Because the scale and speed of this crisis has meant that massive impregnable financial institutions have literally disappeared overnight. If you would have asked me or anybody else wether it was fathomable for titanic corporations with trillion dollar balance sheets like AIG, Lehman, Merrill to all disappear within 72 hours as recently as labor day, I would have assumed it was more likely that an alien spaceship would land on wall street and martians would walk out jamming to a remix of Thin Lizzie's "The Boys are Back in Town". This is the equivalent of bank runs - it's happening in real time before our eyes. Waiting til January may be too late.
I didn't say "Great." I don't expect 30% unemployment. This will definitely be more than the "recessions" we've had since the 1960's though. Housing will continue to decline, medical costs will continue to go up, and gasoline isn't going back to a buck per gallon.
But it wasn't just in 72 hours. It had been building a long time and people were too drunk with money to heed the signs.
I agree with all of that. But you don't worry about the patient's diet while he's having a heart attack. You stop the heart attack, get him back to normal, and then force him to change his diet. The regulation and all is coming in the next Congress. The question is how much damage will be done in the meantime.
Actually, I believe manufacturing in the US has steadily climbed as a percent of GNP and is actually very healthy in the United States. While it is true that many traditional manufacturing plants and jobs have gone overseas, many technological or quality driven manufacturing jobs are growing steadily in the US. I think it has become somewhat of a myth that we don't make anything anymore. Now it is true also that employmentwise, manufacturing has dropped in the US relative the economy (not in real numbers), but that is often explained by higher US worker productivity and technology as well as more craftsman/skilled manufacturing compared to line driven mass production. I think its telling that US manufacturing has maintained a stable and higher relative growth compared to much of the world seperate from the "growing" economies of Asia and India.
it would have passed if just 11 more dems had voted for it (and the republican house leadership voted for it).
Because every day, you lose another major institution or two. Today, you lost Wachovia. Last Thursday, you lost WaMu. The week before that, you had Lehman, AIG, and Merrill was on its way. This has to happen - yesterday. The credit markets are seized up TODAY (and for the past week). Small businesses can't get loans for standard working capital - meaning that shortly, they won't be able to pay their employees. Car loans are gone (one of the largest car dealerships in the country just went under last week, though I'm not sure if there was a correlation). All basic financial activity in the country are basically frozen - three months of that and you have no economy left.
The problem is that the credit markets are frozen, which means loans are not being made as they are normally made. If business do not get loans to grow, they start looking to lay off people, which causes a vicious depressive cycle of a shrinking GDP. It may already be too late to stop the cycle.
Watch the S&P 500. If it closes below 1135 or so then look out below. It's going to be ugly, very, very ugly.
You think this is a depression? Wow. What will you call it when we hit 20-25% unemployment like we did in the 1930's as opposed to the 6% we are at now or the 7.5% we hit in 1990-91
I love the smell of partisanship in the morning. Smells like.... failure. Someday this war's gonna end...
I have yet to meet anyone who has had trouble securing a loan, or who has experienced their company having trouble securing a loan. BUT... I understand the potential and the justifiable concern.
Except the leadership of the parties agreed on how many votes they each needed. The Dems basically delivered their promise; the House GOP leadership wasn't able to. This was a failure by everyone. John McCain's supposed single role in this was to get House GOP members on board, so he failed miserably as well.
Yeah, all the "regular Joe's" cheering that this didn't go through may be in for rude awakening when they their small business goes under, or when they get layed off. Also, I think there are a LOT of people that will make a LOT of money by buying up good companies at greatly reduced prices with the stock market getting nailed.
Neither do you drive a stake through his heart in the hope it will drive the demons of sickness out of his body. If you're going to do "something" make sure it has a reasonable chance of working.
No it really was just 72 hours. The issues on these balance sheets are not really known by anybody that far ahead of time due to the inherent difficulty in valuing them. If it was known that far ahead of time rather than seeing a catastrophic, freefall in share prices like AIG had you'd have instead seen a long slow decline like CFC or WM. Once a downgrade happens and the collateral call occurs it's all over. Look at Goldman Sachs - they were teetering on the brink late two weeks ago - despite turning a multi-billion profit last quarter while having very little direct subprime exposure. The speed that value is being erased here really is unprecedented in financial history. That's not even arguable.
Arent most businesses cash flow positive ie they make enough each month to pay their people and buy supplies, so that they don't need loans all of the time?
