Nov 07 2008
Spread The Wealth? What Wealth?
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It seems Wall Street has signaled its feelings about liberal control of all three branches of government with more shedding of our wealth as the financial markets continue their plunge. As we all know the mortgage crisis was created by the naive liberal concept of “spreading the housing market” to those who were high risk lenders. As banks and Fannie Mae and Freddie Mac piled on one bad loan after another, Democrat friendly ‘rich’ got richer from bonuses that measured number of loans secured, not number of good loans secured.
Their ill gotten windfalls, culled from backs of people sweating out their mortgage payments, were then funneled into the campaign coffers of the liberal democrats who set up this risky scheme. So who lost? Home owners who now see the value of the most prized asset in free fall. Who won? The people shoveling in the bad loans and their politician allies who loosened the regulations on what was determined to be a sound loan.
Now we are entering the next phase of the liberal destruction of the world’s greatest economy. The “spread the wealth’ phase, where liberals take money from those who worked hard and succeeded and give it as a government handout to those who don’t even pay taxes. Problem is, the markets are so spooked by the coming financial crisis at the hands of the dems the “wealth” is disappearing right before our eyes.
U.S. stocks slid, sending the market to its biggest two-day slump since 1987, after jobless claims jumped and the shrinking economy crushed earnings at companies from Blackstone Group Inc. to News Corp.
…
The two-day tumble following Election Day wiped out more than half of the market’s rebound from a five-year low on Oct. 27. Both the S&P 500 and Dow average posted their biggest two-day slides since plunging more than 24 percent as rising borrowing costs helped spur the market crash of October 1987.
And of course this is infecting world markets. It seems the idea of pending liberal ‘change’ has undermined what fragile confidence was building back up prior to the election. And who blames them. What we see now is, in addition to losing huge amounts of personal wealth to the falling housing market built up under the last Democrat President, we are seeing personal investments in the markets now being wiped out.
Next will come the tax hikes in order to give handouts to those who failed to earn enough to have the responsibility of paying taxes. That will squeeze take home pay for some, eliminate jobs for many others. This of course will impact welfare and unemployment costs.
And finally we will have the ‘green house’ taxes, where the twin evils of oil and coal will be crippled as a working business through green house gas taxes – creating spikes in energy from gas to electricity. So those ever shrinking take home dollars, left over from the government grabbing handouts, will be eaten up by the need to travel to work and heat the home.
We are rapidly running out of wealth to spread around. Why would anyone do this? That, my fellow Americans, is the right question.
Next shoe to drop – pension funds. Most pension funds have lost 20 – 40% of their assets over the last year, since everything they invest in has dropped. The very foolish ones who chased high yields in CDO’s have lost more than that.
The best explanation of CDO’s that I’ve seen is this: “You buy insurance on the Titanic for a very good price – but you buy it from one of the passengers.”
At this moment this is hidden, but part of the iceberg showed when CALPERS, arguably one of the best run large cap state funds in the country, reported a few days ago that they would have to start liquidating stocks to meet retiree obligations. CALPERS had previously stated that they would never, ever liquidate stock holdings in response to market pressures. If many other pension funds are forced to liquidate, we’re headed to Dow 5,000.
If the automakers go bankrupt, the pensions get dumped on the PBGC. (pension benefit guarantee corporation.) It is difficult to calculate how many hundreds of billions of dollars this will amount to.
just fyi, the PBGC currently has about $20 billion in it’s coffers with which we are assured all defaulted pensions will be guaranteed. Someone’s missing a few zeroes.
Saw that October’s job report is in – as of today, this country has lost 600,000 jobs in the last 90 days. Explains the election results as much as anything does.
Unemployment is up to 6.5%, the highest since the Clinton administration.
Business isn’t going to spend a dime until they have some clear idea what changes Obama and Congress intend to make. Businesses are not going to risk millions in capital or even hundreds of thousands on any expansion plans or new hiring or anything else until they know what the new business climate is going to be as far as tax policy and other regulations.
WWS, you can probably kiss most (if not all) pension programs goodbye. Most companies raid their pension plan as soon as they get into cash trouble and government pension plans are too generous to be sustainable. It is getting to the point here in California where we are soon going to have more people drawing pensions than paying into them and when the pension is 90% of your pay as it is for many cities, it doesn’t take long to pay out to zero balance.
It is possible to retire from some police and fire departments in one’s early 50’s on 90% salary (with annual cost of living adjustments) and benefits for life. There is simply no way they can sustain that kind of payout. With people commonly living into their 80’s these days, one can draw out 90% of one’s salary for more years than one worked and they certainly didn’t pay IN 90% of their salary.
I think that many people will think this post is written to sound like the financial situation is not going to be good. What is strange though is that Obama was elected by people that think they are going to be given a free ride and it’s all going to be pie and sky.
They are not concerned by people’s pension plans, they want them to be confiscated and given to the people that rightfully deserve them because otherwise they won’t have any income. It’s more correct for those people to have a minimum standard of living than for all those people that spent their life working to have a good retirement be able to have more than they do.
Isn’t that socialism? isn’t that what they want? You can bet that the really rich people aren’t going to be affected, they have their money in cash and in secure places. It’s only the people a little above the bottom that will have to give to the bottom. The country voted for that. Don’t be disappointed in getting what you voted for.
I despise the democrats esp., barney frank, franklin raines, jamie gorelick, chuck schumer, george soros.
This was all brought about to fulfill a certain group’s lust for power, imho.
SEVEN PERCENT of mortgage loans in default DOES NOT cause a worldwide market collapse. EVER.
Credit default swaps do, however. And letters warning of a bank failure do, too. And guaranteeing mortgage loans as though one had the full backing of the US government, when in fact, one is just an AGENCY of the government.
Cross, I do see one long term way out of the looming pension and social security disasters. And only one way, every other avenue leads to collapse of the systems. Because it is the only way out, it’s what I think will happen over the long term.
First, make a big show of honoring all current pension promises, but freeze them at current levels. Do away legislatively with all COLA increases for good – this is very important. Use the current asset deflation as justification.
Then, once this deflationary wave is passed (maybe as soon as late 2010) continue pumping out money and deliberately engineer an inflation rate of 10% – 20% per year. Again, use the recent deflation to justify this as a “temporary bounceback.” It won’t be, but that will sound good.
Then keep this going for at least 10 years. With benefits frozen and 10% inflation per year, after 10 years all of the pension and SS benefits will only be worth 50 cents on the unadjusted dollar. Higher rates done longer get you an even greater decrease in the actual obligations. Voila! You have solved the problem, and no one the wiser. (you hope)
Of course all savings will be destroyed and this country will be nothing but another banana republic financially, but you can say you and your party are heroes for saving the pensions of all those poor policeman and fireman.
Coming soon to a neighborhood near you.
The Democrat Depression. Remember that name. Use it. Don’t let the leftists escape the blame for what they have done.
AJ,
This post is comical. The article you quoted specifically explains why the stock market dropped this week – “U.S. stocks slid, sending the market to its biggest two-day slump since 1987, after jobless claims jumped and the shrinking economy crushed earnings at companies from Blackstone Group Inc. to News Corp.” And yet you skip right over the obvious reference to jobless numbers and quarterly earnings and immediately assume that it all has to do with the liberal take over. Were you not aware that the unemployment numbers publicized this week were the worst in 15 years? Did you not know that corporate quarterly earnings were released this week and showed huge losses across the board? Do you think that maybe, just maybe, actual economic indicators are the reason for the drop, as opposed to speculation about a liberal takeover that won’t even occur for two more months?
I also can’t help but laugh at the double standard of the blame game you love to play. 9-11 and the worst economic situation happens on Bush’s watch, but you consistently blame the previous Democratic president for it because he “created the situation” that Bush inherited. Now the stock market takes a turn for the worst on Bush’s watch, and you blame the future Democratic president. It took me a while to understand why you and the other 20% of Americans think that Bush is such a good president, but I finally am beginning to understand why – you credit Bush for everything positive that happened during his administration and absolve him of any responsibility for everything negative that happened during his administration.
Republican control of Congress for 12 of the last 14 years and Republican control of the White House for the last 8 years, and all of the problems we currently face are still the Democrats fault. Yeah, got it. That makes a lot of sense to me.
Conman, what was really funny was that the market was actually headed back up today . . .
. . . until The Dear Leader (PBUH) opened his mouth, whereupon it promptly gave back damn near all of the gains it made, and will likely continue negative tomorrow if after-hours trading is any indication.
But just wait until the Democrats actually pull the trigger on this stupid idea; you’ll see every American yank their money out of 401ks the instant this clears committee. <1000 DJIA here we come.
You voted for this s*** sandwich, conman, I’m going to laugh my a$$ off at you and make you eat every last f***ing bite with a SMILE on your face.
Obama and Congress are going to do whatever it takes to accomplish their goal — giving money from people who earned it to the people who don’t pay taxes. Because investors are smart, they are putting their money in safe places, which is why the stock market is tanking.
So far, people have been talking about “income tax”, a tax on the money earned from labor or capital, such as ordinary income earned through work.
What happens when there is a $2 trillion deficit next year, caused by Obama “stimulus” spending and the never ending bailout?
You could make the income tax 80% for a couple of years and the economy would die. They could of course point to the past and say, “this is what it was in the 1940’s and 50’s”, except of course there were many tax shelters available that made the actual rate much lower. Reagan stripped most of them out in exchange for lower rates.
You can inflate the currency to make repayment of the deficit easier, since future dollars are worth less than present dollars. There will no doubt be some of this.
The government could sell assets like oil exploration rights, radio spectrum, and land (it owns about half the Western U.S.). This means the politicians would give up their control on these areas, and Democrats would never consider this.
As Cobalt Shiva mentioned, they’re going to take people’s 401K’s, impound that money and make them to loan it to the government at 3%, plus force them to put 5% of their future earnings for life in this bottomless pit. Who knows when you would see this money again, if ever?
The elephant in the room that no one has talked about is a “wealth tax”, where the government takes 10 or 20% of your net worth. Add up your house (if over $1million), your bank account (over $250K, that seems to be a popular number), your stock portfolio (over $250K), what’s left of it, and send in 10%.
In true Obama fashion, this would result in trillions of dollars to the treasury and 95% of you out there wouldn’t have to sacrifice. This would likely only be the beginning of the confiscation.
The 5% would have to decide if its time to leave, assuming Obama hasn’t bolted the bank vaults shut.
Just be aware that it is in Obama’s best interest to talk the economy down right now if he can. He wants the numbers to be at their worst possible when Bush leaves office. That makes Bush look bad, and will make Obama look less bad if he fails, better if he succeeds. Keeping economic numbers down until January is a win/win politically for Obama. So look for a lot of talk about windfall profits taxes (even though oil is the lowest it has been in a long time) and the like. He wants to scare the market down.
Also, WWS, there is an additional step. Social Security retirement age should be indexed to life expectancy. When it was first created, 65 was the average life expectancy. I would make the “early” retirement age 65 and full retirement 75 and give everyone over 40 a free carton of cigarettes every week. Then index up the retirement age every six months until it matches the average life expectancy. And after age 65 I would exempt income from social security tax. Both yours and the employers half.
I was joking about the cigarettes thing, but was serious about the rest of it.
Conguy, the explanation for the stock market going up or down is tailored to fit what it did. If it went down because unemployment was high wed and thurs and then the market goes up on Fri, does that mean the unemployment went down? No, the unemployment is the same. so obviously that’s not why the market went down.
I’ve seen them say the market went down because interest rates are hi, then the rates get raised and the market goes higher then they say oh, unemployment went down. It’s usually just something they say to give the impression they know what they’re talking about. So, what does do it, the intangibles such as how everyone feels like the market should go. so Tues night when it was clear Obama was winning the foreign markets started tanking then wed and thurs the US markets tanked. Pessimism is what did the trick.
You can blame it on the O man. he got elected, it tanked.
“Now the stock market takes a turn for the worst on Bush’s watch, and you blame the future Democratic president.”
FIRST:
Despite the left’s chronic cynicism about America and Americans, I doubt there is a single American from either camp who wouldn’t be ecstatic to give credit where credit is due if PE-O’s victory and the attendant euphoria truly was the Promised Salvation for America that He and His worshippers have all sworn their Oath of Emotional Extremism to.
The stock market rout that followed hard on the morning after is an epic indictment of PE-O’s entire economic platform, His fiscal attitudes, and His market philosophies.
His failing here is in what he stands for economically on behalf of America.
Had the market responded by spiking 500pts instead of high diving 500pts off a short pier, the euphoria over His victory would have been not only justified, but vindicated.
But the market did take a flying leap. It did nose-dive. And it didn’t just falter for one day. It faltered with two days of drastic decline just to underline its absolute dismay at what the future of America’s new PE-O holds.
If the markets see PE-O and his new Admin as a rock-bottom negative in the confidence column, it means his victory has ADDED to America’s economic woes, not BLESSED them.
HOPE? YES HE CAN! HOPE? YES HE SHOULD!
Is it fair to indict the man for failing to bring HOPE to the markets?
Hell yes! If it was enough to win him the Presidency, it’s enough to indict him with, AD INFINITUM.
If PE-O had as much sanity as he had sanctimony in his platform, His victory could have, indeed should have, raised the confidence of the markets overnight.
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SECOND:
If He was incapable of conjuring such magical feats of HOPE then surely if ever there was a more opportune time for His “Over $250k” Winner’s Circle of Buffet, Soros, the Google Boys, et al on his massive Wall St. donor list, to “redistribute” their wealth, the morning of Nov. 5th would have been it.
Surely, given their open endorsement of the man and his outspoken policies, this fraternity should have had no reservations about such a “redistribution” scheme. After all, they’ve already agreed to let PE-O take it from them. What better time than in honor of his remarkable ascendancy?
Not only would it have helped propel their Mighty Messiah into uncontestable sainthood, it would have helped them by helping America. How much more patriotic could they be than to single-handedly wrest the markets from oblivion overnight?
A win-win-win on all counts if ever there was one.
But the markets tanked. Actually that’s a false assertion. Allow me to restate that.
THE MARKETS TANKED in HISTORIC PROPORTIONS!! The biggest tank after a presidential election EVAH!
Now what if PE-O’s pals actually did “redistribute” their wealth that day (i.e. performed their requisite 48 hrs of “community service”), and the headlines we’ve witnessed actually included this manipulation in the result. How big might the vote of non-confidence be then?
CHANGE WE CAN BELIEVE IN? YES WE CAN!
PE-O … St-e-e-e-e-rike (That) One!
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LAST:
“Republican control of Congress for 12 of the last 14 years and Republican control of the White House for the last 8 years, and all of the problems we currently face are still the Democrats fault. Yeah, got it. That makes a lot of sense to me.”
Understandably, this argument couldn’t possibly make sense to someone with a complete and utter lack of understanding about how Congress really works and what control of Congress actually entails.
If you actually took the time to understand the context you might save yourself the indignity of having to dig down so deep just to wrench your foot out of your gullet.
If? Change we can believe in? Okay, uh, not so much in this case.