Unemployment rate at the highest level in a quarter century. 651,000 jobs lost in February alone. 8.1%
The headlines this past week certainly were not pretty and sent the markets down further than it has ever been since 1997. Based on stock market data, we just went back in time over a decade. Based on economic and employment data, we travelled back over 50 years. Sources close to the White House say Obama and his staff have been "overwhelmed" by the economic meltdown and have voiced concerns that the new president is not getting enough rest.
But have no fear. Obama has vowed to redouble their work to revive the stricken economy. The only question remains: How?
Unemployment has already reached the average rate the White House projected for the whole year. In addition to passing the largest stimulus package and the largest budget in US history, Obama is facing a plummeting stock market down 20% since his inauguration, the possible bankruptcy of General Motors, the war in Iraq, and rising unemployment. At the same time, he has put forth efforts to achieve universal healthcare, overhaul education andbegin a green energy revolution.
Now he plans to redouble their work. Is he doing too much too quickly?
The President's $787 billion stimulus plan aims to create or save 3.5 million jobs but the U.S. has already lost 4.4 million since the recession began in December 2007, with more declines coming. "These aren't just statistics, but hardships experienced personally by millions of Americans who no longer know how they'll pay their bills, or make their mortgage, or raise their families," Obama said in his weekly address.
Obama said yesterday that he's "committed to doing all that's necessary to address this crisis."
Key Obama economic advisor, Christina Romer said that despite the grim economic news, better times would return, and would eventually cause a rebound on the stock markets."The best thing we can do for American consumers is exactly what we're doing, which is creating jobs, getting banks in a position where they can lend again and keeping people in their homes."
She's right. So is Obama. That is why they need to keep their focus on repairing the banking system, implementing the stimulus and instilling consumer confidence rather than launching his green energy revolution and efforts to achieve universal healthcare. I know going green and healthcare is important, but that can wait till next year.
I have always said that in order to look toward the future, we must focus on the present. That is why Obama needs to focus on our economy right now, if he wants his green revolution and universal healthcare policies to stand a fighting chance.
Earlier this week, Obama warned that improvements were highly unlikely in the first quarter of 2009. Guess what? The first quarter is almost over.
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It won't stop
Date: 03.08.09 Posted by: Daniel Shy
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replyRisk is pricing itself. This downturn will not stop unless there is true transparency on the toxic assets. As soon as the GDP contracts 10%, then we are within the economic definition of a Depression, not a recession. I see that as completely unavoidable now, as we are already within a hairsbreadth of those numbers.
The CDS market needs overhauled, if not dismantled, and the completely invisible CDO market needs regulated. Nothing major. It wouldn't cost that much. Create laws that standardize the contracts. Put those contracts on an exchange where they can be valued. Pretty simple. It was done with commodities decades ago. Why can't it be done here? Many, many people offered solutions that involved standardizing all CDO contracts, and putting them on a transparent exchange. There was 40 trillion of no show value. They are still resisting that very simple solution. So I'm only left with one possibility as a solution. There truly is 40 trillion that is missing.
If those CDO's are not put on an exchange, expect unemployment rate to reach 11%, the Jobless pool to be around 16%, and deflation rate of -2.5 to set in. We will be within the next Depression
This is about trust. I don't trust that those toxic derivatives are worth anything, so I will price that risk. I'm told by the banks: "Oh don't worry, we think they are undervalued". But they've proven they can't be trusted. That risk will price itself. One way or the other. The longer the delay for transparency - the more destructive the process. I went heavily to cash in August, and
The stock market is just the net result. The Economic stimulus package will do very, very, very little (if anything at all, making it the biggest waste of money in the history of the world) - as long as no one trusts the financial system any longer. Since they are still resisting putting those assets up where everyone can see them in a standardized exchange? Then expect more of the same. I will price that risk. One way or another.
Re: It won't stop
Date: 03.08.09 Posted by: Christopher Jackson
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Its sad to say that the derivatives market has wiped out so much of the economy's money. YOu are right, there are trillions of dollars still yet to be accounted for and will never be accounted for. To move ahead, we need to have those like an exchange and regulate it and keep open transparency. The stock market itself as an exchange is already full of so many scammers and loopholes that we dont need another form of money exchange to further pollute our markets and more importantly, our money
Re: It won't stop
Date: 03.08.09 Posted by: Tim Knowles
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Here you go: Derivatives exchange operator IntercontinentalExchange (ICE.N) said on Friday it would begin clearing U.S. credit derivatives on Monday after it became the second entity to receive full regulatory approval to act as a clearinghouse.
The Securities and Exchange Commission approved conditional exemptions to allow ICE US Trust LLC, the exchange operator's New York-based trust company, to provide central counterparty services for credit default swaps, known as CDS.
ICE said it injected $35 million into the Trust's operations and $10 million into its guaranty fund, and expected to add another $90 million into the fund over two years.
The company also added Barclays Capital to the list of broker-dealers that have agreed to back its clearinghouse, strengthening its bid to take advantage of a potentially lucrative new source of revenue.
ICE's proposal for the $27 trillion over-the-counter market is one of several industry proposals that could satisfy the government's goals for forming central counterparties and increasing transparency in the market for CDS, which are contracts that insure against the default of debt issuers.
The private and interconnected nature of the CDS market has been blamed for exacerbating the global credit crisis, including the unwinding of positions held by U.S. insurance giant American International Group, a major issuer of CDS.
"It is critical that we bring increased transparency to credit default swaps by developing efficient and effective oversight of credit default swap clearing agencies," SEC Chairman Mary Schapiro said in a statement.
In December, the SEC approved Anglo-French clearinghouse LCH.Clearnet to begin operating as a U.S. CDS clearinghouse. Analysts also expect the SEC to soon approve a clearing proposal by Chicago-based derivatives exchange CME Group Inc (CME.O).
"We believe that our SEC approval is imminent," said CME spokesman Allan Schoenberg.
Exchanges have scrambled to set up clearinghouses for CDS since the market was targeted by regulators and politicians last year. A recent study by research and consulting firm TABB Group said CDS clearinghouses will get almost $100 million in revenue this year and $138 million by 2011.
ICE operates futures exchanges and over-the-counter markets for commodities and derivatives products. It received CDS approval from the U.S. Federal Reserve earlier this week, and said in a statement on Friday it would begin processing and clearing index-based CDS March 9.
It will first clear North American Markit CDX indexes, and then "liquid single-name CDS in the following months," ICE said.
"ICE Trust has been designed to further enhance well-functioning CDS markets by reducing counterparty and systemic risks, and increasing transparency and capital efficiency in the CDS markets," ICE Chief Executive Jeffrey Sprecher said in a statement.
ICE agreed in October to buy the broker-owned, The Clearing Corp, giving its CDS proposal the key backing of nine investment banks.
On Friday, Barclays Capital -- which purchased some of the businesses of bankrupt broker-dealer Lehman Brothers, an original TCC shareholder -- was added to the list.
The ten brokers are "the initial clearing members of ICE Trust" and have made "a significant contribution" to the Trust's guaranty fund, ICE said.
ICE said all buyside and sellside institutions that meet its standards are eligible for membership. Dirk Prius, a former managing director in the operations division of Goldman Sachs (GS.N), will be the Trust's president.
The investment banks partnered with ICE in the United States are: Barclays, Bank of America (BAC.N), Citigroup (C.N), Credit Suisse (CSGN.VX), Deutsche Bank (DBKGn.DE), Goldman Sachs, JPMorgan Chase (JPM.N), Morgan Stanley (MS.N), UBS (UBSN.VX) and Merrill Lynch, which Bank of America has agreed to buy
Re: It won't stop
Date: 03.08.09 Posted by: Gordon Weston
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Depression is defined as GDP falling over 10% but no one can truly define this. Some say it has to last 3 years before we can call it a depression. In any case, the Deutsche Bank predicted there are risks that the U.S. economy could contract by as much as 10 percent in the first quarter, given the relentless wave of dismal economic data being reported in early 2009. Then, they forecast growth to return in the fourth quarter, roughly plus 1 percent, following a 2.8 percent drop in the second quarter and a flat reading in the third quarter.
So based on their predictions and if we were to use a one-year time frame, we could see a decline of 11.8% decline in GDP thus putting the US in a depression for 2009
Keeping focus
Date: 03.08.09 Posted by: Jason Lee
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replyI am on board with you, Ivan. The administration needs to put all of their focus on stimulating the economy. Those healthcare and "green plans" right now can wait until our economy stables a bit.
I also hope that you're wrong Daniel with the depression as unavoidable, but it is becoming closing in on us. For all of our sakes, lets hope you're wrong...
Date: 03.08.09 Posted by: Larry Kiefer
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replyPeople have to stop talking about the "stimulus" bill as though it was meant to stimulate the economy. It wasn't! 70% of the spending comes in the out years beginning in 2011. Does that sound like his focus was on the financial crises?
The spending in the bill is focused on green research, education (higher teacher salaries?), subsidizing the states' profligate spending, roadwork in a couple of years, and extending existing government benefits.
It is pretty obvious that he assumed that the economy would take care of itself, and he focused on all the same old programs for his voting constituancy that weren't put in place under the prior couple of administrations.
He is a smart guy but out of his league. He just keeps going on trips to promote his agenda. Good talker but maybe not such a good executive. Then again, he has no, zero experience in running anything or focusing on priorities.
It may now be dawning on him his new job makes him responsible for all of the people. He and we are in deep **it. He had better start focusing on what needs to be done rather than letting Nancy and the rest of the politician types to finally get all the pork that they had missed out on.
No wonder he didn't define "change" in his campaign; He didn't know what that might involve.
Re:
Date: 03.08.09 Posted by: Grill Man
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Its nice to see people on here that know what they're talking about. Obama is a great talker and a celebrity President fueled by the celebrities that all pushed for him in the votes. Of course they did! They all have enough money to survive this.
He packaged all of the stimulus bill into reforming and changing this government and yes he assumed the economy would take care of itself.
If he wants to be voted for a second term, he should focus on the economy NOW and once he helps us through this problem, we'll vote him for a second term and THEN he can have his government
Re:
Date: 03.09.09 Posted by: Donald Yufi
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The stimulus bill was meant to stimulate the economy. Only problem is Obama used it to stimulate his government and his changes. Simple as that.
Date: 03.08.09 Posted by: Merrill Ann Gonzales
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replyI surely hope I am wrong, but it seems to me that this administration is trading in an economy that sustains income and jobs, for a few jobs that have a short duration. It's beginning to look like there will be a whole lot more jobs and enterprises lost
than they can create. I just don't see any sustainability or direction coming that anyone can plan on. How can you start to recover in this environment?
Re:
Date: 03.08.09 Posted by: Toby Cramer
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You are not wrong. There are a lot of jobs that are being created that are simply just for the short term. Thats why economists, Republicans, and even some democrats are having a fit about the spending. Whats going to happen in a few years? Will they need another stimulus package after those jobs are finished?
Re:
Date: 03.09.09 Posted by: Christopher Jackson
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You know, that is why so many are predicting further decline. I think that the focus of our core issues should be focused on ourselves and instilling ourselves with consumer confidence. Easy to say tough to do but its pretty apparent that Obama is a president who will please the people in front of the camera but when it comes down to the nitty gritty, he has no clue
Re:
Date: 03.10.09 Posted by: James Thompson
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You can't. Thats why stocks are down the way they are and even Warren Buffett is now saying how horrible the markets are right now
The signs of decline
Date: 03.09.09 Posted by: Jason
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reply"In order to look toward the future, we must focus on the present. That is why Obama needs to focus on our economy right now, if he wants his green revolution and universal healthcare policies to stand a fighting chance." I couldn't agree more with this statement. There are things that are much more important right now than reforming government. I know a lot needs to change and maybe 5 years, 10 years, from now it may be for the better of the citizens, but we're not going to have a brighter future if we don't fix it starting with things that matter most.
I am with you on this one too Larry, he really is thinking the economy would take care of itself.
Re: The signs of decline
Date: 03.09.09 Posted by: James Thompson
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More focus away from the situation:
On its front page, the New York Times reports that "Obama intends to avoid the thorniest question in the debate: whether taxpayer dollars should be used to experiment on embryos themselves, two senior administration officials said Sunday."
The Washington Times meanwhile, notes "House Minority Whip Eric Cantor, Virginia Republican, called Mr. Obama's plans a 'distraction' from the serious economic troubles the nation and its political leaders have been battling." The Hill notes Cantor said on CNN, "Why are we going and distracting ourselves from the economy?"
Re: Re: The signs of decline
Date: 03.10.09 Posted by: Gordon Weston
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Barack Obama's $787-billion (U.S.) stimulus plan, which critics derided as wasteful and excessive, may in fact have been fatally modest. His proposed $3.6-trillion budget, unveiled only two weeks ago, is already out of date, based on economic assumptions that were naively optimistic.
With the global recession now the worst since the Great Depression, as certified by the World Bank, the U.S. economy is deteriorating in ways not seen by anyone whose memory does not reach back to the Dirty Thirties.
Re: Re: Re: The signs of decline
Date: 03.10.09 Posted by: Casey Ward
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I am a supporter of Obama but I have to say that his proposal and spending were not only optimistic, but rather put forth to quickly change our govermenet. I agree that he might have taken the crisis a little too lightly
Too little too late
Date: 03.10.09 Posted by: Jules Love
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replyAt this point, now that the bill has been passed and the new budget being finalized, we may be in for a depression in the US. Obama has clearly put too little funding on actually stimulating the economy and too much on other matters.
Re: Obama (who?)
Date: 03.13.09 Posted by: Dewayne18
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replyThis guy as no presence. I have to keep reminding myself that he's the President of the Unites States. I wonder if he'll ever get anything done while in power. The Canadian political scene is getting more interesting these days. I wonder if the leaders of other powers will tear him to shreds.
Re: Re: Obama (who?)
Date: 03.13.09 Posted by: Jason
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If the leaders havent already, the economists already have and practically every analyst out there. He already looks worn out and if you look at every weekly address, he is getting older and worse every week