Global Banking Meltdown

Today Monday October 6th 2008, we as a global economy continue our downward spiral. Even as the word of the passing of a $700 Billion dollar bail out with an additional $150 Billion earmarked on the fringes have yet to leave the halls of Washington’s Senate and House buildings. The global crisis has now spread and is engulfing Europe and its markets. There has been a frantic sell off of market based assets and holdings world wide that has sent stocks plummeting downward in the U.S., Europe and Asia.

Russia shut down both its stock markets after they fell more than 15 percent.

Germany’s DAX was down 410.02, or 7.1 percent

Great Britain’s FTSE 100 index lost 391.06 points, or 7.9 percent

France’s CAC-40 dropped 368.77 points, or 9.0 percent

The only bright side to this bleak picture is that the fears of a global recession have caused oil to fall below $90 a barrel. A place that it has not been in almost a year. How soon will gas prices at the pump reflect the barrel price of crude? I would guess that it could take weeks. They crank the gas price up the next morning when crude spikes, but they hold out to the breaking point before they reluctantly reduce the cost at the pump.

Talk of coordinated interest rate cuts from the world’s leading central banks has begun to swirl about. Analysts said they wouldn’t be surprised if the U.S. Federal Reserve, the European Central Bank and the Bank of England instigate the first joint action on interest rates since the 9/11 terrorist attacks on the U.S. in 2001. All three have been dumping Billions of dollars into the financial systems hoping to maintain liquidity.

The current wisdom of the economist mind is that we are going into or are in a recession that will out last the previous two recessions. They seem to agree that it will last about 1 year and be global in scope however will be mild in it’s overall effect. Smart money says buy gold.

The European Union (referred to as the EU) is grinding it’s way deeper into trouble as it’s main financial countries Germany, France, Britain and Italy can not find common ground to get out of this latest problem. Negotiations fell apart when the German Chancellor Angela Merkel announced Sunday that all $786 billion dollars worth of private deposits held in Germany would be guaranteed along with a new $69 billion dollar bailout package for Hypo Real Estate, Germany’s second largest mortgage lender. Additionally Germany has stated that they have no interest in pooling financial resources to serve the EU or offer to take part in a unified plan to insure all of the deposits in the banks of the EU. Of the 27 governments that make up the European Union, Germany is the largest economic power. In direct response to the German Chanellor’ statement, the Danish Economy Ministry said commercial lenders have agreed to contribute up to 35 billion kroner, or about $6.4 billion dollars, over two years to a fund that will help insure account holders from losses. Austrian officials have indicated that they might join in with a contribution as well.

What do you think the debate will be about on Tuesday night?

700 + billion Dollar Bail out Passes Senate with both McCain and Obama backing it

Wednesday night after much political posturing and television face time the Senate has passed the largest political farce our nation has had rammed down our throats since the WMD bit Bush fed us a few years back. Though both Democrats and Republicans alike are talking about how this deal had to happen for the greater good of Wall Street and Main Street, I for one am not happy. I don’t personally feel beholding to the banks or mortgage companies nor do I feel that I should support there failings and mismanagement or payroll.

We are a Democratic society with a Capitalistic market. We need to have both. But we also need to be able to have business take it’s natural course. When people do mismanage a company as bad as the banks have been mismanaged they should fail. If you or I had a company and it were to fail, do you honestly think for one moment that the government would step in and help us out of our mess? Mush less not offer to give us room and board in a nice stone building with three square if it were in the magnitude of this monumental screw up?

I personally thank the Senators who had the guts to vote against this farce.

This garbage product passed by a vote of 74-25. And before you ask, both Barack Obama and John McCain voting in favor of it.

$700 billion dollars, and it took them only a little over 3 hours of floor time to pass it. The House voted the steaming pile down just two days ago. The Senate has change a few details and now thinks this is no longer a steaming pile? Ok, who got to add on pork? That’s the only way I can see this thing passing. Somebody is getting a new bridge to nowhere. Here is the best part. It is no longer $700 Billion. It will now be initially higher than $700 Billion But over time, taxpayers are likely to make back much if not all of the money the Treasury uses because it will be investing in assets with underlying value.

Right and if you get behind us we will get behind you and -

$700 billion in toxic loans.

Look FDR fixed a mess that was a long shot worse than this little market correction and he did it for less with more control and didn’t skip a beat and more over never used threats or scare tactics to achieve the goal. You have a fear monger in office for a few more weeks. Let him rant and rave and his cabinet cry and plead, but don’t let him back in the house. He already screwed the pooch more than once.

Treasury Secretary Henry Paulson  and his buddies caused this crock and now he and Bush are the dynamic duo? Come on you are talking about Henry Paulson. The guy whojoined Goldman Sachs in 1974. He became a partner in 1982. From 1983 until 1988, Paulson led the Investment Banking group for the Midwest Region, and became managing partner of the Chicago office in 1988. From 1990 to November 1994, he was co-head of Investment Banking, then, Chief Operating Officer from December 1994 to June 1998. THis guy is part of the problem! Don’t hand him more of our money!

In case Mr. Paulson doesn’t know this or has never heard the expression – You can not borrow your way out of debt! It just doesn’t work that way!

If this goes all the way thru can you see what this will do to the value of our dollar? Do you think we will have any buy power left? Do you think if we are lucky it will still be valued at or around $0.20 on the Euro? Folks we will have taken out an additional $700 Billion in a loan from a foreign power to fix loans that are going south.

Where is the logic?

You can not borrow your way out of debt!

The house will be taking up the vote on Friday. If you think as I do that this is the wrong thing for our Government to be involved in and that they should allow our markets to live as a market lives then call your congressman and your senators and tell them. Light the switch boards up.

Differences from the last pile of dung?

The FDIC changes the Guaranteed deposits from $100,000 to $250,000 per account. Not forever, but rather for the next few years. If the FDIC can’t cover any accounts the Treasury will bail out the FDIC.

That’s a cluster waiting to happen.

This bill would extend a number of renewable energy tax breaks for individuals and businesses, including a deduction for the purchase of solar panels.

The Senate bill would also continue a host of other soon to expire tax breaks. Among them: the research and development credit for businesses and the credit that allows individuals to deduct state and local sales taxes on their federal returns.

The Bill includes relief for another year from the Alternative Minimum Tax, also known as the “AMT”.

Nothing here that is ground breaking. We were going to get the AMT extension anyway as well as the extensions on the solar and renewable energies. Where is this great sweeping good? These deal making measures?

President Bush, following the Senate vote, said the bill was central to the “financial security” of the nation. (He must have found out that our national security was less in danger than he originally thought after we found all those WMD’s) “The American people expect – and our economy demands – that the House pass this good bill this week and send it to my desk.”

No George, we the people expect that you are screwing us one last time before you leave office.

Was it good for you?