So how are you folks feeling about the economy over there?
From what I read in the financial papers they seem to feel that a real recovery is a long way off.
Well, the recession at this point still seems more something people are talking about than something quite tangible just yet. The rollout of the "stimulus" package is supposed to start sooner than expected. This will toss about $300-600 or so per tax filer out to people with the idea that they will then toss it back into the economy and keep the wheel turning, as it were. Of course we're going to have to pay for this somehow or other later on. I visualize President Bush as "The Joker" from the Batman movie scene where The Joker's tossing money to the crowds going wild, only to release the poison gas in the balloons to spite them for their greed. But I think Bush will become more and more rash as the days of his term in office dwindle down, barring a "national emergency" to derail the election - a thought from the province of the conspiracy-paranoid front, but it's out there, nonetheless. Stranger things have been known to happen. Living near New York City on Long Island I saw the World Trade Center go up - I never thought I'd see it come down in my lifetime, especially in so horrorific way as it did. So what may seem as impossible these days I think is more correctly relegated to improbable instead.
I fear a gradual slide into more of a police state. Bit on the NYC news the other night about a program funded for two years, that they're trying to make permanent of supercops armed with automatics in Kevlar suits down in the Subways. Full acquittal of NYC cops in the Sean Bell case - a bachelor and his buddies were out celebrating the last night of his "freedom" at a club, somehow or other cops got involved and 50 shots later he's dead and his buddies injured. Even closer to home in the town up the lake last week some bomb threat notes, then an M80 firecracker set off in the boys' room of the middle school, not an unusual prank in and of itself, though this one had been packed with shrapnel.. major closing and shutdown there. Cops screening everyone from elementary school through high school - one of the daughters of a co-worker felt the school was more like a prison than a school. Some kid in South Carolina busted, now facing Federal charges for wanting to build a homemade bomb. Fortunately they got to him before he could put it together. Nice peaceful society we've got here, eh?
The biggest clouds on the immediate horizon are a spike in food prices, particularly grains, and of course gasoline, with oil reaching new highs last week. The high fuel cost is the most insidious drag on the economy as so much of the economy depends on moving goods and people around. The cost ultimately gets passed up to the end consumer - so the challenge is to keep all the balls in the air, mortgage, food, etc. So we'll see how it all plays out.
They have also pointed out that the Fed has destroyed the 'Moral hazard' theory by rescuing the very people who caused the problems thus giving them more incentive to create more financial problems in the future at a much grander scale as they know the government will not let them fail.
I think the bigger issue that is part of the whole subprime mess is how these things got bundled up in issues that became more and more removed from the actual original mortgages. Much like the kids' game of "musical chairs" as long as the music lasted all was well. Once it stopped, though, Bear Stearns found themselves without a seat. The problem was that the chairs are connected, much as a row at a train station. So if Bear Stearns landed on their backsides, they were so connected to others still on the chairs I think the thought was that they'd pull down the whole lot after them. Given that your banks on the other side of the planet are feeling some of the downdraft, just shows how connected all these players are. Which is very scary when one thinks about it. 1930's deja vu we can do without. The sound of falling dominoes is not pretty.
No doubt more will reveal itself as we go on - and the change of Administration here next year will have it's own unique stamp on the shape of things to come.
Best,
AIMster
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