Category: Economy

What is happening to us

When an option is to die and take our family with us there is something desperately wrong with our society. I can not imagine making the choice to commit suicide and take my children along with me, is that what people today are feeling is an option? My God, something needs to change here.
A family of four has been found dead in a suburban Columbus, Ohio, home in what’s believed to be a murder-suicide, authorities said Thursday.
Police tape surrounds a Whitehall, Ohio, house, where a family of four was found dead Wednesday.

Police in Whitehall, east of Columbus, responded to a call around 2 p.m. Wednesday and found the bodies of Mark Meeks, 51; his wife, Jennifer Dallas-Meeks, 40; and children Jimmy, 5, and Abbigail, 8.

“We’re confirming all four victims had gunshot wounds, and a gun was found at the scene,” Sgt. Dan Kelso said.

A suicide note purportedly written by Meeks also was found at the scene, but police are not releasing the note’s contents, Kelso said.

Authorities believe Meeks shot his wife and two children and then himself, Kelso said.

It was the second time this week that a family died in an apparent murder-suicide. On Tuesday, the bodies of Ervin Antonio Lupoe, his wife and five children were found in their Los Angeles, California, area home after Lupoe faxed a letter to a local television station explaining that he and his wife had lost their jobs and felt it was better to end their lives.

Police resisted the suggestion that the killings were motivated by finances or job loss.

“Out of respect for the family, detectives are not releasing the actual motive, but it’s not financial, and he was employed,” Kelso said.

The vice president of operations at Immke Northwest Honda, where Meeks was a service manager, confirmed that he was a current employee.

“We as a dealership decline to comment on this devastating tragedy, except to say that all of us here at Immke Northwest Honda are very sad and our condolences go out to the family,” Tom Spicer said.

Meeks’ brother said the family was struggling to come to terms with the possibility that his older brother — a lifelong car buff and devoted family man who adored his wife and children — could be responsible for their deaths.

“They were just great people, and they seemed to be an extremely close family,” Mike Meeks said. “I like to say they were so close they were mushy; they showed affection toward each other and their kids.”

Meeks said that he last saw his brother about three weeks ago when he came by to pick up firewood and that he seemed happy, giving no clue that anything was amiss.

The House has it!

The House on Wednesday evening passed an $819 billion economic stimulus package Wednesday on a party-line vote, despite President Obama’s efforts to achieve bipartisan support for the bill.

The final vote was 244 to 188. No Republicans voted for the bill, while just 12 Democrats voted against it.

The Senate is likely to take up the bill next week.

“I hope that we can continue to strengthen this plan before it gets to my desk,” Obama said in a statement after the vote. “We must move swiftly and boldly to put Americans back to work, and that is exactly what this plan begins to do.”

In floor debate earlier, House Democrats offered near-unanimous support for the bill, touting the package’s ability to quickly create jobs and jumpstart economic growth.

“One week and one day ago, our new President delivered a great inaugural address … which I believe is a great blueprint for the future,” said House Speaker Nancy Pelosi, D-Calif. “With swift and bold action today, we are doing just that — with this vote today, we are taking America in a new direction.”

But Republicans, who are outnumbered in the House, have pushed back, expressing concern about the large amount of spending in the bill, and have criticized the tax cut provisions for not going far enough.

“The underlying bill, while it has some good provisions, has a lot of wasteful provisions and slow-moving spending in it,” said House Minority Leader John Boehner, R-Ohio. “We have to act — we have to heal the ailing economy. The question is how to do it best; we think that fast-acting tax relief is the way to get it done.”

The House voted down a Republican amendment, which would have cut a significant portion of the bill’s spending and greatly expanded the amount of tax cuts in the bill.

Obama spent much of his first week as president rallying support for the bill. After meeting with congressional leadership of both parties on Friday, he met with Republican congressional leaders on Tuesday and a dozen CEOs on Wednesday.

Obama and House Democrats etched out plans for a stimulus package in the weeks leading up to the president’s inauguration. Two House committees amended and added some provisions, resulting in $607 billion in direct pending and appropriations and $212 billion in tax cuts.

Next week, the full Senate will vote on its version. The House and Senate bills will be different and need to be reconciled. Then, both chambers would have to vote on the final version in the coming weeks.

Congress has put the legislation on a fast track, as many lawmakers on both sides of the aisle agree that fast action is needed to help pull the economy out of a deep recession. Both Democratic and Republican leaders have said they aim to get the bill to Obama’s desk for him to sign before lawmakers’ Presidents’ Day recess in mid-February.

I Want to Have Citibanks Spare Chump Change

Citibanks 50 million dollar ride

The high-flying execs at Citigroup caved under pressure from President Obama and decided today to abandon plans for a luxurious new $50 million corporate jet from France.
The bank used TARP funds to purchase a new corporate jet for executives.

The decision came 24 hours after the banking giant, which was rescued by a $45 billion taxpayer lifeline, defended buying the state-of-the-art Dassault Falcon 7X — one of nine to be flying in U.S. skies — as a smart business deal.

The jet, the epitome of corporate prestige and privilege, can carry 12 passengers in elegant comfort.

ABC News has learned that on Monday officials of the Obama administration called Citigroup about the company’s new $50 million corporate jet and told execs to “fix it.”

Pelosi disagrees with Obama

Oh Im shocked. The first thing that Obama should do is to get rid of her, but that wont happen Im afraid. Obama seems to put the old attage to work of “keeping your enemies close”. We will see how all this pans out, it will be interesting to say the least.

(CNN) — Two days before President-elect Barack Obama is officially sworn in, House Speaker Nancy Pelosi made clear she disagrees with the incoming administration on at least two issues.

Obama has indicated he is not interested in repealing President Bush’s tax cuts for wealthy Americans before they expire in two years or investigating past actions of the Bush administration.

But speaking on Fox News Sunday, Pelosi said she wants Congress to consider repealing tax cuts on those who make over $250,000 immediately and is pushing for a congressional investigation into whether the Bush administration illegally fired federal prosecutors two years ago.

On taxes, Obama’s stimulus plan does not call for repealing president’s tax cuts for wealthier individuals, even though the president-elect had said he would during the presidential campaign. Former Treasury Secretary Larry Summers, a top Obama economic advisor, also suggested Sunday that repealing Bush’s tax cuts will not be a priority.

But Pelosi said Sunday she wants the incoming president to stick to his campaign pledge.

“We had campaigned in saying what the Republican Congressional Budget Office told us: Nothing contributed more to the budget deficit than the tax cuts for the wealthiest people in America,” Pelosi said in the interview.

A spokesman for Senate Minority Leader Mitch McConnell called Pelosi’s statement “false,” and cited a recent fact check from the St. Petersburg Times disputing the House Speaker’s claim tax cuts for the wealthy is the biggest contributor to the budget deficit.

Pelosi said she would not seek to block the president-elect’s stimulus plan over its lack of tax hikes for the rich, but she urged Obama to not to simply let the tax cuts expire in two years.

“[Tax cuts on the wealthy] have to prove their worth to me as to how they grow the economy, how they create jobs,” she said.

Pelosi also pushed for an investigation into the Bush administration’s handling of the Justice Department, despite pledges from Obama and his aides not to focus on the administration they are succeeding.

“I think that we have to learn from the past, and we cannot let the politicizing of, for example, the Justice Department, go unreviewed,” Pelosi said. “Past is prologue.”

Tell me your story

The world we live in has changed so much, its not at all what we are used to seeing.

There has been major familiar businesses and small local businesses closing down. One recent is Circuit City.  In and around my old neighborhood little shops that once were full of patrons are now empty with signs stated closed for business. Even the unfamiliar areas look the same. Houses all in a row with for sale signs, businesses closed, jobs lost, empty buildings all making the statement that our economy isn’t doing so well.

I’d like to hear your story from where you live and how your lives have changed.

Foreclosures up by 81% in U.S.

Home is going to have to be where the heart is as there wont be any other place to live.

Foreclosures rose 81% in 2008, ensnaring 2.3 million U.S. households during the year, according to RealtyTrac Inc. data released today.

The Irvine, Calif.-based foreclosure Web site said December filings rose 17% from November and by 41% from December 2007 levels.

Michigan ranked sixth nationwide with 145,365 filings on 106,058 properties, up 21.6% from 2007 and up 107.9% from 2006, RealtyTrac said.

And Wayne County fell to 10th place from first place for 2007 with 38,106 foreclosure filings, down 7.7% from 2007. The rest of metro Detroit, including Oakland, Macomb, St. Clair, Lapeer and Livingston counties, ranked in 25th place with 30,817 filings, up 42.6% from 2007.

The big jump in December foreclosure activity was somewhat surprising given the moratorium enacted by both Freddie Mac and Fannie Mae, and lender programs meant to delay foreclosure actions against distressed homeowners, said James J. Saccacio, chief executive of RealtyTrac.

Nevada, Florida and Arizona had the highest foreclosure rates in 2008, while California had the highest number of properties with a foreclosure filing at 523,624.

While Michigan has had flat foreclosure activity for a few months, it is too early to say whether the state has hit bottom, said RealtyTrac spokesman Daren Blomquist. “The one thing that makes me hesitant to say it will continue on that trend is we are seeing the higher unemployment rate and that could spark some more foreclosures,” he said.

Michigan’s unemployment rate was 9.6% in November.

Bank repossessions rose 19.3% to 55,801 in Michigan last year compared with 46,780 in 2007, Blomquist said. “People had fewer options to refinance. The credit crunch combined with lowering home values really gave people fewer options to avoid foreclosure,” he said.

Blomquist said that bank repossessions in November declined by 8% nationwide and by 2% in Michigan, showing the possible impact of the Freddie Mac and Fannie Mae moratorium for the holidays.

But when that artificial cap is lifted Jan. 31, many expect a flood of bank repossessions as distressed homeowners are unable to pay their mortgages.

“Once the 31st comes, I have heard that we will get triple the number of foreclosures,” said Joe Dakroub, owner and broker of Dearborn-based ERA Dynasty.

There are some good signs for the start of a turnaround in 2009, said Alexis McGee, president of, a Sacramento, Calif.-based Web site.

Housing affordability is better than it’s been in years, mortgage rates are low, minimal new housing construction and a growing U.S. population will inch up demand and unemployment is still below the highs of the early 1980s.

McGee said that Michigan bank repossessions have leveled off at roughly 5,000 per month in recent months.

“What I’m looking at right now is a stabilizing of the Michigan area based on foreclosure filings today,” McGee said. “But if we have big unemployment in Michigan, that will change.”

Professor Peter Morici, a former chief economist

Professor Peter Morici, a former chief economist
Professor Peter Morici, a former chief economist

Professor Peter Morici is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on  CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.

His recent article in the Faculty Opinion is a very interesting read. He wrote:

January 9, 2009

Economy Loses 524, 000 Jobs in November
The Economy Is in a Depression

Today, the Labor Department reported the economy lost 524,000 payroll jobs in December, and average employment was 1.3 million lower in the fourth quarter than in the third quarter. The economy is the jaws of a depression.

The economy has shed 2.6 million jobs since December 2007, as the full weight of the banking crisis, trade deficit with China and burdens imposed by high-priced imported oil are bearing down on manufacturing, construction and the broader economy with unrelenting pressure.

Unemployment increased to 7.2 percent in December; however, factoring in discouraged workers, unemployment is closer to 9.4 percent. Add workers in part time positions that cannot find full time employment and the hidden unemployment rate is 14.5 percent.

Recession or Depression?

The economy contracted at about five percent annual rate in the fourth quarter. The real question is whether the economy is in a recession or depression?

Recessions are like stock market corrections—after a time, equity prices rebound without government intervention. Federal Reserve interest rate cuts and stimulus tax rebates and spending have shortened the lives and eased the impact of post-World War II recessions, but those policies did not end them. The economy self corrected.

A depression is not self-correcting. Roosevelt Administration stimulus packages—huge deficit spending—eased the pain but failed to end the Great Depression. Roosevelt’s policies did not put the U.S. economy on a sustainable growth path, because New Deal policies worsened structural problems that pulled the economy down in the first place. For example, the New Deal proliferated monopoly pricing, extended the life of undersized farms, raised structural savings rates, and created a system of home lending too dependent on federally sponsored banks.

The challenges facing President-elect Barack Obama could not be clearer. The current economic slowdown has two structural causes—bad management practices at the large money center banks and the huge foreign trade deficit. These problems are not self-correcting.

The economy will not recover without fundamental changes in banking and trade policy. A large stimulus package, though necessary, will only give the economy a temporary lift but then unemployment will rise again and continue at unacceptable levels indefinitely without successively larger stimulus packages and huge federal budget deficits. The economy is a depression, not a recession

To accomplish lasting prosperity, President-elect Obama will have to fix the banks and the trade deficit. Obama must ensure that the banks use the trillions of dollars in federal bailout assistance to renegotiate mortgages and make new loans to worthy homebuyers and businesses. Obama must make certain that banks do not continue to squander federal largess by padding executive bonuses, acquiring other banks and pursuing new high-return, high-risk lines of businesses in merger activity, carbon trading and complex derivatives.

Industry leaders like Citigroup have announced plans to move in those directions. Many of these bankers enjoyed influence in and contributed generously to the Obama campaign. Now it remains to be seen if a President Obama can stand up to these same bankers and persuade or compel them to act responsibly.

In addition, Obama must address the huge cost of imported oil and trade deficit with China or any effort to resurrect the economy is doomed to create massive foreign borrowing, another round of excessive consumer borrowing, and a second banking crisis that the Treasury and Federal Reserve will not be able to reverse.

Ultimately, reducing the oil import bill will require higher mileage standards for automobiles and assistance to automakers to accelerate the build out of alternative, high mileage vehicles. Fixing trade with China will require a tax on dollar-yuan transactions if China continues to refuse to stop subsidizing dollar purchases of yuan to prop up its exports and shift Chinese unemployment to the U.S. manufacturing sector.

Near term, a stimulus package focused on infrastructure is critical for resuscitating growth. The recent round of tax rebate checks ended up in savings accounts or spent at the Wal-Mart on Chinese goods, and did little to create jobs or accelerate growth. Whereas projects to repair roads, rehabilitate schools and refurbish public buildings would create high-paying jobs at home and provide a legacy in capital improvements that assist growth now and in the future.

However, stimulus spending, alone, won’t fix what’s broke. It didn’t end the Great Depression. Japan has had a succession of stimulus spending over the last two decades and that has failed to restore its economic dynamism. Similarly, President-elect Obama’s massive stimulus package, alone, won’t fix the U.S. economy. He must also reach into the management of the banks, and dramatically reduce U.S. dependence on imported oil and the trade deficit with China. The alternative is economic stagnation or worse, a long and deepening depression.

Without fixing the banks, energy and trade with China, the stimulus package will give the economy a temporary lift, but then unemployment will rise again. The economy would then require progressively larger stimulus packages, and foreign borrowing to finance them, to keep Americans employed. Eventually, the foreign line of credit would run out, and widespread unemployment, depression and economic decline would follow.

Wages and Unemployment

In December, wages rose a modest 5 cents per hour, or 0.3 percent. Wage pressures pose little threat to accelerate inflation.

The unemployment rate was 7.2 percent in December, up from 6.8 percent in November. However, these numbers belie more fundamental weakness in the job market. Discouraged by a sluggish job market, many more adults are sitting on the sidelines, neither working nor looking for work, than when George Bush took the helm. Factoring in discouraged workers, who have left the workforce, and those forced into part time employment owing to the lack of full time work, the unemployment rate is about 14.5 percent.

During the presidential campaign, declining real wages and fewer adults working gave Barack Obama’s proposals to redistribute income through the tax system a lot of traction. However, those policies will do little to correct the fundamental systemic problems that are destroying good jobs and squeezing middle class families, even if they would make them feel better for a little while.

Going forward, solutions that create better jobs will require cutting the trade deficit by at least half to substantially boost domestic manufacturing, solving the problems of the large money center banks to get mortgage money flowing and housing construction going again, and energy policies that more aggressively develop alternative fuel sources, conserve oil, and open up new domestic fields for conventional oil and gas production. Reducing dependence on foreign oil requires doing all things environmentalists want us to do and all things environmentalists don’t want us to do.

Politically correct promises to create millions of new jobs producing alternative fuels makes effective presidential campaign slogans, but realistic policies for governing require aggressive development of more conventional oil and gas, as well as nonconventional energy sources, and efforts to improve the energy efficiency of personal transportation.

If the Democrats are not willing to drill for more oil off shore and take on the automobile industry’s resistance to significantly higher mileage vehicles, the U.S. economy will be even more indentured to Persian Gulf oil exporters at the end of President-elect Obama’s first term than it is today.

Finally, diplomacy has failed to redress the currency issue with China. If President Obama is not willing to take tough steps to redress the trade imbalance with China and reduce oil imports, together the Persian Gulf oil exporters and China’s sovereign wealth funds may be able to buy the New York stock exchange eight years from now. Americans, outside those working for the New York banks that facilitate this sellout, will find their best futures waiting on tables for Middle East and Chinese tourists.

Manufacturing, Construction and the Quality of Jobs

Going forward, the economy will add some jobs for college graduates with technical specialties in business, health care, education, and engineering. However, for high school graduates without specialized technical skills or training and for college graduates with only liberal arts diplomas, jobs offering good pay and benefits remain tough to find. For those workers, who compose about half the working population, the quality of jobs continues to spiral downward.

Historically, manufacturing and construction offered workers with only a high school education the best pay, benefits and opportunities for skill attainment and advancement. Troubles in these industries push ordinary workers into retailing, hospitality and other industries where pay often lags.

Construction employment fell by 101,000 in December. This is a terrible indicator for future GDP growth. Retailing shed 67,000 thousand jobs, and financial services lost 10,000 jobs.

Manufacturing lost 149,000 jobs, and over the last 105 months, manufacturing has shed more than 4.3 million jobs. The trade deficit with China and other Asia exporters are the major culprits.

The dollar is too strong against the Chinese yuan, Japanese yen and other Asian currencies. The Chinese government intervenes in foreign exchange markets to suppress the value of the yuan to gain competitive advantages for Chinese exports, and the yuan sets the pattern for other Asian currencies. Similarly, Beijing subsidizes fuel prices and increasingly requires U.S. manufacturers to make products in China to sell there.

Ending Chinese currency market manipulation and other mercantilist practices are critical to reducing the non-oil U.S. trade deficit, and instigating a recovery in U.S. employment in manufacturing and technology-intensive services that compete in trade. Neither President Bush nor Congressional leaders like Charles Rangel and Chuck Schumer have been willing to seriously challenge China on this issue, and Senators McCain and Obama appeared comfortable with continuing their approaches during the campaign.

Now President-elect Barack Obama must alter his position, and get behind a policy to reverse the trade imbalance with China, or preside over the wholesale destruction of many more U.S. manufacturing jobs. These losses have little to do with free trade based on comparative advantage. Instead, they deprive Americans of jobs in industries where they are truly internationally competitive.

In the end, without assertive steps to fix trade with China, as well as fix the banks and curtail oil imports, the Bush years will seem like a walk through the park compared to the real income losses Americans will suffer during the Obama years.

Instead, were the trade deficit cut in half and the banks fixed, manufacturing would recoup at least 2 million jobs, U.S. growth would exceed 3.5 percent a year. Real wages and domestic savings would climb, and the federal government would receive more revenues to balance its budget or address other pressing domestic needs.

The choices for the new president are simple. It’s either recovery or depression. Fix the banks, trade with China and energy policy or become America’s Nero.

For more articles of the pending 2009 year:

Articles by Prof. Peter Morici: 2009

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