'Reports the Economist, “America’s growth has been driven by consumer spending. That spending, supported by increased BORROWING, is clearly UNSUSTAINABLE; and the consequent economic and financial imbalances must INVARIABLY UNWIND. As that happens, the country could face a PROLONGED period of slower growth.” (Emphasis mine.)
The bill is coming due. The piper will be paid. And all the financial wonks and gnomes and commissars worldwide know it. In many quarters, the Euro looks like a better bet than the dollar. Why? The Economist says productivity growth is going down in the US and up in Europe. The US structural budget deficit has widened and American savings has disappeared into the negative column...'The US and China: Is a Trade War Next?
'The American automobile industry is hemorrhaging. Today, Ford will announce that it will offer buyouts to 85 percent of its salaried work force. Ford is looking to lay off a staggering 52,000 employees by September 2007. Chrysler has already been merged with the German automaker Daimler-Benz. General Motors is gushing red ink.'Another Iraq Casualty: U.S. Auto Industry
'Based on the historic trends in valuations of U.S. housing, many economists and business writers have predicted a market correction, ranging from a few percentage points, to 50% or more from peak values in some markets, and, in spite of the fact that this cooling has not affected all areas of the U.S., some have warned that it could and that the correction would be "nasty" and "severe". Chief economist Mark Zandi of the investor service Moody's predicted a "crash" of double-digit depreciation in some U.S. cities by 2007–2009.'US housing bubble
Is the US economy in as poor shape as some say? Is it fundamentally strong or weak? Most importantly - if it crashes will it drag Canada down, too?
The Dow is over 12,000. Companies are reporting big gains. Sure there are losers, but that is the way it is. Bush has purposefully kept the dollar low. Now it's about .75 of a Euro. The Canadian dollar has dropped of late to about .87. The thing is, if the US economy tanks, it won't only take Canada, but the whole world with it. That's the nature of the global village.
Posts: 8179 | Location: On Vacation | Registered: 06-06-02
But allowing the currency to fall is hardly a sign of strength, is it? It's just a form of protectionism - and anyway it's a game at which the US can't beat China.
'...a recession is likely, because of the enormity of the housing bubble and the impact of its collapse. Recall that our last recession (in 2001) was caused by the bursting of a stock market bubble of about $7 trillion. The housing bubble is comparable in size (about $5 trillion at peak) and the bubble wealth is much more widely distributed: most Americans still have most of their assets in housing and little or nothing in stocks.
As this housing wealth disappears, people cut spending. We have already seen an enormous drop in the amount that people borrow on their homes, from $600 billion last year to about $350 billion for 2006. It was this borrowing, enabled by soaring house prices that allowed people to borrow more against the value of their homes, that fueled the U.S. economic recovery since 2001.
Housing construction and sales are also a big sector of the economy, currently about 6 percent of GDP. If that falls 30-40 percent, as it has in previous downturns, that's a drop of about 2 percent of GDP.
The recession caused by the stock market bubble bursting, which lasted only from March to November of 2001, would have been a lot worse if not for the enormous demand created by the housing bubble. So what will rescue the U.S. economy from the collapse of the housing bubble?..'Economy Looks Bad for 2007
I just bought a very nice standard lamp from Hammacher Schlemmer -- beautifully packed, good assembly instructions, novel features, energy-efficient, good solid base, attractive shade -- and proudly bearing the 'made in China' tag. Since I live in a rather remote area, I catalog shop a lot. The last five items I bought were made in China.
From now on, I'm not going to buy on the internet. I'll use the 1-800 number and ask where the goodie I want was manufactured before I buy.
North American petfood- and human food- manufacturing companies including cheap grain grown with absolutely no control of how much DDT or other pesticides, herbicides etc. are used in the growing, and which make animals and humans sick while increasing the profits of the manufacturers -- hey, it's the capitalist way!!!
Posts: 6961 | Location: British Columbia, Canada | Registered: 06-11-02
This has been an exceptional week in the stock market for the Bears.
As of right now, Dow Jones Industrial Average stands at 13,166.87, down 103.81 points from this morning but up over 100 points from this morning's low.
Low during the last year: 11,042.64 High during the last year: 14,021.95
Posts: 8578 | Location: in the backwoods of North Carolina | Registered: 06-07-02
Looks like we are in For a long rough Ride I have some Bank shares They were 1100 a few weeks ago (record High) Today they are trading @ 850 and Still dropping!!
Unknown how low they'll have to go before the Bank starts Suspending them? On the Plus side the Stat/Graphs for My Bank shares do say the market Had been running too high over the Last year! So 850 to 900 is a Mean average So in that respect It has now corrected itself (Could go to as low as 825-30 to keep in the "safe" area) Watch the Numbers over the Next week If the trading is Quiet and there is a small rise of 1% then my theory is Proved
On the other Hand If the Market drops again then it means Trouble
Posts: 14541 | Location: 6 miles west of Wigan UK | Registered: 06-05-02
Nobody knows how much exposure the various financial institutions of the world have got to the sub-prime mortgage problem. That makes people nervous. Banks start sitting on their cash. Then there's less liquidity and the hedge funds, the private finance investors who would buy into businesses, and anyone who would have lent money starts to fret.Whatever the exposure is, it could not be critical in itself but stock markets are not dictated as much by true assessments as by sentiment.
BTW you could have bought some oil stocks very cheaply had this gone on: you may still be able to, even now One thing's certain and that is there's a lot of people out there now with big sums of cash who are waiting for their moment to buy back in to the stockmarket. When they do the market will go rapidly up again.
The Fed has just lowered one of its interest rates. That should calm matters.
The global economy is, by all accounts here, pretty strong.The current shenanigans are no more than a minor matter.And America isn't going to go bust (Writes he, in a manner reminiscent of the chairman of the NYSE during the Wall Street Crash crisis. He marched in and loudly ordered a big purchase of steel stocks, with a view to inspiring confidence. He ended up in jail, but not quite for that gesture )
'Puzzled by the current gyrations of the world's financial markets? This time you're right to be. You're also in good company, as no one seems to know what the hell is going on. And that's part of the problem. If any of the following makes any sense then it's probably wrong...'commentisfree.guardian.co.uk
" There has been a little distress selling on the Stock Exchange...due to a technical condition of the market" J P Morgan and Company's statement after they had convened a meeting (...on Thursday, 24th October, 1929, a date subsequently known as 'Black Thursday' )
We've not to worry, then
All of us on AP are, of course, familiar with every page of J.K Galbraith's The Great Crash:1929, if only because we read it so often to our children and grandchildren as a bedtime story. So much less disturbing to young minds than, say, Little Red Riding Hood !Anyhow,to remind ourselves: in summary, the Professor put the decline down to
1)bad distribution of income 2)bad banking structure 3)bad corporate structure 4)dubious state of the foreign balance 5)poor state of economic intelligence
The Independent newspaper, here in Britain, rather unkindly says " He might have been writing about George W Bush's world rather than that of Herbert Hoover". The swine !
Then, as now, the US economy was fundamentally sound.It was just those pesky people with their mood swings that mucked everything up A case of 'up like the rocket, down like the stick'. Can't happen now .One feature then was that people of all backgrounds and means were able to buy stocks with money they hadn't got, relying on the market rising (which, unsurprisingly, it did when there were so many buyers )
In the meantime, in conservative 'middle England', long queues have formed outside branches of our fifth biggest mortgage lender, the Northern Rock Bank (formerly Northern Rock Building Society). The people are queueing to withdraw their savings. They withdrew about £1 billion [c $2 billion] on Friday alone.This action was prompted only by Northern Rock announcing that it had agreed a line of credit with the Bank of England, the credit being agreed as a precautionary measure. It has not yet used any of this credit and probably won't.It can comfortably pay out anyone and everyone who wants to withdraw and that situation will never change. The business is absolutely solid: the Financial Services Authority says so, the Chancellor of the Exchequer says so and the Bank of England says so.There is absolutely no risk to their savings at all, nor to any mortgages held. Nonetheless, the lines still form
One feature then was that people of all backgrounds and means were able to buy stocks with money they hadn't got, relying on the market rising (which, unsurprisingly, it did when there were so many buyers)
Whereas, today, people of all backgrounds and means have been able to buy houses with money they haven't got (through sub-prime mortgages), relying on the market rising (which, unsurprisingly, it was doing while there were so many buyers).
In France, home to such ignorant fools (in American terms ), the law is that every lender must be satisfied that the borrower is able to repay the loan. Any claimed default which is ascribed to the lender's failure in this regard falls on the lender not the borrower.It's held to be the lender's fault. That rule might tighten matters a little elsewhere in the world In practice, and perhaps under law, lenders do not lend more than a certain multiplier of the proven income net of expected expenses. From memory that multiplier is currently three.No salesman is going to get far by selling a sub-prime therefore. Any problem ends up costing his employer or the lender for whom he has acted.
Applying for a mortgage in France involves a truly exhaustive inquiry.The lender seeks every conceivable piece of evidence of status, income, outgoings, tax returns etc etc. The whole loan is covered by life assurance.And you can't get a 'confirmed offer': an offer which you can take with you until such time as you settle on a property to buy
- if it crashes will it drag Canada down, too?
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