The year 2007 is over and a new year has begun.

During the year 2007, the US economy didn't do bad, the major markets finished the year with gains, several segments of the market showed extremely good gains, jobs grew pretty well, and so on.

The really good news was the resiliency shown by the economy in the face of many coming forward with gloomy outlooks for the market....none of those doom scenarios held the market back.

We will soon see what the new year holds.

Yes we will.

I don' know about you Mac2, but the stock market is not much of an indicator of the U.S. economy any more in my eyes.

Good on Wall Street is usually counter to what is good for Main Street.

While it is true that the DOW showed gains of about 7%, I'm not looking forward to what is coming:

to wit:

Housing collapse continues, food costs doubling, dollar devalued further, banks collapsing. We have been warned. Stay in dollars? I wonder.. http://www.earthfiles.com/news.php?ID=1364...ory=Environment

The Solvency Crisis
Robert Kuttner
December 26, 2007 | web only
The Fed is lowering interest rates and exchanging ordinary bank collateral for cash. But it will take more than that to see America through this perfect economic storm.

Blindly Into the Bubble
By Paul Krugman
The New York Times Friday 21 December 2007

When announcing Japan's surrender in 1945, Emperor Hirohito famously explained his decision as follows: "The war situation has developed not necessarily to Japan's advantage."

There was a definite Hirohito feel to the explanation Ben Bernanke, the Federal Reserve chairman, gave this week for the Fed's locking-the-barn-door-after-the-horse-is-gone decision to modestly strengthen regulation of the mortgage industry: "Market discipline has in some cases broken down, and the incentives to follow prudent lending procedures have, at times, eroded."

That's quite an understatement. In fact, the explosion of "innovative" home lending that took place in the middle years of this decade was an unmitigated disaster.

But maybe Mr. Bernanke was afraid to be blunt about just how badly things went wrong. After all, straight talk would have amounted to a direct rebuke of his predecessor, Alan Greenspan, who ignored pleas to lock the barn door while the horse was still inside - that is, to regulate lending while it was booming, rather than after it had already collapsed.

I use the words "unmitigated disaster" advisedly.

Apologists for the mortgage industry claim, as Mr. Greenspan does in his new book, that "the benefits of broadened home ownership" justified the risks of unregulated lending.

But homeownership didn't broaden. The great bulk of dubious subprime lending took place from 2004 to 2006 - yet homeownership rates are already back down to mid-2003 levels. With millions more foreclosures likely, it's a good bet that homeownership will be lower at the Bush administration's end than it was at the start.

Meanwhile, during the bubble years, the mortgage industry lured millions of people into borrowing more than they could afford, and simultaneously duped investors into investing vast sums in risky assets wrongly labeled AAA. Reasonable estimates suggest that more than 10 million American families will end up owing more than their homes are worth, and investors will suffer $400 billion or more in losses.

So where were the regulators as one of the greatest financial disasters since the Great Depression unfolded? They were blinded by ideology.

"Fed shrugged as subprime crisis spread," was the headline on a New York Times report on the failure of regulators to regulate. This may have been a discreet dig at Mr. Greenspan's history as a disciple of Ayn Rand, the high priestess of unfettered capitalism known for her novel "Atlas Shrugged."

In a 1963 essay for Ms. Rand's newsletter, Mr. Greenspan dismissed as a "collectivist" myth the idea that businessmen, left to their own devices, "would attempt to sell unsafe food and drugs, fraudulent securities, and shoddy buildings." On the contrary, he declared, "it is in the self-interest of every businessman to have a reputation for honest dealings and a quality product."

It's no wonder, then, that he brushed off warnings about deceptive lending practices, including those of Edward M. Gramlich, a member of the Federal Reserve board. In Mr. Greenspan's world, predatory lending - like attempts to sell consumers poison toys and tainted seafood - just doesn't happen.

But Mr. Greenspan wasn't the only top official who put ideology above public protection. Consider the press conference held on June 3, 2003 - just about the time subprime lending was starting to go wild - to announce a new initiative aimed at reducing the regulatory burden on banks. Representatives of four of the five government agencies responsible for financial supervision used tree shears to attack a stack of paper representing bank regulations. The fifth representative, James Gilleran of the Office of Thrift Supervision, wielded a chainsaw.

Also in attendance were representatives of financial industry trade associations, which had been lobbying for deregulation. As far as I can tell from press reports, there were no representatives of consumer interests on the scene.

Two months after that event the Office of the Comptroller of the Currency, one of the tree-shears-wielding agencies, moved to exempt national banks from state regulations that protect consumers against predatory lending. If, say, New York State wanted to protect its own residents - well, sorry, that wasn't allowed.

Of course, now that it has all gone bad, people with ties to the financial industry are rethinking their belief in the perfection of free markets. Mr. Greenspan has come out in favor of, yes, a government bailout. "Cash is available," he says - meaning taxpayer money - "and we should use that in larger amounts, as is necessary, to solve the problems of the stress of this."

Given the role of conservative ideology in the mortgage disaster, it's puzzling that Democrats haven't been more aggressive about making the disaster an issue for the 2008 election. They should be: It's hard to imagine a more graphic demonstration of what's wrong with their opponents' economic beliefs.

The dollar decline will lead to a gradual decline in living standards for the average American. That is the hidden tax in paying for the Iraq war. A country does not fight wars that are optional that it does not wish to pay for up front. It will be paid for one way or another. All of that borrowed money plus the trade deficit = a lowering of living standards one way or another. Well Mac still happy with the Iraq quagmire? Still happy with the idiot Bush?

The More Things Change, The More They Stay The Sameby Doug FabianVolatility could well be the quintessential term when it comes to describing the market of 2007, so why should the final days of the year be any different? As of Wednesday's close the S&P 500 index was back above its long-term, 200-day moving average and heading for what many thought would be a strong final flurry to finish out 2007
You Can't Handle The Truth!by Doug FabianSo, what's wrong with this market? I guess the best answer is that investors are just really nervous right now. People are justly worried over the truth of an economic slowdown, a less-than-aggressive Federal Reserve and the prospect of more big writedowns from the major investment banks.
The ADR Revolutionby Nicholas A. VardyDuring the past two years, U.S. investors have piled into fast-growth, global stocks. Net inflows into emerging market equity funds alone topped $44 billion through December 12th -- the highest level ever.

Dollar Falls as Data May Show December U.S. Manufacturing Growth Weakened The dollar fell against the euro, extending last year's 10 percent decline, on concern the slowdown in U.S. manufacturing will give the Federal Reserve more reason to lower interest rates.

Manufacturing in U.S. Probably Slowed in December as Sales, Orders Dropped Manufacturing in the U.S. probably expanded in December at the slowest pace in 11 months as weakness in other parts of the economy made companies less willing to spend, economists said before an industry report today.

Oil Rises Above $97 a Barrel on Speculation U.S. Stockpiles Fell Last Week Crude oil futures rose above $97 in New York, extending last year's 57 percent gain, on speculation that U.S. stockpiles fell for a seventh week.

Legg Mason's Bill Miller Trails S&P 500 Index for Second Consecutive Year Bill Miller's Legg Mason Value Trust fell 6.6 percent in 2007, the first time he has trailed the benchmark Standard & Poor's 500 Index in back-to-back years since 1990.

GM, Ford December U.S. Sales Likely Fell, Capping Slowest Year Since 1998 General Motors Corp. and Ford Motor Co. will probably say December U.S. auto sales fell as consumers reined in spending, ending a year with the lowest demand for cars and trucks in a decade.

Citigroup May Have to Write Down $12 Billion, Sanford C. Bernstein Says Citigroup Inc., the biggest U.S. bank, may have to reduce the value of holdings by $12 billion in the fourth quarter because of financial-market swings, according to Sanford C. Bernstein & Co. analysts.

Editorial
The Economy and the New Year
http://www.nytimes.com/2008/01/02/opinion/...amp;oref=slogin

Published: January 2, 2008

As 2008 begins, house prices are still skidding, bank losses are still mounting, oil is again flirting with $100 a barrel and consumers are buying less as prices rise. To many, the wheels appear to be coming off the economy. To others, including President Bush and his aides, the economy is fundamentally sound and resilient.
Skip to next paragraph

Obviously, both camps cannot be right. Unfortunately, the preponderance of evidence is grim.

When Mr. Bush says the economy is strong, he is generally referring to rising wages, low unemployment and what he calls healthy economic growth. But wages have either fallen or failed to outpace inflation during most of his tenure. Job creation is now slowing from a pace that has long been subpar. Economic growth is also braking, if not contracting. In any event, growth during the Bush years has not been healthy; rather, it has been abnormally lopsided. Corporate profits have soared (until recently) and the rich have become richer, while most Americans have treaded water or lost ground, their troubling circumstances masked by an unprecedented borrowing binge, now exacting its toll.

The other presumed economic bright spots — business investment and exports — are less bright upon closer inspection. According to a new government report, orders for big-ticket commercial goods rose a spare 0.1 percent in November.

As for exports, they have surged lately, but the growth has not yet led to more manufacturing jobs or inflation-beating pay raises for existing factory workers. The relative health of exporters is also obscuring the fact that to be more competitive in the long term, corporate America needs health care reform and tax reform, two fronts on which the Bush administration has made no progress. Instead, much if not most of recent export growth is due to the weakening dollar, which makes American products more affordable elsewhere.

While the boost is welcome, relying solely on a weaker currency to correct America’s trade imbalance has downsides. For one, a falling dollar interacts with global money flows in a way that complicates the job of the Federal Reserve to steer the economy. That was made clear again last week, when a top Chinese bank official warned of a destabilizing sell-off in dollar-based assets if the Fed continued to cut rates.

Hoping for the best is facile if not paired with preparation for the worst. Perhaps more than anything, a lack of preparation makes it hard to believe Mr. Bush’s assurances that all will be well. The administration has operated in a state of economic denial for years: conducting wars while cutting taxes, piling up debt, neglecting to regulate the financial sector even as it went on a lending binge, and ignoring the pain that was sure to come when consumers, bankers and investors sobered up.

Given that record, it is no surprise that Mr. Bush is now refusing to acknowledge the seriousness of the problems he has helped create. Americans don’t need more denial. They need an unvarnished appraisal of the nation’s economy — including the politics and ideology that has driven it to this point. That is the only real hope for starting to turn things around.

• 
  Unbridled Markets
  
  Conservatives Allow Unregulated Securitization
  The subprime mortgage securitization debacle may be the most profound legacy of the Bush era, writes Scott Lilly.

• 
  You’re a Mean One, Mr. Grinch
  
  Debt is Haunting Consumers and the Economy
  Christian E. Weller and Amanda Logan on the choice facing consumers this holiday season: borrow less or go broke.

I wouldn't say that myself. I would say that the positive correlation is not particularly strong.

Defaults on Insured Mortgages Rise 35% to Record : Defaults on privately insured U.S. mortgages rose 35 percent in November to a record, an industry report today showed, adding to evidence the U.S. housing slump is deepening.

I would say that we agree more than disagree... it's just a matter of degree.

As the stock market is more driven by institutional money these days... which has little where else to go... and as the markets are becoming more global in nature, the correlation with the prosperity of America (and Americans) is not what it used to be. And, corporate profits being what they are, are somewhat in opposition to higher wage rates for workers.

What is going to be interesting is to watch the gradual drawdown of money from the liquidation of stocks and investments as the baby boomers stop earning / investing and start living off of their investments.

The ones who face belt tightening first will do the best, IMO...although jobs may suffer...


http://www.bloomberg.com/apps/news?pid=206...&refer=home

National City to Trim Dividend by 49%, Cut 900 Jobs (Update4)

By David Mildenberg

Jan. 2 (Bloomberg) -- National City Corp., Ohio's largest bank, will eliminate another 900 jobs and halve its dividend, the first reduction since the payout began in 1935. The company fell 6 percent in New York trading.

The lender plans to raise capital and hired Goldman Sachs Group Inc. as its adviser, Cleveland-based National City said today in a statement. The bank is halting home loans through brokers and firing the employees in that business, bringing total cuts to 3,400, or about 10 percent of its workforce, in one year.

National City is still reeling from the U.S. housing slump a year after selling its subprime mortgage unit to Merrill Lynch & Co. It now expects to make $15 billion to $20 billion in home loans in 2008, compared with a previous projection of $35.7 billion.

``The housing market was poised for a correction and then it corrected with a high degree of suddenness,'' Chief Executive Officer Peter Raskind said in an interview. ``It's not clear to me that anything can be done prudently to dramatically improve that process.''

National City will pay 21 cents a share on Feb. 1 to shareholders of record on Jan. 14. The dividend was previously 41 cents a share.

The bank fell 99 cents to $15.47 in New York Stock Exchange composite trading, the biggest drop in three weeks. The stock lost 55 percent in 2007.

`Cleaning Up the Mess'

``National City is probably at the front edge of cleaning up the mess,'' said analyst Gerard Cassidy of RBC Capital Markets, who has an ``underperform'' rating on the bank. ``They still have some heavy lifting going forward. We think others are going to follow. The housing problems are going to continue through 2008.''

...
Most of National City's problem loans stem from markets including California where prices surged and then declined, Raskind said.

About one-third of the bank's branches are in Ohio and Michigan. Ohio has the third-highest foreclosure rate in the U.S., and Michigan ranked sixth, according to RealtyTrac Inc.

National City on Dec. 17 took a $200 million charge related to the declining value of mortgage securities and said it expects to set aside about $700 million in the fourth quarter to cover bad loans. The bank said it has ``elevated risk'' from loans made by its former First Franklin unit and its closed National City Home Equity business. National City sold First Franklin, which principally made loans to borrowers with less than prime credit, to Merrill Lynch in December 2006.

Washington Mutual, the biggest U.S. savings and loan, sold $3 billion of perpetual convertible preferred bonds last month to shore up its capital and slashed its dividend 73 percent after mortgage-market losses increased.

Bank of America Corp.,the nation's second-largest bank behind Citigroup Inc., said in October it would stop making loans through brokers, a business called wholesale lending. The move will lead to 700 job cuts, Bank of America said.

---------------------------------------

The most transparent and honest banks get my trust vote...fasten your seat belts, it's going to be a bumpy ride.

I would agree with that.

How is the Bush manufacturing czar doing?

Probably about as good as his war czar...

U.S. Economy: Manufacturing Shrinks Most Since 2003 (Update1)

By Courtney Schlisserman
http://www.bloomberg.com/apps/news?pid=206...&refer=home
Jan. 2 (Bloomberg) -- Manufacturing in the U.S. shrank the most last month in almost five years, triggering speculation that the Federal Reserve will cut interest rates by half a percentage point to stave off a recession.

The Institute for Supply Management's factory index fell to 47.7, from 50.8 the prior month, the Tempe, Arizona-based group said today. The figure was lower than forecast by any economist surveyed by Bloomberg News. Fifty is the dividing line between contraction and expansion.

Stocks fell and Treasury notes climbed as the report suggested the housing-market rout is spreading to the broader economy. The ISM's gauge has now fallen six straight months, the longest losing streak since the eve of the economy's last contraction in 2001.

``Right now we're not expecting a recession, but after this report we may have to revisit that forecast,'' said Kenneth Kim, an economist at Stone & McCarthy Research Associates in Skillman, New Jersey, which had the closest estimate in the Bloomberg survey. ``There's probably more pain and contraction to come'' in manufacturing, he said.

Traders increased bets the Fed will cut its benchmark rate when policy makers meet Jan. 29-30. The chance of a half-point reduction to 3.75 percent rose to 22 percent, from zero, according to futures quoted on the Chicago Board of Trade. Ten- year Treasury yields fell to 3.93 percent at 11:02 a.m. in New York from 4.02 percent late Dec. 31.

Economists' Estimates

Economists predicted the index would fall to 50.5, according to the median of 69 forecasts in a Bloomberg News survey. The manufacturing gauge, which covers about 12 percent of the economy, averaged 52.2 last year, down from 53.9 in 2006. The December reading was the first below 50 since January 2007.

The ISM's measure starts pointing to a recession across the economy when it falls below 41.9 for two straight quarters, according to Norbert Ore, chairman of the institute's manufacturing survey.

``I don't see sufficient evidence yet to have grave concern about recession following this,'' Ore said in an interview. ``I would want to see what January and February look like'' before drawing a conclusion.

A report from the Commerce Department showed spending on construction projects unexpectedly rose in November as work on schools, power plants and factories helped overcome cutbacks in homebuilding. The 0.1 percent increase followed a 0.4 percent drop the prior month that was smaller than previously reported.

Rising Prices

The group's index of prices paid rose to 68 from 67.5. Economists surveyed by Bloomberg had expected the measure to fall to 65.

The decrease in today's overall manufacturing index reflected a decline in new orders to the lowest level since October 2001. ISM's new orders index fell to 45.7 from 52.6. The production measure fell to 47.3 from 51.9.

The report follows others that show manufacturing weakening. The Philadelphia Federal Reserve's business gauge for December contracted for the first time in a year and the Richmond Fed's measure also was negative.

Orders for durable goods excluding transport equipment fell 0.7 percent in November, held back by a drop in defense procurement and machinery demand, the Commerce Department said on Dec. 27. Inventories of such goods unexpectedly rose and economists said they will remain watchful as to whether that will detract from economic growth later on.

The inventory index in today's report declined to 45.5 from 46.9. Figures less than 50 mean manufacturers are reducing stockpiles.

Inventories

Stockpile building added 0.89 percentage point to third- quarter economic growth and helped boost growth to the fastest rate in four years. Slower consumer spending and continued housing weakness the last three months of the year probably brought down economic growth in the quarter to a 1 percent pace, one-fifth the rate it did from July through September, according to a Bloomberg News survey taken last month.

The ISM's gauge of export orders fell to 52.5, from 58.5.

Increased exports had helped shield some companies from the effects of slowing U.S. demand last year. Some economists, including Michael Gregory at BMO Capital Markets in Toronto, expect that to change as growth in foreign countries slows.

``I think the last few months you've had a change in attitudes in a lot of major markets outside the U.S.,'' Gregory said.

Turning Overseas

Even so, some companies are shifting more attention to overseas sales. Eaton Corp., the world's second-largest maker of hydraulic equipment, announced plans Dec. 20 to buy Moeller Group of Germany and Phoenixtec Power Co. of Taiwan.

``We are seeing the U.S. economy slowing,'' said Alexander M. Cutler, chief executive officer at Eaton Corp., in a Dec. 21 interview. There is the ``potential that industrial production could move to flat to slightly negative in the first quarter.''

Some companies are trimming their spending. FedEx Corp., the second-biggest U.S. package-delivery company, lowered its capital spending forecast for the full year by 11 percent, to $3.1 billion, and said additional reductions are ``possible'' as executives review the timing of spending plans.

``We see challenging near-term economic trends,'' Chief Executive Officer Fred Smith said in a statement Dec. 20.

Illinois Tool Works Inc., the maker of Duo-Fast nail guns and Wilsonart countertops, last month cut its full-year earnings forecast, in part because of lower-than-expected sales in North America. Also Black & Decker said that retailers placed fewer orders last quarter because consumers are buying fewer tools for home remodeling projects as the housing slump enters its third year.

Less Hiring

Some companies are preparing for a slowdown by cutting back on hiring or trimming their payrolls.

The ISM's employment measure rose to 48 from 47.8 in November, which was the lowest in four years.

The government is scheduled to release the December employment report on Jan. 4. The number of Americans who continued to collect unemployment benefits, considered by some economists to be a harbinger of companies' willingness to hire, rose to a two-year high in the week ended Dec. 15, the Labor Department said on Dec. 27.

To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net .

Last Updated: January 2, 2008 11:46 EST

Ah Mac2 -- starting another thread on a lark...

Oil Flat on US Economic Concerns
By GEORGE JAHN – 2 days ago
http://ap.google.com/article/ALeqM5i5Ttajg...HBB-tAD8TSF94O0

VIENNA, Austria (AP) — Oil prices were flat Monday on the final trading day of the year, after a decline in the previous session on concerns about the U.S. economy.

Light, sweet crude for February delivery traded down one cent at $95.99 a barrel in electronic trading on the New York Mercantile Exchange in the early afternoon European time.

The contract fell 62 cents to settle at $96 a barrel Friday after a report showed weak figures on new home sales in the United States. The data again raised fears about a possible economic slowdown in the world's largest consumer of oil products.

On the ICE Futures exchange in London, February Brent crude was selling Monday for $94.30 a barrel, up 42 cents.

Oil prices remain supported, though, by concerns about supply disruptions from the oil-rich Middle East. As well, Vienna's PVM Oil Associates noted that "falling inventories in the U.S. may have affected prices in a bullish way."

Turkish jets hit suspected Kurdish rebel shelters in northern Iraq for a third time on Dec. 26. Turkey has also launched a cross-border raid and fired artillery at Kurdish rebel positions since the first airstrike on Dec. 16. The rebels have vowed to take the group's battle for autonomy deep inside Turkey if the cross-border airstrikes do not stop.

Tension in the Middle East usually brings worries that oil shipments from the region will be reduced or halted.

In late November, oil threatened to rise to $100 a barrel. It has since retreated as supplies appeared to be growing and demand seemed to be falling. But over the past several weeks, inventories have fallen in the U.S. while demand has remained strong.

Gasoline futures have been pushed to new records in recent days, in part by the Goldman Sachs Commodity Index's plan to boost its gasoline futures holdings next month. Nymex gasoline futures were up by over a penny Monday, fetching US2.4776 a gallon (3.8 liters).

The $90 billion (61 billion euros) fund, administered by Standard & Poor's, will boost its gasoline futures holdings by about $3 billion (2 billion euros), according to Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service. That would raise its percentage holding in gasoline futures to 4.55 percent of the fund from 1.37 percent.

In other Nymex trading Monday, heating oil futures rose nearly 2 cents to $2.6542 a gallon while natural gas prices dropped more than 9 cents to $7.295 per 1,000 cubic feet.

More Bush lip service which amounted to nothing...

Friday, April 28, 2006
The Invisible manufacturing czar
Leaders say he lacks clout to help Mich.

Deb Price / The Detroit News
WASHINGTON -- Michigan lawmakers had hoped that President Bush's manufacturing "czar" would be a powerful voice in support of the state's battered factory sector. Instead, they're seething in bipartisan anger over what they see as his lack of clout -- and accomplishment.

For instance, Albert Frink, U.S. Commerce Department assistant secretary for manufacturing and services, has rarely even been in the same room as President Bush in his first year and a half on the job.

"I just happen to have had an encounter with the president (recently) at a (Small Business Administration) function. That was an opportunity for me to thank him for giving me this job," Frink, a friendly ex-California carpet manufacturer, said in an interview at his Commerce Department office located about a seven-minute walk from the Oval Office.

Advertisement

Asked whether he's spoken extensively with Bush directly, either in person or by telephone, about manufacturing, Frink said, "It has not been necessary, because the secretary of commerce is a manufacturer himself, and he is able to produce a lot of the valuable input about manufacturing that the president needs. (Bush) gets the right information through the means that we bring information to the (Commerce) secretary, and the secretary moves it to the president."

But the revelation of how little access Frink has to the president prompted Rep. John Dingell, D-Dearborn, to call his office "about as useful as side pockets on a cow." Many other members of the congressional delegation from Michigan, which has lost 256,000 manufacturing jobs over the past decade, heartily agreed.

Commerce Department and White House spokesmen confirmed that Frink, who earns $143,000 a year, has been at only one White House meeting attended by Bush -- a gathering last May 25 of the presidential export council, a private-sector group that Frink oversees.

But White House spokesman Alex Conant discounted criticism from Michigan lawmakers that Frink's job is little more than window dressing for an administration that should be doing more to help American manufacturers who are being whipped by foreign competitors.

"The president is very focused on strengthening American manufacturing and discusses how to help manufacturers during his weekly meetings with the secretary of commerce, who obviously works very closely with his assistant secretaries, including Al Frink," Conant said.

But state officials say Michigan manufacturers need immediate action -- not more reports -- on such things as out-of-control health care costs, currency manipulation by global competitors, unfair trade barriers and counterfeit auto and other manufacturing parts.

They had hoped the czar would at least be a senior presidential adviser with insider ties to Bush and key players on Capitol Hill.

"That job came in like a lion and has lingered around like a mouse in the landscape of Washington," said U.S. Rep. Mike Rogers, R-Brighton.

"I'm not even sure if anybody is reading the papers (Frink) is shuffling. The position is ill-conceived. (The Bush administration) talks a great game, but they are moving in inches and we are losing in miles."

But Frink and the White House counter that he's doing exactly what Bush envisioned: advocating, coordinating and implementing policies to help U.S. manufacturers compete globally.

Frink is implementing 50 recommendations contained in a report, "Manufacturing in America," based on roundtable meetings with U.S. manufacturers in 2003. He's set up, for example, an interagency working group to streamline manufacturing-related work by 17 government agencies and a manufacturing council with 15 private-sector leaders acting as a liaison to the government. The manufacturing council's advice, Frink believes, helped shape the administration's legislative efforts on energy, tort reform and the Central American Free Trade Agreement.

Drawing on his 30 years of manufacturing experience -- he used a federal Small Business Administration loan in 1974 to create a successful carpet business with 450 workers and global clients -- Frink says he hopes to entice reluctant manufacturers to "have a global strategy."

Asked about the ongoing troubles of Michigan manufacturers, Frink, 63, replied: "America does some of its best work when it's against the wall I have confidence that Michigan folks will rally and take the necessary course to put themselves into a competitive position."

But U.S. Rep. Pete Hoekstra, R-Holland, responded to that viewpoint by saying, "that doesn't cut it."

Michigan officials wanted a go-to person on manufacturing who brings together the president, the Congress and trade policy officials on tough, immediate steps to take. In contrast, Frink tours manufacturing plants, prepares letters and reports, and has testified -- twice -- before congressional committees, including last June 8 when he described the outlook for manufacturing as "good."

In his job, Frink has visited 71 manufacturers, spoken to 47 industry groups, chaired 58 manufacturing roundtables, stopped by five community colleges and led an eight-day trade policy mission to China.

He has gone to Michigan six times, including to the Automation Alley manufacturing consortium and the Detroit auto show.

But several Michigan lawmakers say the problems are already well-documented, and the czar role instead should be one with clout to push through legislative and policy remedies.

"The job and the $47 million agency of which he is the head are components of a black hole in which everything disappears and from which nothing emerges," said Dingell.

"This is like the old story of the mother who had two sons. One was elected vice president and the other went off to sea, and neither was ever heard of again. If she had had three sons, the third one would have been Bush's manufacturing czar."

Frink has met only a few of the state's House members, and has never met Michigan's top political figures: Gov. Jennifer Granholm and Sens. Carl Levin, D-Detroit, and Debbie Stabenow, D-Lansing.

"That says it all; nobody who is a serious player in manufacturing would not have met with Carl Levin and Jennifer Granholm," said Charles Ballard, an economics professor at Michigan State University and expert on Michigan's manufacturing crisis. "Either you shouldn't have the job at all or the government should be serious about it."

Bush promised to appoint a czar on Labor Day in 2003. The president backed off from his first choice, Anthony Raimondo, after it became public that his company, Behlen Manufacturing of Nebraska, had cut its domestic work force and was opening a factory in China.

Frink, who had a demonstrated track record of building up a small business with global reach, was the next pick.

Frink says his biggest accomplishment to date has been getting his newly created division up and running.

"Our job is to take the information we hear and formulate policy advice that will help make changes to improve conditions for manufacturers," he said.

Asked what he has to say to Michigan companies and workers still facing rocky times in the next few years, he said, "I think you have a government and an administration that cares. I do believe Michigan folks will find a way to overcome the competitive difficulties they are dealing with As some jobs are lost, new ones are created."

You can reach Deb Price at (202) 662-8736 or dprice@detnews.com.
http://www.detnews.com/apps/pbcs.dll/artic...D=2006604280329

Now I know where I have seen Mac2 before --- Voltaire's Candide --- he's Pangloss.

NEWSWATCH
U.S. stocks decline amid worries about economy

http://www.marketwatch.com/news/story/news...p;dist=printTop

By MarketWatch
Last update: 12:00 p.m. EST Jan. 2, 2008
MARKETWATCH FRONT PAGE
U.S. stocks on Wednesday extended the prior session’s losses into the new year after a key gauge of manufacturing activity showed continued weakness in the sector and rising energy prices added to market uncertainty. See full story.
Futures Movers: Oil contract rises 2% on supply concerns, violence in Nigeria
NEW YORK (MarketWatch) -- Crude-oil futures surged to trade near $98 a barrel on Wednesday, propelled higher by expectations of another drawdown in weekly U.S. crude supplies as well as by a fresh outbreak of violent clashes reported in oil-rich Nigeria. See full story.
National City slashing dividend, laying off 900 staffers
NEW YORK (MarketWatch) -- National City Corp said Wednesday that it's cutting its quarterly dividend in half, laying off 900 mortgage-services workers and moving to bolster capital as it becomes the latest bank to feel the pain of the subprime-mortgage debacle. See full story.
Qualcomm eyes 'workarounds' as Broadcom wins patent order
NEW YORK (MarketWatch) -- Qualcomm Inc. warned Wednesday that it expects an "immediate, short-term impact" to result from a federal court's ruling that it must stop producing and marketing wireless-phone chips and software that infringe three Broadcom Corp. patents. See full story.
Election Notebook: Obama and Huckabee hold leads on eve of Iowa caucuses: poll
WASHINGTON (MarketWatch) -- It's looking like it could be a happy New Year for Barack Obama: The Illinois senator is leading closest rival Hillary Clinton in a new poll with just one day to go before the critical Iowa caucuses. See full story.
MARKETWATCH COMMENTARY
Todd Harrison: Year-end playbook for investing TDs
"The essence of football is blocking, tackling and execution based on timing, rhythm and deception."Knute Rockne See full story.
MARKETWATCH PERSONAL FINANCE
Real Estate: Selling a home in 2008? Don't make your makeovers extreme
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MARIN COUNTY'S NEWS MONTHLY - FREE PRESS
(415)868-1600 - (415)868-0502(fax) - P.O. Box 31, Bolinas, CA, 94924


January, 2008

http://www.coastalpost.com/08/01/15_The_Im...Des_13A1D2.html




The Impending Destruction Of The U.S. Economy
By Paul Craig Roberts


Hubris and arrogance are too ensconced in Washington for policymakers to be aware of the economic policy trap in which they have placed the U.S. economy. If the subprime mortgage meltdown is half as bad as predicted, low U.S. interest rates will be required in order to contain the crisis. But if the dollar's plight is half as bad as predicted, high U.S. interest rates will be required if foreigners are to continue to hold dollars and to finance U.S. budget and trade deficits.

Which will Washington sacrifice, the domestic financial system and overextended homeowners or its ability to finance deficits?

The answer seems obvious. Everything will be sacrificed in order to protect Washington's ability to borrow abroad. Without this, Washington cannot conduct its wars of aggression, and Americans cannot continue to consume $800 billion dollars more each year than the economy produces.

A few years ago the euro was worth 85 cents. Today, it is worth $1.48. This is an enormous decline in the exchange value of the U.S. dollar. Foreigners who finance the U.S. budget and trade deficits have experienced a huge drop in the value of their dollar holdings. The interest rate on U.S. Treasury bonds does not come close to compensating foreigners for the decline in the value of the dollar against other traded currencies. Investment returns from real estate and equities do not offset the losses from the decline in the dollar's value.

China holds over one trillion dollars, and Japan almost one trillion, in dollar-denominated assets. Other countries have lesser but still substantial amounts.

As the U.S. dollar is the reserve currency, the entire world's investment portfolio is overweighted in dollars.

No country wants to hold a depreciating asset, and no country wants to acquire more depreciating assets. In order to reassure itself, Wall Street claims that foreign countries are locked into accumulating dollars in order to protect the value of their existing dollar holdings. But this is utter nonsense. The U.S. dollar has lost 60 per cent of its value during the current administration. Obviously, countries are not locked into accumulating dollars.

The reason the dollar has not completely collapsed is that there is no clear alternative as reserve currency. The euro is a currency without a country. It is the monetary unit of the European Union, but the countries of Europe have not surrendered their sovereignty to the EU. Moreover, the UK, a member of the EU, retains the British pound. The fact that a currency as politically exposed as the euro can rise in value so rapidly against the U.S. dollar is powerful evidence of the weakness of the U.S. dollar.

Japan and China have willingly accumulated dollars as the counterpart of their penetration and capture of U.S. domestic markets. Japan and China have viewed the productive capacity and wealth created in their domestic economies by the success of their exports as compensation for the decline in the value of their dollar holdings. However, both countries have seen the writing on the wall, ignored by Washington and American economists: by offshoring production for U.S. markets, the U.S.A. has no prospect of closing its trade deficit. The offshored production of U.S. firms counts as imports when it returns to the U.S. to be marketed. The more U.S. production moves abroad, the less there is to export and the higher imports rise.

Japan and China - indeed, the entire world - realize that they cannot continue forever to give Americans real goods and services in exchange for depreciating paper dollars. China is endeavoring to turn its development inward and to rely on its potentially huge domestic market. Japan is pinning hopes on participating in Asia's economic development.

The dollar's decline has resulted from foreigners accumulating new dollars at a lower rate. They still accumulate dollars, but fewer. As new dollars are still being produced at high rates, their value has dropped.

If foreigners were to stop accumulating new dollars, the dollar's value would plummet. If foreigners were to reduce their existing holdings of dollars, superpower America would instantly disappear.

Foreigners have continued to accumulate dollars in the expectation that sooner or later Washington would address its trade and budget deficits. However, now these deficits seem to have passed the point of no return.

The sharp decline in the dollar has not closed the trade deficit by increasing exports and decreasing imports. Offshoring prevents the possibility of exports reducing the trade deficit, and Americans are now dependent on imports (including offshored production) for which there are no longer any domestically produced alternatives. The U.S. trade deficit will close when foreigners cease to finance it.

The budget deficit cannot be closed by taxation without driving up unemployment and poverty. American median family incomes have experienced no real increase during the 21st century. Moreover, if the huge bonuses paid to CEOs for offshoring their corporations' production and to Wall Street for marketing subprime derivatives are removed from the income figures, Americans experience a decline in real income. Some studies, such as the Economic Mobility Project, find long-term declines in the real median incomes of some U.S. population groups and a decline in upward mobility.

The situation may be even more dire. Recent work by Susan Houseman concludes that U.S. statistical data systems, which were set in place prior to the development of offshoring, are counting some foreign production as part of U.S. productivity and GDP growth, thus overstating the actual performance of the U.S. economy.

The falling dollar has pushed oil to $100 a barrel, which in turn will drive up other prices. The falling dollar means that the imports and offshored production on which Americans are dependent will rise in price. This is not a formula to produce a rise in U.S. real incomes.

In the 21st century, the U.S. economy has been driven by consumers going deeper in debt. Consumption fueled by increases in indebtedness received its greatest boost from Fed chairman Alan Greenspan's low interest rate policy. Greenspan covered up the adverse effects of offshoring on the U.S. economy by engineering a housing boom. The boom created employment in construction and financial firms and pushed up home prices, thus creating equity for consumers to spend to keep consumer demand growing.

This source of U.S. economic growth is exhausted and imploding. The full consequences of the housing bust remain to be realized. American consumers lack discretionary income and can pay higher taxes only by reducing their consumption. The service industries, which have provided the only source of new jobs in the 21st century, are already experiencing falling demand. A tax increase would cause widespread distress.

As John Maynard Keynes and his followers made clear, a tax increase on a recessionary economy is a recipe for falling tax revenues as well as economic hardship.

Superpower America is a ship of fools in denial of their plight. While offshoring kills American economic prospects, "free-market economists" sing its praises. While war imposes enormous costs on a bankrupt country, neoconservatives call for more war and Republicans and Democrats appropriate war funds, abroad.

By focusing America on war in the Middle East, the purpose of which is to guarantee Israel's territorial expansion, the executive and legislative branches, along with the media, have let slip the last opportunities the U.S. had to put its financial house in order. We have arrived at the point where it is no longer bold to say that nothing now can be done. Unless the rest of the world decides to underwrite our economic rescue, the chips will fall where they may. CP

Dr. Roberts was assistant secretary of the U.S Treasury for Economic Policy in the Reagan administration. He is credited with curing stagflation and eliminating "Phillips curve" trade-offs between employment and inflation, an achievement now on the verge of being lost by the worst economic mismanagement in U.S. history.

Jim Kunstler's
Forecast 2008
http://www.kunstler.com/Mags_Forecast2008.html

For the tiny fraction of people who actually pay attention to real events -- those, for instance, who know the difference between Narnia and Kandahar -- the final hours of 2007 leading into the fog-shrouded abyss of 2008 must induce great racking shudders of nausea. Has there ever been a society so exquisitely rigged for implosion? The whole listing, creaking, reeking edifice stands like one of those obsolete Las Vegas pleasure palaces awaiting a mere pulse of electrons to ignite a thousand explosive charges perfectly placed to blow away the structural supports.
The inertia holding everything together that I described in last year's forecast finally melted away at mid-summer and events began spooling out of control. Specifically, the massive tonnage of debt-backed securities circulating through the financial sector stood revealed for the mostly worthless bales of paper they truly are, and the investment community was left suspended in mid-air, grinning unconvincingly, like Wile E. Coyote thirteen yards beyond the edge of the mesa, with a sputtering grenade in each hand and an anvil tied to his ankles.
The whole second half of 2007 in the ranks of finance was a desperate rear-guard action to stave off the inevitable work-out. The fiasco over at Bear Stearns was instructive. Not long after two of their hedge funds blew up in August, the company announced that the funds had been chartered in the Cayman Islands and were therefore beyond the reach of official US legal machinery -- meaning, forget about lawsuits, you losers, chumps, and suckers who bought into our jerry-rigged scams... submit your complaints to the Tough Noogies desk and begone with you! This dodge might have benefited Bear Stearns in the short term, but in the long term it's hard to see why anybody would ever after cast one red cent in Bear Stearns' direction (in the life of this universe or several like it).
The summer's blow-ups were followed by truckloads, boatloads, and helicopter loads of rescue "liquidity" delivered through autumn by the Federal Reserve and other central banks in a continuing effort to allow investment houses, mortgage originators, reinsurance firms, and other companies trafficking in suspect paper to avoid declaring greater losses. Then the foreign sovereign wealth funds jumped in with five billion here, ten billion there, coming away with big chunks of ownership, but of what? Of companies with liabilities in excess of assets? Mostly, these desperation moves worked to paper over virtual bankruptcy through the crucial Christmas holiday, when yearly bonuses are doled out, which spared the boards of directors from having to explain why executives were lined up at the loading docks filling their Lincoln Navigators with stupid dope piles and knots of the shareholders' loot.
On the ground out in the heartland, in the anxiety-drenched, over-valued beige subdivisions of California and the ennui-saturated pastel McHousing tracts of Florida (not to mention the pathetic vinyl outlands of Cleveland and Detroit) a mighty keening welled forth as mortgage rates adjusted upward, and loans stopped "performing," and "for sale" signs failed to turn up buyers, and sheriff's deputies showed up with the rolls of yellow foreclosure tape, and actual ownership of the re-poed collateral entered a legal twilight zone somewhere north of the Florida State Teacher's Pension Fund and south of the Norwegian Municipal Councils' investment portfolios. What a mighty goddam mess was left out there by the boyz at the Wall Street genius desks, who engineered a magical system for eliminating risk from the capital markets -- only to see it leak back in from a million holes and seams and collapse the greatest bubble ever blown.
In the background, the US dollar sank to record lows against the euro and the pound sterling, the price of oil jumped 56 percent across the year just grazing the $100-a-barrel mark, drought punished the American southeast and Australia's grain belt, floods ravaged Texas and England, the polar ice shrank dramatically, but the US escaped any major hurricane action for a second year in a row.
Except for the murder of Mrs. Bhutto just a few days ago, the international scene was supernaturally quiet. Even Iraq fell into a torpor, variously attributed to utter exhaustion among the warring factions or to the US troop "surge" under general Petreus. Iran got a surprise clean bill-of-health on its nuclear bomb-making activity from America's own investigators, to the consternation of Mr. Bush & Co. The non-human denizens of Planet Earth didn't have such a good year. Honeybees, Yangtze river dolphins, and house sparrows took big hits, and Al Gore went up another suit size (as well as winning part of the Nobel Prize for his Powerpoint show). Which brings us finally to the heart of the matter: what's coming down the pike starting tomorrow, January 1, 2008?


Down and Dirty
I shudder to imagine how things will play out now as we turn the corner into 2008. Not to put too fine a point on it, but my little walnut brain can't imagine any scenario in which the US economy doesn't end up on a gurney in history's emergency room. It's not necessary to rehash the particulars of the Greenspan bubble-blowing disaster. The outcome is what concerns us. The web cables have been blazing for months with arguments as to what form the workout will take. There's little disagreement about the fundamentals at the housing end of things.
The housing market is in a death spiral. Eventually, the median price of a house will have to fall back to the median income, and it has a very long way to go, perhaps 50 percent. Until that happens, houses will be generally unsellable. At the same time, of course, an anxious finance sector will be offering fewer mortgages and on much more rigorous terms, so there will be far fewer qualified buyers even for distress sales. And the median income itself may soon not be what it has been. The whole equation has changed. As the painful re-pricing process plays out, many owners/sellers will be upside-down and under water in what they owe on the mortgage in relation to the value of the house they occupy. Quite a few may have lost jobs and incomes along the way. Most of these unfortunates would be better off just mailing in the keys and walking away. But in so far as these awful liabilities are peoples' homes, full of all their stuff and their childrens' stuff, not to mention being the repository of all their previously-imagined wealth, as well as their hopes and dreams, walking away is psychologically more easily said than done.
Surely in this election year, schemes will be advanced to bail out these poor suckers. But the beneficiaries of such a putative bail out would be far outnumbered by the home-owners still making mortgage payments, plus property taxes jacked up during the recent orgy by greedy public officials, and I don't think this majority would stand for the unfairness of seeing their neighbors simply let off the hook on their obligations. Perhaps the one thing that congress could do is change the insane law that treats foreclosures like some kind of bizzaro capital gain and piles additional huge tax demands on people who can no longer afford to buy their kids a frozen burrito. The issue of what to do about the dispossessed will be so politically red-hot that it could upset the election process --but I get a bit ahead of myself.
One thing the public doesn't get about the housing debacle is that it is not just the low point in a regular cycle -- it is the end of the suburban phase of US history. We won't be building anymore of it, and those employed in its development will have to find something else to do. Now, unfortunately the whole point of the housing bubble was not really to put X-million people in so many vinyl and chipboard boxes, but rather to ramp up a suburban sprawl-building industry as a replacement for America's dwindling manufacturing economy. This stratagem ran into the implacable force of Peak Oil, which not only puts the schnitz on America's whole Happy Motoring / suburban nexus, but implies a pervasive trend for contraction in everything from the daily distances we can travel to the the very core idea of regular economic growth per se -- at least in the way we have understood it through the age of industrial capital.
But to return to my point, something like 40 percent of all new jobs after the year 2000 were created in the final burst of suburban expansion -- everything from the excavators to the framers to the sheet-rockers, and then the providers of granite countertops, the sellers of appliances and furnishings, and cars to service the far-out new subdivisions, and so on. This is the end, therefore, not only of the production "home-builders," but perhaps everything from Crate and Barrel to WalMart, too, eventually.
By the way, the housing collapse was only one phase of a more generalized real estate debacle, because the commercial side of the business has also begun a nauseating slide into non-performance and equity destruction. In other words, we built way too many strip malls, power centers, and office parks. God knows what will happen to the owners of these white elephants, or the mortgage and lien holders of these things -- but as one wag remarked to me some years ago as we both gazed upon a forlorn abandoned strip mall outside of Tulsa, "...we don't need that many evangelical roller rinks...."
What happens out there on the housing market scene will certainly redound in banking and finance and whatever still constitutes the US economy generally. The fears and uncertainties surrounding all credit-backed tradable securities derive first from the millions of troubled home mortgages dangling slowly in the wind. These fears and uncertainties will multiply as defaults commence in commercial real estate, and desperate individuals next enter a wave of credit card default, all of it, too, securitized and sprinkled all over the world. None of this stuff has yet been priced into the public disclosures of the many troubled banks and bank-like companies holding it. Nor does anyone really know how this is affecting the hedge funds, and their staggering leveraged positions in things that are looking more and more like quicksand. I can't imagine that quite a few major banks will not collapse in the first half of 2008. It is hard to escape the conclusion that many hedge funds will also blow up, given the unsoundness of their counter-parties' positions, not to mention the frailty of the bond reinsurers. But the death of more than a few hedge funds could easily unwind the entire global finance system -- meaning a period of destructive chaos followed by a set of severely different institutional arrangements, with untold loss of imagined capital wealth along the way and big changes in everyday life. The world has never really been in a situation like this before and it is impossible to say what it might lead to. But there is no doubt that the American public has enjoyed an artificially high standard of living in relation to the value of what we actually produce -- fried chicken, hair extensions, and the Flaver Flav Show -- so the conclusion is pretty self-evident.
Others have said (and I concur) that 2008 will be the year that the issue of Peak Oil not only takes stage in the forefront of American politics, but pushes global warming aside as the most immediate threat to the "modern" way-of-life. There is every reason to believe that the world has arrived at its all-time oil production peak -- and some statisticians would even pin-point the exact moment as July 2006. Since then a few new and crucial story-lines have emerged to allow us to understand what is happening out there on the world oil scene.
One story-line is that only "demand destruction" among the world's poorest nations has kept the oil markets functioning "normally" among the OECD nations and the rising Asian players. Even so, oil priced in US dollars more than doubled in 2007. It remains to be seen whether demand destruction in a wobbling US economy -- with the suburban builders crippled -- will keep oil prices from jumping into the uncharted territory beyond $100-a-barrel. But two other forces are in operation now.
One is the growing oil export problem, soon to be a crisis. It now appears that exports, in nations with surplus oil to sell, are going down at an even steeper rate than production declines. Why? They are using more of their own oil. The population is growing robustly. The Saudi Arabians are building the world’s largest aluminum smelter and many chemical factories. This takes a lot of oil. Russia, another big exporter, saw its car sales jump by 50 percent in 2007. Mexico is depleting so rapidly, and using so much more of its own oil, that it might be out of the export game altogether in three years. That will be bad news for the US, since Mexico is tied with Saudi Arabia as America's number two leading source of oil imports. Remember, the US now imports close to three-quarters of all the oil we use.
The second new factor on the Peak oil scene is "oil nationalism." It is prompting countries like Norway and Russia to husband more of their own resources as the awareness hits that they are past peak and might want to keep their own motors humming further into the future. Oil surplus nations are also trending more toward selling their oil on the basis of long-term contracts with favored customers rather than just auctioning the stuff off on the futures market. This makes oil a much more important element in geopolitical power politics. Note that the US may not enjoy "favored customer" standing among many of these nations.
Matt Simmons, the leading investment banker to the oil industry, predicted at a major conference in October that the US is much closer to encountering a problem with chronic spot shortages of oil (and gasoline, of course) than the public realizes, and Simmons says that this supply problem will be extremely disruptive in every imaginable way -- economically, politically, and socially. Most of the commentators I take seriously see the price of oil oscillating in 2008 between $80 and $160-a-barrel. Simmons says Americans will keep sucking up the price increases, but they will probably freak out over spot shortages.
I have no idea how presidential election politics will play out in 2008. It must be obvious that so many nasty pitfalls lie out there in the months ahead that something's got to shake up the current scripted mummery among the contenders. The current batch of candidates will soon find their story-lines and pre-cooked messages out-of-date as the nation faces crises in finance and energy (at least). Given the uneventful geopolitical scene of the past 18 months (since the Hezbollah-Israel War and up to the murder of Mrs. Bhutto in Pakistan), odds are that the US will have more rather than less trouble from the rest of the world in 2008-- especially if our own financial recklessness trips up the global economy.
Back in the early days of George W. Bush, even before 9/11, I used to joke with my friends that Bill Clinton would return as the Emperor Bill the First. The joke doesn't seem so funny anymore with Hillary off and running. I never liked the way she muscled her way into a US senate seat -- sending the message, in essence, that there was not one genuine New York resident qualified for the job. But there is so much more about her I dislike now, starting with her presumption of dynastic entitlement to the annoyingly phony way she nods her head (like one of those old "drinky-bird" toys) to put across the idea that she is a fabulous "listener." I write this a few days before the Iowa caucuses and then the New Hampshire primary. New York's Mayor Bloomberg is suddenly making noises again about entering the race as an independent. That might lead to a situation as fractured as the one in 1860 that saw a multi-party scuffle send Lincoln into office (or the election of 1912 when Teddy Roosevelt made a credible run on the independent Bull Moose line). At the moment, I'd like to see both John Edwards and Barack Obama roll on. The mere thought of a president Huckabee gives me the chilblains, and the rest of the Republican pack I would not want to have as my county supervisor.
In any case, whoever ends up in the oval office will preside over one king-hell of a cluster"expletive deleted". In the immortal words of TV's erstwhile "Mr. T," I pity da fool who gets elected into this mess. There will be a whole continent full of bankrupt, re-poed, and idle former WalMart shoppers, many of them with half of their skin tattooed and many of that bunch all revved up to "roll heavy and gun up" against the folks who screwed them.
Which leads me to my penultimate observation of the moment: 2008 will be the year that celebrity wealth goes into hiding. A land full of people crying into their foreclosure notices will take a dim view of the Donald Trumps and P. Diddys luxuriating out there and may come looking for scalps -- though in the case of Mr. Trump they'll be sorry they woke up the wolverine that lives on his head. Basically, though, I'm not kidding. Conspicuous displays of wealth will be so "out" that Mr. Diddy might take to club-hopping in a 1999 Mazda. Lindsay Lohan and Paris Hilton may have to double-up living in a minuteman missile silo to keep the angry mobs of fans-turned-vengeful-berserkers away.
Okay, my final comment. After being chastised endlessly about mis-calling the DOW in 2006 (I said 4000), I have learned my lesson about making numerical predictions for the stock markets. So let's just say there is no "expletive deleted"ing way that the DOW, the NASDAQ, and the S & P will not end the year 2008 absolutely on their asses. The charade of permanent prosperity based on getting something for nothing is over. That sound you hear out there is reality knocking on the door. It has been standing out in the cold for a long time and it is not happy with us.

The economy did pretty well all of last year. The facts are that the negative comments and predictions of many who post here were simply wrong.



With all of the problems in this country, the resilience of the US economy was impressive. That resilience was what stood out in 2007, as the economy and the markets moved forward and upward.

But many who made negative comments and predictions were right. And your statement about the economy is a judgment. It certainly performed well on certain factors, but badly on others. The question is what is the meaningful picture and what is likely for the future.

Please cite some of those negative comments and predictions that were right?



The economy did pretty well,......... hindsight is 20/20. And the economy did pretty well...... Are you saying that the economy did badly or remained the same?

Well I don't have specific cites of posts at my fingertips.

But I think that everyone here can agree that several people have commented on the subprime mortgage mess and associated credit problems. I believe that people making such comments correctly pointed out some serious problems that we need to address, not dismiss by saying that all is well.



IMO the economy did okay overall, it grew, unemployment did not get very high, and inflation is still low. However there were some very serious problems, some directly involving lots of people getting hurt, and we have ample reason to worry about what might be coming. We are not necessarily heading towards disaster, but we would be foolish to ignore our problems.

U.S. Stocks Tumble After Manufacturing Contraction Poses Recession Threat U.S. stocks tumbled, led by banks and computer companies, after the biggest decline in manufacturing in five years sent the Dow Jones Industrial Average to its worst start since 1983.

Manufacturing in U.S. Unexpectedly Shrinks, Spurring Rate-Cut Speculation Manufacturing in the U.S. shrank the most last month in almost five years, triggering speculation that the Federal Reserve will cut interest rates by half a percentage point to stave off a recession.

Fed Officials Cut Economic Growth Forecasts at Last Meeting, Minutes Show Federal Reserve officials said economic growth in 2008 will fall short of their own forecasts, reflecting weaker consumer spending and a deeper housing slump.

Oil Reaches $100 a Barrel for First Time; Gold, Grains Rise on Dollar Drop Crude oil reached a record $100 a barrel and gold soared to the highest ever, leading a commodity surge as the dollar's slump against major currencies enhanced the appeal of raw materials as hedges against inflation.

National City Will Slash Payout 49%, Cut 900 More Jobs as It Curbs Lending National City Corp. fell to its lowest price in 12 years after Ohio's largest bank said it will eliminate 900 jobs and halve the quarterly dividend, the first reduction since the payout began in 1935.

Wien Predicts U.S. Recession, Stock `Correction,' Rebound in Second Half Byron Wien, the strategist whose New Year's predictions have influenced investors for a quarter century, said the U.S. economy will fall into a recession and stocks will tumble 10 percent this year.

I remember reading early last year that the housing bubble was going to burst --- and it came to pass.

This has caused an incredible credit crunch.

I also remember reading about our manufacturing being on the decline earlier last year. And it came to pass.

Its pretty interesting Mac2 -- you demand evidence for our conjecture, but when we ask the same of you --- you do not respond.

In the article from today's FT, Prof Ferguson, the author of Colossus, appears to have tired of parallels from British imperial history for the American experience. He has now turned to the Ottomans for inspiration. But he always entertains.
An Ottoman warning for indebted America
By Niall Ferguson

Published: January 1 2008 18:37 | Last updated: January 2 2008 08:07

Future historians will look back on the current decade as a turning point comparable with that of the Seventies. No, not the 1970s. This is not going to be another piece pointing out the coincidence of an unpopular Republican president, soaring oil prices, a sagging dollar and an unwinnable faraway war. I am talking about the 1870s.

At first sight, the resemblances across 130 years may not seem obvious. The 1870s were a time when conservative leaders such as Benjamin Disraeli, British prime minister, were powerful and popular. It was a time of falling commodity prices, after the financial crash of 1873 and the opening up of the American plains to agriculture. And it was an era of currency stability, as one country after another followed the British lead by pegging to gold.

Yet, on closer inspection, we are indeed living through a global shift in the balance of power very similar to that which occurred in the 1870s. This is the story of how an over-extended empire sought to cope with an external debt crisis by selling off revenue streams to foreign investors. The empire that suffered these setbacks in the 1870s was the Ottoman empire. Today it is the US.

In the aftermath of the Crimean war, both the sultan in Constantinople and his Egyptian vassal, the khedive, had begun to accumulate huge domestic and foreign debts. Between 1855 and 1875, the Ottoman debt increased by a factor of 28. As a percentage of expenditure, interest payments and amortisation rose from 15 per cent in 1860 to 50 per cent in 1875. The Egyptian case was similar: between 1862 and 1876, the total public debt rose from E£3.3m to E£76m. The 1876 budget showed debt charges accounting for more than half of all expenditure.

The loans had been made for both military and economic reasons: to support the Ottoman military position during and after the Crimean war and to finance railway and canal construction, including the building of the Suez canal, which had opened in 1869. But a dangerously high proportion of the proceeds had been squandered on conspicuous consumption, symbolised by Sultan Abdul Mejid’s luxurious Dolmabahçe palace and the spectacular world premiere of Aïda at the Cairo Opera House in 1871. In the wake of the financial crisis that struck the European and American stock markets in 1873, a Middle Eastern debt crisis was inevit­able. In October 1875 the Ottoman government declared bankruptcy.

The crisis had two distinct financial consequences: the sale of the khedive’s shares in the Suez canal to the British government (for £4m, famously ad­vanced to Disraeli by the Rothschilds) and the hypothecation of certain Ottoman tax revenues for debt service under the auspices of an international Administration of the Ottoman Public Debt, on which European bondholders were represented. The critical point is that the debt crisis necessitated the sale or transfer of Middle Eastern revenue streams to Eur­opeans.

The US debt crisis has taken a different form, to be sure. External liabilities have been run up by a combination of government and household dis-saving. It is not the public sector that is defaulting but subprime mortgage borrowers.

As in the 1870s, though, the upshot of this debt crisis is the sale of assets and revenue streams to foreign creditors. This time, however, creditors are buying bank shares not canal shares. And the resulting shift of power is from west to east.

Since September, Middle Eastern and east Asian sovereign wealth funds have made a succession of investments in four US banks: Bear Stearns, Citigroup, Morgan Stanley and Merrill Lynch. Most commentators have been inclined to welcome this global bail-out : better to bring in foreign capital than to shrink balance sheets by reducing lending. Yet we need to recognise that these “capital injections” represent a transfer of the revenues from the US financial services industry into the hands of foreign governments. This is happening at a time when the gap between eastern and western incomes is narrowing at an unprecedented pace.

In other words, as in the 1870s the balance of financial power is shifting. Then, the move was from the ancient oriental empires (not only the Ottoman but also the Persian and Chinese) to western Europe. Today the shift is from the US – and other western financial centres – to the autocracies of the Middle East and east Asia.

In Disraeli’s day, the debt crisis turned out to have political as well as financial implications, presaging a reduction not just in income but also in sovereignty.

In the case of Egypt, what began with asset sales continued with the creation of a foreign commission to manage the public debt, the installation of an “international” government and finally, in 1882, to British military intervention and the country’s transformation into a de facto colony. In the case of Turkey, the debt crisis was followed by the sultan’s abdication and Russian military intervention, which dealt a lethal blow to the Ottoman position in the Balkans.

It remains to be seen how quickly today’s financial shift will be followed by a comparable geopolitical shift in favour of the new export and energy empires of the east. Suffice to say that the historical analogy does not bode well for America’s quasi-imperial network of bases and allies across the Middle East and Asia. Debtor empires sooner or later have to do more than just sell shares to satisfy their creditors.

The writer is a professor at Harvard University and Harvard Business School and a senior fellow of the Hoover Institution, Stanford

Taz, what you do is make assumptions, frame an argument against those assumptions, and then wildly run ten miles with it.


Please don't look on this as coming from your image of me, just honestly and sincerely ponder it some, the results could help you more than a little. Forget that it came from me.

And Mac2 you do likewise...with this assessment...

I'll grant you that if you will grant me this...

You see how the wind is blowing and then make a statement that goes against those winds with no basis of support that you are willing to share with anyone.

Once people challenge your conclusion, you will do anything but offer a basis for it...

And you still have not responded with any substance on any thread....

I really hate to do this, but Taz do you own a house ? ....

Mac2 is correct:
Stocks managed to post gains in an extremely volatile 2007,
with the Dow rising 6.4 percent, the S&P 500 adding 3.5 percent and the Nasdaq climbing 9.8 percent.

However, there were huge gains in the first half and tall falls during the second half...which brings us here...

BTW Mac2...love the avatar. See y'all soon...should be a good one!

Mac , Enron looked well to and just look what happen to that. Welcome to the Enron government. The Republican spinners are now the same as Enron spinners.

Have to admit, the idea for my avatar came after seeing yours.


It should be a great game. Knowing what a big LSU fan you are; I celebrate a little either way the game goes.

Mac was EnRon a good company?

Well, since most of the shenanigans Enron pulled happened under the tenure of Bill Clinton and they got caught under the tenure of George Bush I'd say you ought to change your avatar to a whirlpool Jason.

A company is only as good as its people. Enron no doubt had many good people; but Ken Lay was a crook to the bone. There were many other crooks with him at the top, and a lot of greedy people all the way down the line from what I could make out.

I still hear Bush and Ken Lay were friends so nah I say Bush is the enron government.

Mac2 --

Yes, I own a house. What does that have to do with a lack of substance from you on this thread?

And, as for the stock market --- as someone suggested earlier, what is good for Wall Street is not necessarily good and often bad for Main Straeet. In fact, that is the true nature of the so-called Bush economic recovery. The corporate gains have far outpaced wage gains and the creation of jobs.

Well, I heard Bill Clinton had numerous people whacked. The difference between you and me is I can tell when someone says something I can tell when it's balooney.

Actually Marine - it was Clinton's pardon of Mark Rich that was pretty sleezy.

Wait until you see this one!



Yep. No one has refuted that one yet.

Now of course the fortunes of the stock market could be closely aligned with the fortunes of the general economy. But to show that one has to talk about things outside of the stock market. And try to paint a broad picture, not just cherry pick the stats that back up one's case. I see both gloomsters and pollyannas doing that.

Kohn Says Fed Is Trying to Signal When Views on Economy Shift `Materially' Federal Reserve Vice Chairman Donald Kohn said the central bank has increased its communication on policy views to the public in the wake of the financial-market ``turmoil'' that began in August.

U.S. Stocks Post Steepest Weekly Drop in 5 Months Amid Weaker Jobs, Output U.S. stocks had the steepest weekly loss since July after unemployment increased to a two-year high and manufacturing declined, bolstering speculation that a recession will stymie profit growth.

Dollar Declines Most Against Yen in Almost 2 Months as U.S. Hiring Slows The dollar posted its biggest decline against the yen in almost two months as a slowdown in hiring raised concern that U.S. economic weakness will spread globally.

Pimco's Bill Gross Says Federal Reserve May Not Be Able to Avoid Recession Bill Gross, manager of the world's biggest bond fund, said the Federal Reserve may not be able to avoid a recession even if central bank policy makers lower borrowing costs by at least another percentage point.


Fed Raises Next Two Emergency Sales to $30 Billion in Bid to Add Liquidity The Federal Reserve will increase the size of two scheduled auctions of emergency loans by 50 percent to $30 billion as part of a global attempt by central bankers to restore faith in the money markets.

Actually I believe the opinion of Bill Gross more then MAC2. I will act accordingly with my financial planing.

My post included no opinions, and no advice for the future.

Actually the title of this thread is GOOD NEWS ON THE ECONOMY. That seems to indicate an opinion.