Mid December, early
Christmas shopping has shown that consumers are spending a lot
less. The US Central Fed has cut the rate it charges banks
for money to 0 - .25 % which is the lowest yet. And Bush offers
loans to the auto makers with lots of conditions as their last
ditch attempt to get sales going and restructure before claiming
bankruptcy protection. A nice Christmas gift to get them to
March 2009. Gasoline prices continue to "tank" as crude prices
drop into the low $40.00 per barrel price giving traveling
consumers a lot of relief. At the start of
December, it is noticed that the Dow Index and unemployment
figures in the US keeps rising.
Increasing profitability and productivity by trimming labour
content seem to attract more stock purchases BUT
in today's marketplace does it also diminish the chances that
your products will be purchased. Also the cost of money
becomes cheap as Japan puts is lowest interest rate to .3 % and
the US has 1 % rate. However, it does not seem to work as
even with low interest rates the public is still not borrowing
and buying. They seem to be just being very conservative
and saving to survive instead of spending on non essential items
. Forecasts for Christmas shopping indicates it will one of the
worse ever. The US report that they lost 700,000 jobs in
November which was about 200,000 more than was estimated by the
best economic heads in the US.
Zhou Xiaochuan,
governor of the Chinese central bank says “Over-consumption and
a high reliance on credit is the cause of the US financial
crisis,”
Mid November and the
global financial situation is starting to demonstrate that many
countries are in a recession. The US bailout seems to have
reached a nasty result as those who are making say $10.00 to
$15.00 per hour are asked to contribute to
bailout firms that have people who are making $50- $75 per hour.
The big auto makers are also asking for and getting bailout
funds while non foreign US car makers who make fuel efficient
cars are still selling lots of cars at reasonable prices.
At a meeting of the top 20 world's best economic countries who
meet to decide on solutions - it is decided that there should be
more meetings to determine if there is a global strategy to
solving the problem... It has also been reported that
despite bank loan rates dropping, credit card interest rates
have increased globally by about 2 %. Banks have used the
rational for the rate hikes that bad debt non payment has caused
this rise - governments are furious! Big companies seem to be
the ones who are eligible for the bailouts but not the little
guy except that the price of crude oil has dropped to less than
$60.00 per barrel sending gasoline prices plunging.
End of October and
the stock markets are still in a downslide spin despite governments
trying to stop the slide by things like insuring losses globally
by banks on their loans. Cash is now King as the old Scottish
adage of not spending until you have the cash bites into the
economy. And lessened non regulation by the US federal
reserve as promoted by Greenspan is blamed for the devaluation
of the stock markets around the world plus the sale of
derivatives and other non cash schemes are blamed. The
question will soon be if not now, where can people invest their
cash that was removed from the market so that it will give them
an insured return on my investment.
Mid October and the
major countries in the world decide to bail out the banks with
such things as loan guarantees with massive amounts of money...
The Dow responds on October 13th with a resounding 936 points
straight up which is the largest one day amount in their
history. The world now questions - should governments bail
out banks which caused the problem in the first place by giving
loans to companies and people who could not really pay them
back?
At the beginning of
October, despite the US putting $700 billion into a bail out of
some financial institutions, the stock market again tanked
sending the Dow straight down.
At the end of
September with the US presidential election a short 5 weeks away
the US Congress votes to bailout banks, businesses and home owners
who were caught up in the subprime mortgage economic mess
sending the financial markets still plunging. The "Me have it now"
generation can no longer have it now without paying for it now -
Cash is king again!
Then two days
later, the US Senate votes on a revised bill and passes it with
ease.
The proposed US bailout legislation authorizes Treasury
Secretary Henry M. Paulson Jr. to initiate what is likely to
become the biggest government bailout in U.S. history, allowing
him to spend up to $700 billion to relieve faltering banks and
other firms of bad assets backed by home mortgages, which are
falling into foreclosure at record rates.
The question of course is. "What will be what will be the short
and long term effect on global economies? And will it be
enough to stop a depression such as what happened in the 1930's"
Mid September and
the markets crash but the US government bailed out the big
insurance company AIG with loans of 85 billion dollars and other
controls. The next day governments around the world
put new regulations on trading such as a short ban on short
trading ~~~ it seems to have worked as markets around the
world rebounded as people began to reinvest the money that they
had taken out of the market. The cost to do this was in
the trillions of dollars which George Bush said would be paid
back over a period of time.
In early September,
the Bush administration's seizure of troubled mortgage giants
Fannie Mae and Freddie Mac is potentially a $200 billion bet
that it will help reverse a prolonged housing and credit crisis.
What's going on in the US of A... Work hard, fail in your
ventures and the government bails you out.... is the US is on
the slippery Teflon slope of more debt and increased inflation?
