions of dollars into the system and in return only receives temporary relief.
How much more is it going to cost us and how much longer till we find a real solution?
http://money.cnn.com/2008/09/19/news/paulson.wrong.message.fortune/index.htm?postversion=2008091917
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