The Political Junkies
UPDATED: APR 3, 2008
REPUBLICAN LUNCH
The economy is in recession but food prices are rising. More Americans are struggling to make ends meet – many are not making it.
Republican economics has brought Americans:
The worst case of food inflation in nearly 20 years has more Americans giving up restaurant meals to eat at home. We're buying fewer luxury food items, eating more leftovers and buying more store brands instead of name-brand items. . . .
Record-high energy, corn and wheat prices in the past year have led to sticker shock in the grocery aisles. At $1.32, the average price of a loaf of bread has increased 32 percent since January 2005. In the last year alone, the average price of carton of eggs has increased almost 50 percent. . . .
Overall, food prices rose nearly 5 percent in 2007, according to the U.S. Department of Agriculture. That means a pound of coffee, on average, cost 57 cents more at year's end than in 2006. A 12-ounce can of frozen, concentrated orange juice now averages $2.53 — a 67-cent increase in just two years. . . .
In 2007, the FMI survey showed the average number of weekly shopping trips falling below two per household for the first time.
The numbers of Americans who cannot make ends meet are looking for charity:
Those who can't absorb the added expenses are increasingly seeking help from food pantries. America's Harvest, which distributes nearly two billion pounds of food and grocery products each year to more than 200 food banks across the country, estimates that its overall client load increased by 20 percent in the fourth quarter of 2007.
In addition, the price of gasoline continues to rise as these trends show:
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Americans are losing confidence. The Conference Board Consumer Confidence Index continues to plummet. In particular, the CBCCI measures future confidence (Expectations Index) in the economy which is at a 35 year low.
The Conference Board Consumer Confidence Index, which had declined sharply in February, fell further in March. The Index now stands at 64.5 (1985=100), down from 76.4 in February. The Expectations Index declined to 47.9 from 58.0. The Present Situation Index decreased to 89.2 from 104.0 in February.
The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world's largest custom research company. The cutoff date for March's preliminary results was March 18th.
Says Lynn Franco, Director of The Conference Board Consumer Research Center: "Consumers' confidence in the state of the economy continues to fade and the Index remains at a five-year low (March 2003, 61.4). The decline in the Present Situation Index implies that the pace of growth in recent months has weakened even further. Looking ahead, consumers' outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon. The Expectations Index, in fact, is now at a 35-year low (Dec. 1973, 45.2), levels not seen since the Oil Embargo and Watergate."
Consumer spending represents 2/3rds of the national economy. With less money in their pockets and their expectations souring, the recession could be long and hard.
Simple question for Americans; “had enough.”
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UPDATED: MAR 30, 2008HOW BAD?
The Republican recession underway is inflicting economic pain for most Americans. How bad will this recession be? “How bad” typically translates into two questions; how deep the recession will be and how long it will last.
At TPJ, one of the economic forecasters we follow is John Maudlin, publisher of Frontline. Maudlin’s economic forecasting is always balanced and insightful.
Maudlin’s current views can be summarized:
1. The housing bubble that triggered the recession will continue. In the immediate future, home sales will drop by another 30%.
2. An oversupply of homes means new home construction will drop by 32% to 70% in the top twenty housing markets and will last three or four years. Many homebuilders will fail as a result.
3. The credit crunch makes loans harder to secure, reducing the number of potential buyers of growing number of empty homes across the United States. Home sales, estimated at some 6,000,000 this year will drop to 4,000,000 next year.
4. Millions of variable rate loans are set to have their interest rates adjusted this year. This means that even more borrowers will owe more on their homes than the value of their homes as housing prices continue to fall. The number is already 8.8 million and growing. Those who keep their homes will have no equity in their homes for years to come.
5. Foreclosures will continue to rise – and rise rather dramatically. America may experience another 2,000,000 foreclosures in the short term.
6. Investors who bought “packaged” securities consisting of mortgages and banks that made loans will continue to experience losses. “Merrill Lynch may have to write down another $4.5 billion this quarter, with other banks also continuing to add to their losses. And it is going to get worse. There were $828 billion dollars of securitized first-lien mortgages made in 2005-7 that were comprised of loans that have little or no historical precedent in terms of documentation or loan-to-value. Another $56 billion in second-lien mortgages were made with little or no attempt to actually and properly value the loans. These are loans that are likely to be in trouble.”
Maudlin simply sees no bottom in sight. He quotes one report from T2 Partners, “"In summary, today we are only seeing the tip of the iceberg: an enormous wave of defaults, foreclosures and auctions is just beginning to hit the United States.”
How bad? The recession will be longer rather than shorter and deeper than Bush and the Republicans who brought America this recession will ever admit.
Bush’s successor will be saddled with the burden of spending four years trying to right the American economy.
A Sen. McCain victory in November will be another four years of Bush.
Had enough?
BUSH’S TITANIC
The American economic ship of state is taking on water at an alarming rate. As the economy flounders there are simply not enough life boats. The draconian question is who gets the life boats and who will simply drown.
The Republican captains of the ship have decided that the crew and first class passengers go first. Second and Third Class passengers (average and lower socio economic Americans) are left to sink or swim on their own.
At first blush, the Federal Reserve’s bailout of Bear Stearns Companies (BSC) appeared to be a logical candidate for a seat on the lifeboat. If BSC was not saved the subsequent economic fallout across financial markets would drown even more. The logic was not only economically rational but inescapable.
American taxpayers funding the bailout could seek consolation in the fact that BSC stock owners would also feel the pain as they would receive a nominal $2.00 for each share of their stock from JP Morgan, who, as a part of the bailout, agreed to buy BSC.
The terms have changed. JP Morgan has raised its bid to $10.00 a share giving BSC shareowners a seat in the lifeboat. BSC investors were obviously elated:
JPMorgan boosted investors' optimism by lifting its offer for Bear Stearns to $10 per share from $2. The revised plan is aimed at soothing Bear Stearns shareholders upset over JPMorgan's earlier offer, which was made at the behest of the Federal Reserve when Bear Stearns was near collapse.
Bear Stearns shares jumped $5.29, or 89 percent, to $11.25, while JPMorgan rose 58 cents to $46.55.
. . . The latest Bear Stearns deal signals that investors' losses might not be as sizable as feared.
"The reason we've rallied the last three or four days is people are saying 'Hey, even if this paper is worth less than people think, the Fed is willing to come in and buy it at some level,' " said Charlie Smith, chief investment officer at Fort Pitt Capital Group in Pittsburgh.
The Republican captain, Bush, sends the message rather directly to those who will be left to perish. While Bush supports the bailout (now equivalent of massive cheap loans) for BSC and its investors, Bush refuses a lifeboat to the passengers as he warns of “overcorrecting” the economy in the face of the crisis. “Overcorrecting” is simply political spin indicating the passengers will sink or swim on their own instead of taking a seat on the lifeboat BCS and its investors just occupied:
[T]he president said his administration would act only "in a way that does not damage the long-term health of our economy." He wasn't specific about what sort of action this would preclude.
But Bush has in the past rejected Democratic lawmakers' ideas on the economy. They include proposals to help struggling families by extending unemployment and food stamp benefits and sending aid to strapped states and to prevent homeowners from foreclosure by allowing bankruptcy judges to adjust loan rates.
Sen. McCain sends the same message. He recently stated that he has
"always been committed to the principle that it's not the duty of government to bail out and reward those who act irresponsibly, whether they're big banks or small borrowers," without noting that McCain reportedly stated that he didn't think the Federal Reserve acted improperly by extending a $30 billion line of credit to facilitate the acquisition of the near-bankrupt investment bank Bear Stearns by JP Morgan Chase.
Translated, McCain approves of the BSC lifeboat and crew but none for the passengers.
As the passengers grow more unruly, Republicans start the band playing a reassuring tune that rescue is on the way for the passengers, which in reality offers no real hope of rescue.
The Treasury Department will propose on Monday that Congress give the Federal Reserve broad new authority to oversee financial market stability, in effect allowing it to send SWAT teams into any corner of the industry or any institution that might pose a risk to the overall system.
The proposal is part of a sweeping blueprint to overhaul the nation’s hodgepodge of financial regulatory agencies, which many experts say failed to recognize rampant excesses in mortgage lending until after they set off what is now the worst financial calamity in decades. . . .
While the plan could expose Wall Street investment banks and hedge funds to greater scrutiny, it carefully avoids a call for tighter regulation.
The plan would not rein in practices that have been linked to the housing and mortgage crisis, like packaging risky subprime mortgages into securities carrying the highest ratings.
Scrutiny but no real power to regulate abuses? Republicans are simply rearranging the chairs on the Titanic while the band plays on until the drowning begins.
And, it has already started. Simply consider the numbers of people in the United States who are already struggling to survive as the number on Food Stamps has just hit an all time high:
[T]the number of people receiving Federal food stamps jumped to a record level in August, meaning that almost one in 10 Americans now depend on the Government to put food on the table.
According to figures made public today by the United States Department of Agriculture, 23.6 million Americans received food stamps in August, an increase of more than 3 million over the same month last year.
To specialists, these numbers suggest that the economy is slipping back into recession. But for many working Americans, they confirm that poverty and hunger are no longer just problems of the inner city or the hollows of Appalachia and instead have now spread out into middle class suburbs.
Simple question: “had enough?”
Last Update: 04/09/2008