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Cost of U.S. Crisis Action Grows, Along With Debt
Matthew Benjamin, Bloomberg
The global financial crisis is turning into a bigger drain on the U.S. federal budget than experts estimated two weeks ago, ballooning the deficit toward $2 trillion.
Bailouts of American International Group, Fannie Mae and Freddie Mac likely will be more expensive than expected. States are turning to Washington for fiscal help. The Federal Reserve said this week it will begin buying commercial paper, the short- term loans companies used to conduct day-to-day business, further increasing costs. And analysts now say the $700 billion bank- rescue plan passed by Congress last week may have to be significantly larger.
“I always assumed they would be asking for more money along the way if it was necessary, and it looks like it’s going to be necessary,” said Stan Collender, a former analyst for the House and Senate budget committees, now at Qorvis Communications in Washington. “At the moment, there’s nothing happening here that’s positive for the budget. Nothing.”
The 2009 budget deficit could be close to $2 trillion, or 12.5 percent of gross domestic product, more than twice the record of 6 percent set in 1983, according to David Greenlaw, Morgan Stanley’s chief economist.
(10 October 2008)
Contributor SCL writes:
Ouch. This could severely constrain the US government’s ability to deal with infrastructure, climate change, and energy constraint issues.
The Big Apple Loses Luster
Keith B. Richburg and Robin Shulman, Washington Post
Wall St. Meltdown Caps a Streak of Defeats for City
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NEW YORK — This big, brash, in-your-face city suddenly seems to have lost its mojo.
… On top of all that gloom comes the spectacular implosion of Wall Street, where some of the city’s most storied financial behemoths — Bear Stearns, Lehman Brothers, Merrill Lynch, American International Group — have been forced to merge or seek federal handouts to stave off bankruptcy. There are projections of thousands of lost jobs in the financial services sector, and the continuing plunge in stock prices has forced dramatic and sudden changes in the lifestyles of some of New York’s wealthiest.
Bookings for private jets are way down, and yacht rentals are drying up. Young Manhattanites are giving up the multimillion-dollar lofts they can no longer afford. The decade-long real estate boom appears to have stalled, with new projects on hold and existing skyscrapers difficult to refinance. New Yorkers are scaling back plans for big weddings and bar mitzvahs. Even a staple of life in the city, eating out, has taken a hit.
“Businesses are having tremendous difficulty getting money, and there’s a loss of confidence in the marketplace,” said Kathryn Wylde, president and chief executive of the Partnership for New York City, a nonprofit alliance of business leaders. “Merger and acquisition activity has stalled. . . . Portfolios have gone to hell. It’s rippling all the way through our system.”
In true New York fashion, more and more of those directly affected by the financial crisis are finding their way to psychoanalysts’ couches.
(12 October 2008)
A Power That May Not Stay So Super
David Leonhardt, New York Times
… The United States of today and Britain of 1905 are certainly more different than they are similar. Yet the financial shocks of the past several weeks — coming on top of an already weak economy and an unpopular war — have created their own crisis of national confidence.
On Friday, as the stock market finished one of its worst weeks by falling yet again, to roughly half of its level just one year ago, the Gallup Poll reported that Americans were substantially more pessimistic about the economy than they have been in more than two decades of polling. Nearly 60 percent say the economy is in poor shape, and 90 percent say it’s still getting worse.
“One thing seems probable to me,” Peer Steinbrück, the German finance minister, said recently. “The U.S. will lose its status as the superpower of the global financial system.” At another time, that remark might have sounded like mere nationalist bluster. Right now, it doesn’t seem so ridiculous to ask whether 2008 will come to be seen as the first year of a distinctly non-American century.
At the heart of the troubles, both short term and long term, is debt. Debt helped create the housing bubble and has now left almost one of every six homeowners with a mortgage larger than the value of their home.
… Whereas Britain lumbered under the weight of imperial overreach, as the historian Niall Ferguson has written, the United States will be shackled primarily by its financial overreach.
“Given the burden of debt that has accumulated, it’s hard to see the U.S. economy growing as fast as it did over the past few decades,” Mr. Ferguson said. “There is a profound mood shift occurring.”
But he added two caveats. The political language of both presidential campaigns makes clear that many voters, for all the current pessimism, still believe in the idea of American pre-eminence. So, apparently, do many of the world’s investors.
In recent weeks, the dollar has held its own. Stocks in every other major country are down about as much over the last year as they are in the United States, if not much more. America may not be a safe haven anymore, but it does seem to be safer haven.
(11 October 2008)
People in region fed up with prices, politicians
Steve Israel, Times Herald-Record (New York state)
Of all the big issues that concern voters — from abortion and the economy to terrorism and taxes — for Harry Moran, it all comes down to an incredibly shrinking jar of peanut butter.
Skippy — that All-American brand — recently cut the amount of peanut butter from 18 ounces to 16.3 ounces. But it hid the reduction by making the new jar look the same as the old one.
And guess what? The price stayed the same.
This sneaky move — on top of soaring gas and food prices and unanswered letters to politicians — symbolizes Moran’s frustration with America.
“I feel like I’m getting ripped off, taken advantage of, like nobody listens to my concerns, like nobody cares,” says the 86-year-old IBM retiree in the Sullivan County hamlet of Summitville.
From the Shawangunk mountains behind Moran’s home to the streets of Newburgh in the shadow of the Hudson River, residents feel powerless — pummeled by spiraling prices, soaring medical costs and politicians who just don’t care.
This is the overwhelming consensus of an informal survey of more than 50 people that gets at the emotional pulse of the people in the region.
(12 October 2008)
Anger, properly harnessed, can be productive. Or it can lead to horrendous politics – wars, searching out scapegoats, irrational policies. -BA
The California Natural Gas and Big Truck Addiction Scam
Julian Darley, Post Carbon Institute
It is surely not often that reading a dry piece of legal verbiage causes one to take flights of fancy and think of Hollywood, of great movies, and of even greater skullduggery. But California Proposition 10 changes all that. On November 4th 2008, voters will be asked to back this disgraceful farrago of rebates for fake clean vehicles cooked up by T Boone Pickens and his gas-producing friends. So think of ‘Chinatown’, ‘The Third Man’ and ‘The Sting’ all rolled into one. Here’s how the story unfolds:
If Prop 10 – misleadingly called ‘The California Renewable Energy and Clean Alternative Fuel Act’ – passes, California taxpayers (of which I am one) get to shell out five billion dollars spent over a 10 year period to help Pickens and friends get America further hooked on a fast depleting non-renewable natural resource – natural gas, while brilliantly further dooming America’s long distance freight transport system to early collapse and obsolescence and doing almost nothing to reduce the emission of greenhouse gases (GHGs) and other pollutants.
… So here is the message to California: this is the toxic mortgage to beat them all–we end up paying out ten billion dollars over the next thirty years for vehicles which are going to need a fuel we won’t have enough of and need to keep Americans from freezing, ten billion dollars for vehicles which will be on the scrap heap before we finish paying for them, ten billion dollars for vehicles that won’t even necessarily be used in California (which is good and bad), and ten billions dollars wasted that we won’t be spending to build a decent rail system to help California, the largest engine of the American economy, prepare itself for fast approaching peak oil and gas.
(10 October 2008)
