I start with the shorter answer. <<And does this mean the first "stimulus" plan was a failure? Sure, the banks are still open, but the economy continues to plummet. >>
The first bail-out delayed the problem, I wrote here, while it was under discussion in October or November, that it would delay the problem until February or March. Which is the problem? the bankruptcy of the banking and financial system. Last days probably your have started to hear to Roubini, Krugman, etc. that right now banks are insolvent and they have to be nationalised. I do not know what this administration will do if a second bail-out or a nationalization. <<And will throwing money at the problem fix it?>> In my opinion absolutely not, it does not fix anything, it just gives cash to companies that are in bankruptcy, it delays their problem some months, because the real root problem is not the banking system, now the root problem is the real economy. Few days ago I wrote here that my first option would be to forget curent banks (BofA, Citi, etc.) to let them die, or survive by themselves. To make them alive is extremely expensive and maybe at the end they will fall. The option is to create new banks from scratch or to use small banks that are healthy and make them grow enough through acquisition of the healthy units of current banks. To help them grow, the $800bn or $900bn from the next bail-out could be used not for old banks but for loans to those small banks, loans for acquisitions. It would make sense as it would be a healthy business. <<Where's the bottom?>> Nobody can know it yet. There is no robust sign that gives a serious clue. If somebody makes a prediction today it is a wish, not a true prediction. I explain why. On past summer, this crisis became an economic crisis type U, not just a financial crisis, type V. Type U crisis have four phases. 1.- First phase. The left side of the U. Indicators fall sharply and at a constant or even growing pace. For example, right now, imagine that unemployment falls for example at 1% per month or per quarter, does not matter, it is just an example. Let us say at 500,000 per month more or less. We cannot know how long we will last this phase. 2.- Second phase. The left-bottom side of the U. Indicators still fall, but the pace is slower and slower. For example, emplyment falls 0.9% this month, 0.7 next month, etc. Now, in second phase is the first time that we can predict when we will reach the bottom. 3.- Third phase. The right-bottom side of the U. Indicators start to rise, but at a slow pace yet. For example, employment raises 0.1% this month, 0.3% next month, etc. We have left the bottom behind. 4.- Fourth phase. Indicators rise sharply. As this is an economic crisis, not just a financial crisis, we need net investments and trade. Right now, we are in a disinvestment phase yet. That is why your administration, among many others, plan to invest huge amounts of funds, to start to counter disinvestments. Building roads, houses, etc. Since we start an investment until we see results we need AT LEAST 6 to 9 months. For example, since you decide to build a shop until you open that shop and you produce results you need that time. It cannot be shorter, but unfortunately it can be longer because many reasons (investment were not enough, it was not the right business, etc.), then we are not sure if the owner of the shop will disinvest some months later. But, if you make investments and, at the same time you withdraw the same amount of funds and give them to useless banks to fix in part their balance sheets, the second action (the bailout) neutralizes the first one (investments on roads, houses, etc.). The net gain is much lower than if you avoid the bailout. If investments stay in the real economy (companies and workers who will build roads and buildings, their suppliers, etc.) it will be a complete gain, it will create economic activity, it will push the economic engine to move. Peace and best wishes. Xi On 6 feb, 20:10, Kamakazee <[email protected]> wrote: > Where's the bottom? > > And does this mean the first "stimulus" plan was a failure? Sure, the > banks are still open, but the economy continues to plummet. > > And will throwing money at the problem fix it? > > On Feb 6, 9:01 am, "[email protected]" <[email protected]> wrote: > > > > > My comment: Rate of fall does not rise much, first phase of this > > crisis yet. > > > Peace and best wishes. > > > Xi > > >http://www.bloomberg.com/apps/news?pid=20601087&sid=aFTLrvbYYuMM&refe... > > > Feb. 6 (Bloomberg) -- The unemployment rate reached the highest level > > since 1992 and payrolls tumbled in January, with millions more losses > > likely until a fiscal stimulus and emergency lending programs begin to > > temper the U.S. economy’s freefall. > > > The jobless rate rose to 7.6 percent from 7.2 percent in December, the > > Labor Department said today in Washington. Payrolls fell by 598,000, > > the biggest monthly decline since December 1974. Losses spanned almost > > all industries, spanning from construction and manufacturing to > > retailing, trucking, media and finance. > > > “We are in the middle of a very severe, a violent, collapse in > > activity and it could go on for months,” James Galbraith, an economics > > professor at the University of Texas in Austin, said in an interview > > with Bloomberg Television. The report will likely diminish objections > > “that somehow the president’s recovery plan is too large and should be > > trimmed back.” > > > Obama, who predicted a “dismal” report, is trying to push lawmakers to > > approve a package of about $900 billion, and in three days plans to > > announce a new effort to shore up credit markets. The rate of the job > > market’s decline means it’s unlikely the steps will halt a collapse in > > consumer spending until the second half of the year, economists said. > > > Millions Hurt > > > “We’ll see households pull way back, the economy is still in > > freefall,” said Nariman Behravesh, chief economist at HIS Global > > Insight in Lexington, Massachusetts. “We’ll probably see job losses of > > another 2 million to 3 million before this is over.” Payrolls have > > already plunged by 3.57 million so far. > > > Treasuries slipped while stock-index futures headed higher after the > > figures, indicating some investors feared an even worse January > > employment report. Contracts on the Standard & Poor’s 500 Stock Index > > gained 0.5 percent to 844.70 at 9:11 a.m. in New York. Benchmark 10- > > year note yields rose to 2.93 percent from 2.90 percent late > > yesterday. > > > The loss of jobs, at employers ranging from manufacturers like > > Caterpillar Inc. to retailers such as Macy’s Inc., is shattering > > consumer confidence and crippling spending. Household purchases fell > > more than 3 percent at an annual rate in the past two quarters, the > > first time that’s happened since at least 1947. > > > With a revised decline of 597,000 jobs in November, revisions > > subtracted 66,000 workers from previously reported payroll figures for > > the last two months of 2008. The 3.57 million of losses since the > > recession started in December 2007 marks the biggest employment slump > > of any economic contraction in the postwar period. > > > Worst on Record > > > Last month’s losses mark the first time since records began in 1939 > > that job cuts exceeded half a million in three consecutive months. > > > Payrolls were forecast to drop 540,000, according to the median > > estimate of 75 economists surveyed by Bloomberg News. Estimates of the > > decrease ranged from 400,000 to 750,000. > > > The jobless rate was projected to jump to 7.5 percent. Forecasts > > ranged from 7.3 percent to 7.6 percent. > > > The House of Representatives last week passed an $819 billion stimulus > > package that includes tax cuts and infrastructure spending. The Senate > > is working on a plan that is closer to $900 billion. > > > “A failure to act and to act now will turn crisis into catastrophe and > > guarantee a longer recession,” Obama told lawmakers on Feb. 4 in > > Washington. > > > Factory Jobs > > > Today’s report showed factory payrolls decreased by 207,000, the > > biggest drop since October 1982, after declining 162,000 in the prior > > month. Economists had forecast a January drop of 145,000. The decrease > > included a loss of 31,300 jobs in auto manufacturing and parts > > industries. > > > Caterpillar, the world’s largest maker of construction equipment, on > > Jan. 30 said it plans to cut 2,110 workers in addition to the 20,000 > > reductions it reported earlier in the month. > > > Payrolls at builders declined 111,000 after decreasing 86,000. > > > Service industries, which include banks, insurance companies, > > restaurants and retailers, subtracted 279,000 workers after cutting > > 327,000. Retail payrolls decreased by 45,100 after a decline of > > 82,700. Financial firms reduced payrolls by 42,000, after a 27,000 > > decrease the prior month. > > > Government payrolls increased by 6,000 after shrinking by 10,000 the > > prior month. > > > Retailers Hit > > > Saks Inc., Target Corp., Starbucks Corp. and Home Depot Inc. last > > month reported plans to reduce workers. Others following suit in > > February include Macy’s. The second-largest U.S. department-store > > company said it will cut 7,000 jobs, eliminate executives’ merit > > increases for 2008, and trim its contribution to staff 401(k) > > retirement-savings plans. > > > “This is a time when nothing should be considered a sacred cow,” > > Macy’s Chief Executive Officer Terry Lundgren said on a conference > > call with investors and analysts. > > > News of job losses continued this week. PNC Financial Services Group > > Inc. will reduce almost 10 percent of its workforce by 2011, and Estee > > Lauder Cos., the maker of Clinique and Bobbi Brown cosmetics, will > > slash 2,000 jobs over the next two years. > > > Government jobs are now also in jeopardy. The U.S. Postal Service > > plans to trim headcount through attrition and early retirement, and > > has asked lawmakers to allow it to reduce its six-days-a-week delivery > > schedule to pare expenses. > > > Working Hours > > > The average work week remained at 33.3 hours in January. Average > > weekly hours worked by production workers fell to 39.8 hours from 39.9 > > hours, while overtime decreased to 2.9 hours from 3 hours. Average > > weekly earnings rose by $1.67 to $614.72. > > > Workers’ average hourly wages rose 5 cents, or 0.3 percent, to $18.46 > > from the prior month. Hourly earnings were 3.9 percent higher than in > > January 2008. Economists surveyed by Bloomberg had forecast a 0.2 > > percent increase from December and a 3.6 percent gain for the 12-month > > period. > > > With today’s report, the Labor Department also issued revisions to > > payrolls going back to 2004. The annual benchmark revision, which > > aligns the data with corporate tax records and covers the period from > > April 2007 to March 2008, subtracted 89,000 workers from payrolls in > > the 12 months ended in March, exceeding the 21,000 reduction Labor > > estimated in October. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "World-thread" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/world-thread?hl=en -~----------~----~----~----~------~----~------~--~---
