Posts Tagged ‘banking’

Recession Update: Economy Worsens

August 7, 2009

CNN made a decieving headline today: “Jobless rate down for first time in a year”. What is perhaps comical is that the only “jobless rate” that was down was the number of jobs being lost (“only” 247,000 jobs were lost in July). What the headline implied was that the unemployment rate had decreased, when in reality,  unemployment is still on the rise. Indeed, we are in the middle of the deflationary spiral. The same CNN article acknowledges that the national unemployment rate will likely increase to the double digits.

While it may be a little early to call Obama’s economic policy a failure (seeing as most of those “shovel-ready” projects will not begin until the end of next year), there certainly has been little to no recovery. In the middle of July, when the markets usually boom due to the spending of savings on family vacations, the only good news was that fewer jobs were lost than the month before and the unemployment rate fell 0.1%.

Obama’s manipulation of the the banking industry doesn’t appear to have done too much help, either. According to Fox Business, due to continued real-estate deflation and instability, banks are continuing to experience significant losses. Of course, Obama’s solution to this problem is another bailout, this time of the real-estate industry. Based off of our experience of past bailouts, the real-estate bailout will likely shift the instability elsewhere, while keeping the real problem in place.

Edward Liddy, the Congressional Scapegoat

March 30, 2009

We all need to blame someone for our troubles.We saw this with George Bush in 2007 and with Steve Bartman in 2003.

Kenneth Westhues wrote,
<blockquote>”Scapegoating is an effective if temporary means of achieving group solidarity, when it cannot be achieved in a more constructive way.”</blockquote>
People look for scapegoats when they need someone to blame, and most often, they are not even related to their effects. For example, George Bush is blamed for Freddie Mac’s failure, though the failed institution was created by Franklin Delano Roosevelt and forced into bad loans with poor families by the Carter Administration (and Bush would have made the necessary changes to save Freddie Mac had the liberal congress not prevented this in the name of the poor).

This brings us to Edward Liddy. Congress called him in, like a court, and questioned him about AIG and what was being done to fix the company. Congress was fuming about AIG’s continuous corruption, and they wanted answers.

Well, Edward Liddy is certainly not responsible for this corruption. The federal government put him at his post as CEO of AIG. Many other people have been CEO before him, including Martin Sullivan, Robert Willumstad, and Joseph Cassano. ABC says that the latter “virtually bankrupted” AIG, and even this is unfair.

It is implausible and unfair to attack Edward Liddy for contractual bonuses, especially when Liddy believes he’s “made progress in winding down this business”.

Now we must note that our government hates the very AIG that they set up. Says Democrat Paul Hodes, “AIG now stands for arrogance, incompetence and greed.” Well, one thing is certain. Dissatisfaction with the work of liberal congress is bipartisan.

Are They Stupid?

March 14, 2009

When one tree branch falls, should we chop the whole tree down?

Logically, this makes no sense at all, but metaphorically, it’s happening right before our eyes. A few banks go under, so the government concludes that all the banks are going to collapse. So, it takes over the banking industry, effectively destroying its ability to compete and produce wealth.

But before the tree is chopped, a doctor is sent to try to save it. The doctor gives CPR and $20 to the fallen twig, but it is not revived and does not start growing again. The doctor tells the lumberjack that the tree is dead, and the living tree is chopped down.

This is a terrible way to heal the banking industry when we look at it this way, but for some reason, it is the very way that our government feels necessary in rescuing the economy.

The solution to a few failing companies is to let them fail. To prop up a failing company is a waste of money because no matter what you do to it, it will still just be a dead twig. Yes, temporarily a few jobs are lost, but in the long run,the productive banks have a larger market to expand.

Recession is a natural part of the economic roller coaster and government failure will only extend it.