Economic Bright Spots in 2010

The mood at the World Economic Forum in Davos this year was decidedly gloomy, which seems a fair reflection of economic conditions. Let's look forward: tell us what the bright spots might be in the world economy this time next year.

Posted by Fareed Zakaria on February 2, 2009 11:24 AM

Readers’ Responses to Our Question (70)

daniel12 Author Profile Page :

To Blund from Daniel. I think you accidently sent your last post to me--I never mentioned anything you discussed in the post. After looking through other posts I figured it was probably Shiveh's last post you meant to respond to--in other words you should have addressed to Shiveh.

ReggieW17 Author Profile Page :

Your post, I believe has many faults and many errors. Fannie Mae is the best thing that could happen to the United States of America. Seriously man, take a look around you the banks need all they can get, and HUD loans are essential to overcoming this hurdle we like to call the dead economy.
I understand the things that you have said, but honestly, your thinking is the reason why our country has been in turmoil these past eight years; the reason why Bush ran the economy and government into the ground. We have to move past the traditional way of thinking; we have to think towards capitalism or even socialism if it means getting out of this mess.
Honestly, we will never get out of this deep, dark hole if we don’t let them bail us out and that means letting the banks bail out the lower-income families. You said:
“ I’m not saying that HUD loans (themselves) were a factor, only that the government MANDATED a certain percentage of the GSE loans - a high percentage - to low and medium income families. Clearly, home ownership by minorities and the poor were pushed at the Presidential and Congressional levels of Congress, and this was the case during the Clinton Administration, as well as during the Bush years in the White House. Congressional Democrats (primarily) protected Fannie Mae from regulators that were aware of their creative accounting”
But don’t you think that, that’s the way to go? I feel that you just don’t understand how the economy is going to be fixed and its not going to be the way you think it is, we have to bail people out even if it means spending more money
I think some of your idea’s are correct, but maybe more for the land of Oz then for the USA.

blund Author Profile Page :


The US's economy moving from industrial base to service baed was neither. It wa a matter of necessity. Labot costs were just so mush lower aboard.

As far as Saudi herding goats or sheep again I never said this was a deterrent. I said without a world wide market they would be doing it again.

We all know the Saudi's and all the OPEC countries are going to run out of oil. It might thake 50 years, but thats it. Once their oil is gone they either have build their economies to transfer into the industrialized world or herde sheep again. So far it appears herding sheep is in their future.

Shiveh Author Profile Page :

Hi Daniel,

Thanks for the lead. But you put me to work this morning! Sundays I do not fire up my browser (It is family time) so I had to look for the article today (not an easy task.) I think I found the article you were referring too. If Harvard guys are talking about it, then someone in the government may listen!


Nice read. Was changing the US economy from an industrial based to a service based economy a matter of policy or evolution. In other words, do you think we moved our factories to China and became the world’s accountant because we thought it is the smart way forward or it just happened because it looked profitable? It seems to me that we need to know the answer to this question before we can decide on a path out of this situation.

One point regarding Saudis that you may want to consider in your calculations- It was not too long ago that they were herding sheep (kinda.) They still remember how to do it and some of them are even nostalgic for going back. The Arab-Israeli problem is fast approaching a climax. Losing oil profits is not going to be as strong a deterrent as you think it is. Yeolds is correct about the influence of the Arab streets.

blund Author Profile Page :


I reread your question and I'm not sure my first response was what you were asking so let me try this. Think of a bell curve. On one extreme side of the curve is a total sellers market. Demand to buy houses far exceeds the number of properties for sale. On this side of the curve prices rise, but only to the limits of affordability. In a sellers market buyers are forced to bid on properties usually right to the limit of what they can afford to pay each month. This normally required a borrower being willing to devote about 40% of their gross monthly income to housing payments. We referred to these poor souls as being house poor. By simply converting what an individual can afford as a monthly payment you can back into the maximum amount of money they can borrow. This number changes based on current interest rates. The lower the interest rate the more a person can borrower. Price becomes much less important in a sellers market then affordability.

On the other side of the curve is a buyers market. In this market there are far too many homes on the market for the number of potential buyers. While affordability always plays a role in a house purchase on this side of the curve buyers are able to negotiate "good" deals. It's rare to see buyers in a buyers market devote anywhere near 40% of their gross monthly income to housing. They don't have to ass ellers are desparate for a variety of reasons to sell and are willing to drop their prices just to unload the property. As long as a buyers market continues prices will continue to decline until an equilibrium is reached between the properties on the market and the number of potential buyers.

If your question, which I think it was, is when is this equilibrium going to be reached we don't know. Could it be 5%, 10%, 20% or even another 50%. Truth is, I have no idea. I just know home prices will continue to decline as long as the market has shifted to a severe buyers market. It's so far out of whack today it's becoming a game in many areas of the country where investors are just looking to see how cheap they can buy something. Ultimately, equilibrium will be reached again one way or the other. Either housing will lose so much value everyone with a few bucks in the bank will purchase property (ugly thought) or the government needs to step in and work out a plan to cut housing inventory back to where homes are selling in an average of 3 months. This will stabilize prices where they are at the time this happens.

I hope this answered your question...

Historically, with the exception of the depression, housing has for the most part just slightly outpaced inflation until 2001. There are exceptions to this general rule in various pockets around the country, but on an average this rule stands up well. The massive increases in value between 2001-2006 were the direct result of creating 15 million more eligible borrowers and throwing the market heavily to the sellers side. By 2004 someone could put a home on the market on Monday for 250K and by Tuesday have 7 offers up to 300K. Today, you can put a home on the market for 250K and it will take 12-14 months to get an offer, if you get one at all, and the price will be 175K if you're lucky. Within a relatively short time span we've gone from one extreme to the other. I have always argued neither of these market conditions is healthy for the economy.

TomW2 Author Profile Page :


Banks were instrumental in the financial crisis, but there were other important factors as well - government related - that contributed to the problem. Most sources cited the low Fed interest rates as a big factor (if not the major factor).

1. Fannie Mae and Freddie Mac hold about 50% of the residential mortgages in the US, so they are major players in this crisis. The bailout of the GSEs could cost taxpayers as much as one trillion dollars. I think the current cost of the bailout is at about 200 billion.


“In 1996, HUD directed the GSE that at least 42% of the mortgages they purchased should have been issued to borrowers whose household income was below the median in their area. This target was increased to 50% in 2000 and 52% in 2005. From 2002 to 2006 Fannie Mae and Freddie Mac combined purchases of subprime securities rose from $38 billion to around $175 billion per year before dropping to $90 billion, thus fulfilling their government mandate to help make home buying more affordable.”

From the New York Times (September 30, 1999):

“…In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action-- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans… Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits…”

I’m not saying that HUD loans (themselves) were a factor, only that the government MANDATED a certain percentage of the GSE loans - a high percentage - to low and medium income families. Clearly, home ownership by minorities and the poor were pushed at the Presidential and Congressional levels of Congress, and this was the case during the Clinton Administration, as well as during the Bush years in the White House. Congressional Democrats (primarily) protected Fannie Mae from regulators that were aware of their creative accounting.

2. Fed Monetary Policy - low interest rates

According to Stiglitz (no friend of capitalism or Bush):

“… The president [Bush] and his advisers seemed to believe that tax cuts, especially for upper-income Americans and corporations, were a cure-all for any economic disease—the modern-day equivalent of leeches. The tax cuts played a pivotal role in shaping the background conditions of the current crisis. Because they did very little to stimulate the economy, real stimulation was left to the Fed, which took up the task with unprecedented low-interest rates and liquidity… the Fed met the challenge in the most myopic way imaginable. The flood of liquidity made money readily available in mortgage markets, even to those who would normally not be able to borrow. And, yes, this succeeded in forestalling an economic downturn; America’s household saving rate plummeted to zero. But it should have been clear that we were living on borrowed money and borrowed time…”

Several sources I read concluded that the Federal reserve set interest rates contributed significantly to the crisis (or were the major factor - see end of this post).

3. Deregulation by the SEC

Again, according to Wikipedia,

“…The SEC has conceded that self-regulation of investment banks contributed to the crisis. The SEC relaxed rules in 2004 that enabled investment banks to substantially increase the level of debt they were taking on, fueling the growth in mortgage-backed securities supporting subprime mortgages.
The top five US investment banks each significantly increased their financial leverage during the 2004–2007 time period (see diagram), which increased their vulnerability to the MBS losses. These five institutions reported over $4.1 trillion in debt for fiscal year 2007, a figure roughly 30% the size of the U.S. economy….”

And according to Stiglitz:

“…One was the decision in April 2004 by the Securities and Exchange Commission, at a meeting attended by virtually no one and largely overlooked at the time, to allow big investment banks to increase their debt-to-capital ratio (from 12:1 to 30:1, or higher) so that they could buy more mortgage-backed securities, inflating the housing bubble in the process…”

Certainly this change might have made the difference of survival of large banks that eventually went under (increasing the debt to capital ratio by 2.5 + times). Even though that is government DEREGULATION, it was, none the less, a poor decision by government - obviously.

There is too many variables to suggest that ONLY Wall Street caused this crisis, although you have made a good case that Wall Street was a primary contributor to the problem. The government - especially the Federal reserve - seems to have played a significant role in the financial crisis, as well.

One final question. You say that greed and a loosening of the underwriting guidelines by Wall Street were the primary causes of the financial crisis. Well, as you have said, greed is expected on Wall Street, so what changed on Wall Street to loosen the underwriting guidelines? Presumably, they could have changed the guidelines at any time (1990, 1995...) So why in 2001 (or whatever year they loosened them)? What was the driving force behind the change?

Note: there is an article in the Wall Street Journal today titled, “How Government Created the Financial Crisis”, by John B. Taylor.

“…Keeping interest rates on the track that worked well in the past two decades, rather than keeping rates so low, would have prevented the boom and the bust…” 

Zolko Author Profile Page :

blund, you say:

"I'm simply not ready to dig a grave for capitalism yet."

and then:

"I mean nationalizing them [the banks] all." and "nationalize the banks, reduce the inventory of housing on the market and stimulate jobs"

What you describe is a state-run economy, the end of private capitalism. You seem to have a faith-like belief that "capitalism is good" yet all you prove is the contrary. Mind-you, I mostly agree with you, I just find it weird that you cannot let it be said that an entirely private capitalist economy is BAD for a society. Some aspect of capitalism are good - the daddy-style productive investment capitalism for example - but only in some limited aspects of life (where it doesn't really matter, like making computers or cell-phones). But if you let capitalism take over banking or military, it's recipe for disaster.

daniel12 Author Profile Page :

To Shiveh from Daniel. In this sunday's Washington post outlook section there is an article remarkably similar to your post of a few days earlier--you might want to check it out.

blund Author Profile Page :


Interesting question. There is no bottom to this market without intervention. Prices will continue to drop as supply outpaces demand. It is what is normally referred to as a buyers market. With over 50 percent of the houses sold in the last 12 months being foreclosures normal sellers are having to compete with banks who are desparate to get REO (Real Estate Owned via foreclosure) off their balance sheets. Too many houses and too few buyers always equals price reductions.

As the economy continues to decline and more jobs are lost more people will become deliquent. This has a mushrooming effect that an already weak market simply cannot handle thus reducing prices further. Remember during the depression they used to have nickel farm sales. This is where the bank would auction off a property and only one person would bid a nickel for the property so they could sell it back to the owner for the same. Will it get this bad? I hope not, but it does illustrate this market can continue to slide considerably from where it is today.

Having said that here's the real worry. At what point does Harry/Harriet Homeowner who owes let say 300K on his/her house simply walk away from the debt even they can continue to pay it? Seems like an odd question, but think about it. Let's say you owe 300K and have a mortgage payment of 2,500 a month. The exact same house you have is being sold down the street for 150K. You know that it's going to be many years to have any probability of coming back to 300K in value. You also know you can go buy another house just like what your living in for half the price and half the mortgage payments. Then you can let your current home go into foreclosure. Have you ruined your credit? Of course you have to some degree, but in the process you just saved yourself 150K plus 1,250 per month for 20 years. If you want to add up those numbers Harry/Harriet homeowner comes out well over a half a million dollars ahead throwing the keys back at their current lender. This is already starting to take place and will accelerate as the market continues to decline. By letting prices drop at the rate they are dropping it's within many people's best interest to walk away from their properties.

I know I'm going to sound like a broken record, but nationalize the banks, reduce the inventory of housing on the market and stimulate jobs and at least there is a recipe for having a chance to stop the slide. Sit back and do nothing and you have a good chance of seeing 10 dollar foreclosures in the future.

Orlov was right on this point. Most housing in Russia was owned by the State. When they collapsed people didn't have to move. In the US it's much different. We own our homes and if the economy collapses those who can't pay are living out of their cars (if they haven't been repo'd).

yeolds Author Profile Page :

re: your notion that house prices have to be stabalized [I agree, can not see the way]

A Q for you:

taking into consideration the affordability of a house [residentital and or condo] related to price/ family disposable income considering that food health etc inflation is still around [talking of necessities, not cars, tv, etc]considering that the median income of the USA is at best static [though apt to fall for the next 2-3 years] what % drop is needed in present median house prices to stabilize the market?

e.g I have read estimates that housing prices might drop another 5-10-15% [depending on ths forecaster].

And is the price drop costs affordable to the over indebted taxpayer?

blund Author Profile Page :


You'd think after how I felt about the Bush Administration I would never trust the government again, but this is not the case. Although, I do believe Bush showed us how bad a presidency can be.

Back to mortgage banking. Wall Street loved the yields sub-prime paper generated. In the pre let's forget about underwriting standards it was very profitable and secure. It was put point blank to wall street the only way to generate more paper was too loosen underwriting standards and they agreed this would be OK and they would buy it. The industry loosened U/W standards and in the first 24 months as the market was going up these loans performed very well. Wall Street still wanted more and the standards were basically dropped altogether. That's how it came about. There was never and still isn't to this day anything wrong about the way old sub-prime was conducted. It was safe and profitable. It wasn't until underwriting standards were thrown out the window that the risk level soared to unacceptable levels. Many of us knew this. We knew you can't lend 750K to an illegal immigrant who isn't employed and expect the loan to perform. We knew as long as the housing market was increasing in value you could get away with it as the property could aways be sold without much of loss, if a loss at all. We also knew once the market turned there would be hell to pay. That's why I've been talking about greed and arrogance driving the markets. That's exactly what happened.

Don't confuse State and Federal programs for low income housing with what happened to this market. They were such an insignificant portion of the loans being done they didn't effect anything. They weren't a statistical bump on a chart. Even FHA (HUD) was only doing 5% of the loans in the US from 2000-2007. It went up last year, but was still under 10%. FHA has been the governments arm in both affordable housing initiatives and loans for people who wouldn't qualify for a Fannie or Freddie loan, but only up to a point. FHA loans are insured by the borrowers themselves who pay a mortgage insurance premium to FHA. It has changed recently, but it was for the most part of the time frame we're talking about 2.25% on single family housing. FHA to the best of my knowledge isn't experiencing the foreclosure rates Fannie, Freddie and all the old sub-prime lenders are today.

I'm 58 years old and I can't remember a time in my adult life where home ownership wasn't a priority. It has always been viewed as desirable and every administration has at least paid lip service to it. The American dream. Go to college, marry the girl next door, buy a house and have 2.5 children. In essence become the great American consumer.

This crisis is very easy to understand. By throwing away underwriting guidelines and securitizing junk we added approximately 15 million new borrowers to the existing base of people who were qualified for a home loan. This massive infusion of new blood combined with low interest rates drove housing prices up in most parts of the country faster then people could even comphrehend. I have a friend who bought a condo in Alexandria, Virginia in 1998 and paid 45K for it. In 2004 he sold it for 260K. The only thing that drove that price up like that was the demand created by all these new borrowers looking to grab a piece of the American dream. Once housing started to level off in mid 06 that's when the mess we created started to surface. More foreclosures started to take place as sub prime borrowers couldn't sell their properties quick enough to keep them out. Add to this the number of sub-prime borrowers who were deliquent on their mortgages and the hand writing was on the wall. At this point the snowball started to roll downhill.

It was at this point I was telling everyone who would listen if we didn't step in and stem the stream of foreclosures it was going to get much worse. By early 07 sub-prime lending was a thing of the past. Virtually every company had either gone bankrupt, was going bankrupt or was lucky enough to find a white knight to buy them out. All of the programs that allowed this debacle to take place were now gone. This sealed the fate of all sub-prime borrowers. They couldn't refinance and the moment their first adjustment hit (2 or 3 years from the date of their loan) they couldn't afford the payments. A bad situation became an intolerable one.

Here's where we go right back to the laws of supply and demand. We now take these 15 million borrowers we created and uncreate them. At the same time we're dumping these foreclosures on the market. Fewer borrowers and more inventory will always lead to lower prices. By allowing the markets to seek their own level and not intervening we in essence allowed prices to drop faster and insured more securities would go bankrupt.

My issue with the Bush Administration is for not intervening sooner to slow down and manage the decline in prices, and the economy, as it was going to decline no matter what. We couldn't sustain the artifically inflated values we had without funny money (the term I give to sub-prime loans) so a downturn was inevitable. However, by bolstering the mortgage backed securities market and not allowing them to default we would have sent a message to our investors as well as foreign investors their money was safe. We could have also bought up the foreclosed properties and/or given mortgage companies incentives not to put them on the market for sale. We could have kept housing inventory relatively low and reduced values over time. Nope, we just let the bottom fall out of the market and lost investor confidence at the same time.

I reserve my wrath for the banks. I expect wall street to be greedy. This doesn't even phase me. I don't expect major banks in the US to jump on every short term bandwagon thus legitimizing bad behavior. No offense to these morons, but they have earned the right to be nationalized for being too stupid to continue.

Anyway, the thoughts that affordable housing was the cause of this recession may fit your politics, but it's not reality. All the affordable housing programs in the country combined with all the ACORNS in the country were such an insignificant percentage of the problem they really aren't even worth discussing. This crisis came about via wall streets greed and the bank industries participation for the same reason.

yeolds Author Profile Page :


thanks for clarifying how the fiancialo fiasco came to be in plain english language.

yeolds Author Profile Page :


ALL those bad thing which you mentioned in IRaq occured after USA's ILLEGAL invasion. Sadam did not have WMD, did not have AlQuada in Iraq, and did not attack the USA -while US/UK was constantly bombing iraq.

While I do not perscribe to the notion that the government [any one of 191+] can run banking or any large industries efficiently, I do subscribe to the notion that even the USA gopvernment with all her faults could not be as destructive of USA/World economy as Wall Street and Big Banks have proved to be.

RETAIL BANKING IS A NECESSARY UTILITY FOR CITIZENS. The State can run it as did the UK Postal Service did for years. If the state does not propose to run retail banking, then it MUST HAVE STRICT REGULATION to FORESTALL & eliminate major systematic bank-frailures.

Bush and cabal did not do either, thus the world wide systematic banking failure due entirely to UK/USA innovative fraud.

I do not think that anyone anywhere in the world knows how to solve the present economic problems stemming from Wall Street.

Without doubt ALL the BAD LOANS will have to written down. Without doubt RETAIL ABNKINg, RETAIL MORTGAGE systems will have to closely regulated. Investment banks, hedge funds private equity funds etc will have to abide by very limited operations consistent with high reserves.

POLITICIANS AND MADIA TALKING HEADS will have to tell the truth:

1., living standards are going to go apprecitably down and stay down

2., Stock holders and bond holders of abnks will have to take a haircut, the tqaxpayer can not save them all.

3., There has to be a major cut-back on K-Street and related lobby groups - the USA does not have the wealth to allow this large scale waste of funds [ which most often result in laws contrary to the common good], nor can it afford all the time taken up by constant court cases -- laws must be clearly written in undertandable english [appropriate to tht citizens' comprehension, not to the desire of spin master lawyers].

4., The USA can not afford the present Dod [and thing related to it, Dept energy and A-bombs, 16 intellignce cabals, homeland security idioticity -though some missing measures might be useful] and neither can she afford WARS, 700+ forward bases, etc

5., The USA's citizens can not be disenfranchised by varius political measures, whose sole aim is to keep incumbents in power.

6., Come hell or high water, the USA has to spend heavy to eliminate CO2 production as per
Mr/. Obama's timetable. further, she must encourage all countries to fololw the same lead.

7., Finally, as a price for the idiocity of Wall Street the USA will offer the world all scientific and technological findings related to global warming FREE OF CHARGE [no patents, no intellectual property] as an PARTIAL ATONEMENT FOR


TomW2 Author Profile Page :


"...IF you mean by the USA winning in Iraq, that the new Iraq will be a Shia state, primarily an ally though not a slave of Iran, and that all USA oil companies will be shut out in a year or two, that you have managed to inflame most of the Muslim World, that you lost any moral authority in the WORLD [excet Israel] and that the war helped to push the USA closer to bankrupcy [or default] then you are somewhat correct. If non of these results please you, the you lost."

I agree that none of that pleases me, but it pleases me more than saying Iraq is a state sponsor of terror, host to Bin Laden and alike groups, new proxy of Iran, building weapons of mass destruction, still in a state of civil war, that Iraqi citizens are still dieing by the bus load and we lost.

TomW2 Author Profile Page :


Not that I want to argue too hard about something you do for a living, but it seems to me you are dismissing the role of the government in the crisis such as the protection of Fannie Mae and Freddie Mac (by the government). Government policies seem to have encouraged the subprime crisis - including the lending to people who were not qualified for a loan. In addition, in 2004, the SEC (a government agency) allowed “big investment banks to increase their debt-to-capital ratio (from 12:1 to 30:1, or higher) so that they could buy more mortgage-backed securities, inflating the housing bubble in the process.”

You mention that  “Wall Street was the entitiy that purposed loosening underwriting standards to generate more paper.”, but how did they do that?

Government Policies (Wikipedia - my brackets in the text)

"Increasing home ownership was a goal of the Clinton and Bush administrations. There is evidence that the Federal government leaned on the mortgage industry, including Fannie Mae and Freddie Mac (the GSE), to lower lending standards. Also, the U.S. Department of Housing and Urban Development's (HUD) mortgage policies fueled the trend towards issuing risky loans.
[In 1995, the GSEs began receiving government incentive payments for purchasing mortgage backed securities which included loans to low income borrowers. Thus began the involvement of the GSE with the subprime market]. Subprime mortgage originations rose by 25% per year between 1994 and 2003, resulting in a nearly ten-fold increase in the volume of subprime mortgages in just nine years. The relatively high yields on these securities, in a time of low interest rates, were very attractive to Wall Street, and while Fannie and Freddie generally bought only the least risky subprime mortgages, these purchases encouraged the entire subprime market. [In 1996, HUD directed the GSE that at least 42% of the mortgages they purchased should have been issued to borrowers whose household income was below the median in their area.] This target was increased to 50% in 2000 and 52% in 2005. From 2002 to 2006 Fannie Mae and Freddie Mac combined purchases of subprime securities rose from $38 billion to around $175 billion per year before dropping to $90 billion, thus fulfilling their government mandate to help make home buying more affordable. During this time, the total market for subprime securities rose from $172 billion to nearly $500 billion only to fall back down to $450 billion. 
[By 2008, the GSE owned, either directly or through mortgage pools they sponsored, $5.1 trillion in residential mortgages, about half the amount outstanding.] The GSE have always been highly leveraged, their net worth as of 30 June 2008 being a mere US$114 billion. When concerns arose in September 2008 regarding the ability of the GSE to make good on their guarantees, the Federal government was forced to place the companies into a conservatorship, effectively nationalizing them at the taxpayers' expense."

“Are we there to kill terrorists? Are we there to effect a regime change? Are we there to create a stable democracy? Are we there to thwart Iran? If we are there for any or all of these reasons then we don't have a clue if we've "won" until we leave.”

Yes (except we already effected a regime change), and we are still in South Korea, but had we left at any time, South Korea could have been defeated by North Korea in a war. The fact that we are there doesn’t mean we can’t say we won (although in Iraq, “winning” is much closer to the truth).

I haven’t found any cost that exceeded (to date) about 800 billion for the wars in Afghanistan and Iraq that doesn’t include future military cost.

Finally, Obama can't even select a cabinet without a third of his nominees being tax cheats and you trust the government to run the banking system? I have no idea why you trust the government for anything.

blund Author Profile Page :


Nope, I mean nationalizing them all. I am not in favor of nationalizing Credit Unions.

We need to restore confidence in our banking system and I no longer believe we can do this with the same people/companies that put us in this mess. On one hand we didn't want to control this recession because we were unwilling to bail out these "dirty" sub-prime borrowers and on the other we're bailing out the same intstitutions that helped create these bad borrowers. The banks have lost credibility and thus confidence in their decision making skills is neglible today. I don't see any other way then nationalizing them as a key piece in attempting recovery. I know you are going to label me a socialist for this stand, but I'm willing to live with that label if it succeeds in restoring confidence in our financial system again.

blund Author Profile Page :


Thank you for the lesson in mortgage banking. Since my entire career (30+ years) has been spent in this field mostly in upper management let me set the record straight.

First, let's dismiss ACORN right from the start. ACORN wasn't (and still isn't) a pimple on an elephant's butt. They are in no way responsible for the mortgage meltdown. Even invoking their name in relation to what has happened is so misleading it's beyond words.

Second, both Fannie and Freddie got into the sub-prime game late. Their core business has always been doing A paper lending. They jumped in late for 2 reasons. The first was they were losing market share and were scrambling for a way to keep their predominance. Second, senior management realized as their market share was slipping so were their bonuses. Had they never ventured into the sub-prime market they were still going to be in trouble and obviously taken over by the Feds through nothing more then the fall out sub-prime has created. Yes, Fannie and Freddie, can be scolded for venturing into sub-prime late in the cycle. They shouldn't have done this, but in the end it didn't really make a difference. Their core economic models couldn't stand up to a 30-40% property devaluation no matter what. For the most part because of Fannie and Freddie's size they have become the scape goat of lending gone awry. This isn't fair, but it's reality.

It used to be Tom we had mortgage companies and finance companies. Finance companies like Ford Consumer Credit, American General, Benefical, Household, etc. started doing consumer loans for people with shakey credit histories or no credit histories. They made these loans based on equity in whatever product they were financing. This limited their exposure and combined with the higher interest rates they charged they were profitable. Sparing you a lengthy history lesson they ultimately moved into home loans. Many of the people who grew up in the Finance industry went on to start up or run companies like Option One, Accredited Home Lenders, Decision One, etc. etc. These companies were either created or transferred over to doing home loans for people who were credit impaired. Again, they made these loans based on equity in the property. The assumptions used were the more money someone had to lose the less likely they would default. It worked. They were profitable businesses. Average LTV's (loan to values) ran in the 70% range and for years never exceeded 80% of the value of the property. After the collapse of the market wall street was looking for a new vehicle and found it in the sub-prime market. They bought sub-prime paper, securitized it and made money. They liked it so much they wanted more. The problem was there wasn't anymore to sell them given the restrictions on the lending practices. Wall Street was the entitiy that purposed loosening underwriting standards to generate more paper. The Sub-prime lenders were willing to do so and started expanding their businesses. This was at a time when the market was just starting to take off. (It's no coincidence the market started to heat up as underwriting standards were lowered) This created additional demand for more paper and a further reduction in the quality of the paper. At this point even traditional mortgage companies (like Countrywide, Wells Fargo, WAMU) were witnessing the sub-prime companies gowing leaps and bounds and making money like there was no tomorrow so they jumped in and created their own sub-prime divisions. Now, just about everyone was doing it. In 2005 almost half of all loans done in the US were either sub-prime or Alt-A (a slightly better class of loan, but not much). Why did this happen when only 5 years before only 10% were sub-prime? Because these new and unimproved program guidelines allowed anyone who could sign their name or make an X to obtain a loan. We created a whole new class of junk borrower. All of a sudden any illegal alien whether employeed or not could buy a $750,000 house with no money down. The result of all these "new" borrowers was property values rising steeply. Basic supply and demand.

This was at the same point Fannie and Freddie really entered the market. Technically, they already had different levels (Levels 1-4) of underwriting depending on credit, but were doing very little of it. They ended up buying paper originated from the sub-prime lenders and the divisions of sub-prime in standard lenders which wouldn't have even made it through Fannie or Feddies expanded underwriting criteria. In essence everybody jumped on the sub-prime bandwagon to make a buck with no view of what would eventually have to happen.

Third, low interest rates only accelerated the collapse. It was not the reason for it. This crisis came about by lenders willing to throw away the book on prudent underwriting guidelines. They did this because wall street was willing to buy it and they were too greedy not to do it. Also, even though several people in the government were seriously questioning the loans being done they were over ruled in their concerns by the BUSH Administration. The Bushies were well aware housing was driving the economy and they didn't want to do anything that would slow this down or reverse it. My house went from a value of $179,000 in 1998 to $625,000 in 2005 (it's back down to around $400,000 today and I'll be happy if it only drops to $300,000 by the end of this year). Many people were able to either sell or refinance and take cash out and they spent it. They bought cars, remodeled, went on vacation, bought electronics, clothes and jewelry. The money coming out of housing and the ridiculous amount of money being made on housing was fueling the economy. If the housing bubble burst, which it did, the jobs created by the bubble would burst right along with it, which they did.

On a different note the GAO report a couple of months ago already listed the cost of Iraq and Afghanistan at 2.5 trillion. This number includes future medical and disability payments along with the cost of replacing arms, munitions and supplies. Also, we've won in Iraq or we're winning? Since our goal was so fuzzy to start with I'm not sure winning can be used when talking about Iraq. Is it time to print up some more Mission Accomplished banners?

Are we there to kill terrorists? Are we there to effect a regime change? Are we there to create a stable democracy? Are we there to thwart Iran? If we are there for any or all of these reasons then we don't have a clue if we've "won" until we leave. I just cannot understand this need to win especially when talking about no-win situations.

TomW2 Author Profile Page :


According to the CBO, the cost in Iraq and Afghanistan could reach 2.4 trillion by - 2017.

yeolds Author Profile Page :


you are mistaken, the biggest threat to King Abdullah, Mubarak, King of Jordan, et al is the ARAB STREET!

Whereas uncle Sam is incabaple to protect the absolute rulers, but the street is capable of extinguishing or exiling the Saud, etc families, the immediate threat is the stronger, non of these USA FRIENDS/MODERATES wishes to imitate the life of the late SHAH OF IRAN.

The total cost of your misadvnture in Iraq is as was published by CBO and others 2-3 trillion .. accounting for all costs [I know TOM, for you the families' cost of living only includes FOOD ... the rest: rent, clothing, insurance, health costs , interest on loans etc does not count].

IF you mean by the USA winning in Iraq, that the new Iraq will be a Shia state, primarily an ally though not a slave of Iran, and that all USA oil companies will be shut out in a year or two, that you have managed to inflame most of the Muslim World, that you lost any moral authority in the WORLD [excet Israel] and that the war helped to push the USA closer to bankrupcy [or default] then you are somewhat correct. If non of these results please you, the you lost.

TomW2 Author Profile Page :


By nationalize the banks, I assume you mean for a temporarily period - and only the very large banks, those considered too big to fail. I can't believe that you would support nationalization of our entire banking system.

TomW2 Author Profile Page :


Why you believe the war in Iraq was lost is beyond me. If anything we are well on our way to victory. Did you notice the elections last week? How many countries in the Middle East hold free elections? Hint: you can exclude Iran which selects the candidates to run for office.

The stimulus by itself is not the primary cause of our future debt - the lost tax revenues (trillions) will far surpass the cost of the stimulus, but a trillion is not negligible since the total cost of the war in Iraq to date - which you said would bankrupt us - is only about $600,000,000. That’s why the stimulus package is important - because the quicker the turn around, the less the debt.

You are really living in a dream world if you believe the Saudis are going to boycott us if the Palestinian problem is not solved by the end of the year. Iran is the biggest threat to Saudi Arabia, and a boycott of the US will only harm the Saudis since we receive no oil from Iran. I do believe that a boycott is a slight possibility if another major conflict erupts in Gaza, however, but there is a huge risk to the Saudis by implementing a policy that will only harm their economy - and their only real source of revenue.

TomW2 Author Profile Page :


There you go again, Bob. Accusing me of not only being a Republican, but thinking like a Republican. Shameful. I’m not sure why you seem to read so much into my post that, in actuality, I didn’t say. Tax break for the rich?

The mortgage failure has the government written all over it as well as market-driven greed. There is enough blame to go around on this issue.

1. The monetary policy of the Fed contributed to the housing bubble (50 year low in interest rates). Rates were set low to encourage the economy which was slow to rebound from the 2000 recession.

2. The Community Reinvestment Act in conjunction with government pressure and the community organization, Acorn, pressured banks into making risky loans to minorities and the poor. Bush, in 2002, “unveiled an initiative aimed at helping 5.5 million minority families buy homes before the end of the decade”. Despite what you think, Bush acted out his campaign slogan of “compassionate conservative”.

3. Fannie Mae and Freddie Mac are government created, privately owned mortgage companies whose function is to purchase and securitize mortgages from banks. They were created with certain “advantages” in the market. They lobbied hard (primarily Democrats) to retain those advantages.

Fannie Mae entered the subprime mortgage market under pressure from Bill Clinton (1999) to make more loans available to low income families. From Wikipedia:

“…In 2003, the Bush administration recommended significant regulatory overhaul of Fannie Mae and Freddie Mac. However, the Democrats opposed that proposal, fearing that tighter regulation could sharply reduce financing for low-income housing, both low and high risk. Under immense lobbying pressure from Fannie Mae in association with Congressional Democrats led by Rep. Barney Frank, the Republican controlled Congress did not introduce any legislation aimed at bringing this proposal into law until 2005.

In 2006, the Federal Housing Enterprise Regulatory Reform Act of 2005 (first put forward by Sen. Hagel) where he pointed out that Fannie Mae's regulator reported that profits were "illusions deliberately and systematically created by the company's senior management". However, this legislation too met with opposition from both Democrats and Republicans. This bill was passed by the House, but was never presented to the Senate for a vote…”

Some highlights of a video of the 2004 Congressional hearings on the oversight of Fannie Mae (note the use of the “race card“ by a member of the Congressional Black Caucus):

“Maxine Waters(D): Through nearly a dozen hearings, we were frankly trying to fix something that wasn’t broke. Mr. Chairman, we do not have a crisis at Freddie Mac, and particularly at Fannie Mae, under the outstanding leadership of Franklin Raines.

Gregory Meeks(D): … I’m just pissed off at OFHEO [the regulators trying to warn Congress of insolvency at the GSEs], because if it wasn’t for you, I don’t think we’d be here in the first place. … There’s been nothing that indicated that’s wrong with Fannie Mae, Freddie Mac has come up on its own … The question that then comes up is the competence that your agency has with reference to deciding and regulating these GSEs.

Lacy Clay(D): This hearing is about the political lynching of Franklin Raines.

Barney Frank(D): I don’t see anything in this report that raises safety and soundness problems.”

Of course, both FM and FM were driven by greed and lobbied Congress very hard in opposition to new regulations. Campaign contributions were primarily directed at the Democrats (Obama received the third most), and they returned the favor by protecting the mortgage giant. To be fair (as a Republican), low income housing is an important part of the liberal agenda which was supported heavily by President Bush and other Republicans.

The important point is, however, I’m not sure that you can blame capitalism for this crisis (although we’ve been led to believe that this crisis results from capitalism - mostly by the regulation-happy Democrats).

Obviously, the least amount of regulations the better for our capitalist system, but one needs to look no further than China (and their environment) to realize capitalism needs some regulation - just the less the better, but isn’t that obvious?

The Stimulus Package

Obama could have included some Republican and Democrat ideas in the stimulus and united the country behind an economic stimulus package where everyone got something, but as he said numerous times, HE won the election - and shut the Republicans out of the process He threw away quite a bit of political capital with this decision. This allowed the weak Republicans to unite against a bill they rightly claim is a massive spending bill.

Unlike the Democrats who jumped ship on their vote to support the war in Iraq, the Republicans are united in their opposition to this bill from the beginning. A February 4th Rasmussen telephone survey indicated that support for the stimulus package is down to 37%, and a full 50% believe that the stimulus will do more harm than good.

What’s interesting to me is that President Obama - much like Bush after 911 - had a chance to set a bipartisan agenda after the financial crisis, but chose a partisan path purposefully to push a left-wing agenda of social spending that is really very consistent with his past - so it’s not a surprise. The politician that promised to transcend politics and unite the country, well, he never intended to transcend politics and unite the country. The change he promised during the campaign is really the same old partisan politics we’ve always had. Note that Bush had bipartisan support for the financial bailout at the end of his term. Is Obama able to lead this country? I still have my doubts.

blund Author Profile Page :


I'm simply not ready to dig a grave for captialism yet. The reason I'm not ready is there is no historical data to back up an assumption we won't be able to work our way out of this over a period of time. We have experienced many downturns in the economy over our history. Some worse then others and still we have always found a way (or were lucky enough) to adapt.

Every time we have a downturn there are thousands of people predicting the sky is falling and it has yet to happen. I'm not going to the bank (if there are any left) on it happening now.

Will some fundamental changes come from this recession? Of course they will and they should. We can not and should not go through this process and let the people who led us into it come out with the ability to do it again. It is fair to assume Wall Street is all about greed and will probably never change. However, Wall Street doesn't make anything. All they do is sell paper. They needed the banking system to create this recession. The bnnking industry was more then willing to lend a hand in the name of profits while ignoring basic fundamental banking prinicples in the process. They must be nationalized in order to restore any faith in our banking system.

There has been so much damage already done only a multi-tiered approach will work. This really isn't rocket science any longer. We know we must do the following:

1. Nationalize the banks
2. Stabilize the housing market
3. Provide stimulus

The quicker these 3 ideas are put into practice the quicker we will come out of this. Any combination of these ideas will not stop our declining economy at this point. It will take all 3 to have a meaningful impact. I agree with people who state the stimulus is too little too late. I agree that nationalizing the banks by itself won't work either. I also agree that stabilizing housing by itself will no longer work. We have to attack this issue from several fronts stimultaneously to have a chance.

This much easier said then done. Congress in their infinite wisdom wants to sit around and still play politics. The republicans love to point to the fact they don't beieve the stimulus will work and really are just interested in more tax cuts (their default answer to everything economic). By itself, the stimulus won't work and we pretty much all know this. However, squabbling over whether to spend 300 million on the Washington Mall or 150 million is just a waste of time and makes people wonder how these people can be so stupid and get elected to begin with. Will they reach the point where they are ready to take the steps necessary to have any probability of repairing what we broke? Schools still out on this question. I hope so, but I don't know. This financial crisis could have been prevented to begin with except for two things. First, it was politically incorrect to shore up sub-prime borrowers. People were against helping people they felt should never have bought a house to begin with. Second, the Bush Administration firmly believed the markets would be able to correct themselves. Both of these assumptions resulted in the crisis we're seeing today. Obama was correct the other night when he said his door was always open to all law makers, but only asked them not to bring the same old tired economic policies that helped create this problem to him. He's obviously willing to think outside the box. Now whether this translates into Congress being able to or not has yet to be seen.

YEOLDS, Thank you for the link to the oil drum. Very good stuff.

Zolko Author Profile Page :


you're talking about "recovery" as if we were facing a crisis, a big one. But many people believe that what we're seeing is a change in paradigm, more comparable to 1989 (Berlin wall) or 1789 (French revolution). The old times won't come back again. In no way. So the "stimulus package", if it aims to restore confidence in capitalism, will be as effective as pissing in the Mississippi. In the french newspaper "Le Monde" the editorial, right after the latest Sarkozy speech, recognized this for the first time: it's already in the mainstream media.

We need to think outside the box.

Nationalizing the banking systems is probably the first necessary step (since the banks are regulated and guaranteed by the state, they are in effect already state owned, except that their profits go into private pockets when their losses are paid-for by the general public: it's the privatization of profits and socialization of losses).

Other steps involve bringing back higher import tariffs, that pay joblessness money to those loosing their job to foreign imports. And that also take into account the ecological impact of all the transportation involved.

A Tobin tax on international financial transaction should be implemented also.

Industry needs to make product that last longer and are repairable when broken.

All-in-all, it's the end of consumer society and international capitalism. The future is continental organizations (EU, Mercosur, Arab League, African Union...) respectful of their environment. How the US is going to get along with it's neighbors (Mexico & Canada) will be interesting to watch.


blund Author Profile Page :


While I agree with a great deal of what you are saying I have to issue over other countries feasting on the bones of the US. 89% of all assets in Suadi Arabi comes from oil. Not only will the bankruptcy of the US effect Americans it will have devastating reprecussions throughout the globe. If we go down the EU goes with us along with most Asian countries. Not only will the dollars these countries are holding be worthless, but countries like Saudi Arabia will be forced to revert back to herding goats. The demand for oil will drop like a rock. China who has enjoyed a great of her growth to selling products to the US market will no longer have markets to sell too. This is already having a negative impact on their economy today and it could get much worse. Japan is in the same boat.

Hence, it's hard to argue it's within anyones best interest to see the US go belly up. I think this being the case the G20 will go to extraordinary lengths to attempt to stabilize the US economy. Whether the US and their economic partners are capable of doing this is another question.

Once the Bush administration allowed mortgage backed securities & CDO's to into default the die was cast for a major recession. Foreclosures started to spike and property values decreased far more then anyone thought possible. This led to more defaults and even lower values. This lead to a loss of confidence in our markets and banks unable and unwilling to lend. This led to reduced consumer spending which resulted in job losses. Job losses are now leading to more foreclosures which will continue to lower property values. It's like a snowball rolling downhill and just getting larger each revolution. This snowball is picking up speed and most of the industrialized world with it. Do we really want to see this gigantic snowball hit a wall and burst into millions of pieces or do want to try to slow it down enough so the sun has a chance to shrink it? Personally, I'm for the shrinking.

I know Tom isn't going to like this paragraph, but it needs to be said. The tried and failed policies of the republican party put us in this mess. Utilizing those same failed policies will only continue to accelerate the decline into a full blown depression.

In order to have any chance of beginning a stabilization we have to stabilize housing in the US. The only way housing can be stabilized is by reducing inventory. Reducing inventory means pulling the foreclosed properties off the market and renting them out. It means either stopping foreclosures altogether for a while or the Feds coming up with a plan to keep properties that are going to be foreclosed on off the real estate market as sales. You simply can't have a glut of housing for sale and expect prices to stabilize. Step two is nationalizing the banking system in the US. Banks have already proven themselves as too greedy to exist in the private sector. Also, banks are basically refusing to lend today in this atmosphere since the risks are too high. However, with lending being available too many jobs will continue to be lost. Step three is a stimulus package to help a percentage of American workers with incomes for a couple of years.

If these steps can make it through Congress (which is iffy) we'll have a chance of turning this around in 2-4 years. Please note I said turning it around. I didn't say we'd be healthy by then, but at least we'd be in the early stages of recovery. Then we go into the next phase of starting to pay back the debt we've accumulated to fund this recovery. Will taxes have to raised? Absolutely. We simply can't have every man, woman and child in the US shouldering a national debt in excess of 50-60K dollars. We will be forced to lower our living standards if we want any chance of long term recovery.

yeolds Author Profile Page :


The war in Iraq was lost when Mr. Benner (?) became the USA procoonsul in Iraq, and made all the wrong moves, re politics, re economics and re divide and conquer. The other years of struggle were a wate of money, scarce natural resources [war materiel and their tranport] and lot of blood.

The stimulus package will fail only as relative to dreams. The losses in assets not yet realized is approx 3 trillion $ mostly in USA, the stumulus represents apprix 10% for each of 2 years. NEGLIBLE!!!!

the amount is limited to the measly 700-900 billion [over 2 years] by the lack of available funds world wide. It will be printed [akraka ... so said the genie] and entails a very great danger of inflation [lot worse than 1975-81]

The USA's credit rating might take a dive in near future, for no-one knows what % of the 8.4 trillion [federal reserve and treausry] loans, guarantees, etc relate to REALITY BASED ASSET PRICING - this without the funds for the stimulus, the wars in Iraq Afganistan and Pakistan's Tribal areas [hopefully leave Somalia alone] AND WITHOUT REFERENCE TO THE NEW BANK BAIL OUT [coming monday].

Finally the unknown UNKNOWN is the Saudi/Arab League warning that the USA has til the end of the year too solve the Palestine Problem. Oil embargo? [do not think so] Selling USA treasuries and wrecking USA monetary syustem [possible] demanding HIGH INTERST FOR TREASURIES [most likely first step] ... All of these makes the USA BANKRUPT - end of Dod, end of Washington, more likely major social unrest by armed ex-middle class people, who do not have a clue how to live without WALMART, CREDIT CARD etc.

Good luck

blund Author Profile Page :


Spoken like a true Republican. There's never anything better then a tax cut for the wealthy or more desirable then letting markets seek their own level without government interference.

Isn't this what basically put us in this undesirable position today?

TomW2 Author Profile Page :

Energy prices will remain relatively low for the near future as the world cuts back energy use because of the economic downturn. High energy prices ($3 or higher per gallon) would delay the recovery of the US economy considerably.

Economist are predicting double digit unemployment for the US, and I believe that is realistic for 2009. The stimulus package is not front loaded and therefore will have little affect on the US economy in 2009, but some help can be expected for 2010, and a long, slow recovery will begin in 2010.

The stimulus package is an agenda-driven social spending bill that, according to the CBO, will have negative future affects on the US economy (and, therefore the world economy).

“…CBO, the official scorekeepers for legislation, said the House and Senate bills will help in the short term but result in so much government debt that within a few years they would crowd out private investment, actually leading to a lower Gross Domestic Product over the next 10 years than if the government had done nothing…”

The bill, as its currently written, also contains a buy American provision, while well intentioned, will cause a costly trade war forcing consumers to pay more for American products, in effect, delaying the recovery of the economy. The bill is a payback for union and teacher support for Obama during the election.

The US economy represents about 25% of the world GDP, so the ramifications of the stimulus package are important for world economic recovery as well as the US. The New York Times ran a story on February 6th  (“Japan’s Big Works Stimulus is Lesson”) which indicated that spending did little for the Japanese recovery:

“…In the end, say economists, it was not public works but an expensive cleanup of the debt-ridden banking system, combined with growing exports to China and the United States, that brought a close to Japan’s Lost Decade. This has led many to conclude that spending did little more than sink Japan deeply into debt, leaving an enormous tax burden for future generations…”

This suggests that the stimulus plan proposed by Obama will only prolong the recession, and burden future generations with a great deal of debt. The current stimulus plan will pass, but in the long run, is a bad idea.

While its been suggested by some (conservative) critics that the House threw Obama under the bus to push an agenda, nothing could be further from the truth. This is exactly the way that Obama, a community organizer by profession, would have written the stimulus package. Obama’s politically-motivated Chief of Staff, Rahm Emmanual, stated on November 21, 2008:

"…You never want a serious crisis to go to waste…Things that we had postponed for too long, that were long-term, are now immediate and must be dealt with. This crisis provides the opportunity for us to do things that you could not do before…"

Emmanual was also the architect of the Democrat strategy to lose the war in Iraq. This statement by Rahm reflects the administration strategy or “opportunity” to push a socialist spending agenda on the US - during a recession - to the long term detriment of the US and world economy. None the less, Franklin Delano Roosevelt will be compared to Obama by the main stream media when the 2012 elections roll around.

congratulations Author Profile Page :

one moment, one moment : ) this is penpal of Bibiana "Daisy" Margarida, teacher of portuguese, for 14 years. and i think, Mr BArosso and Mr Putin shall remind me from the common sense of Armenia Russia Anatolia membership to European Union together all at once.

congratulations Author Profile Page :

David Ignatius, kind regards, again.

congratulations Author Profile Page :

this kind conversation between BArosso and Putin have taken our comprehension and verbal communication a step further into advanced audibility and fluency amongst the folks of lands.

congratulations Author Profile Page :

and journalists print onto papers.

congratulations Author Profile Page :

Prime Minister of Portugal BArosso talked about journalists "gazette" authors in Russia with Prime Minister of Russia Putin,

Russia is known with SAturn, agriculture and to harvest"sickle of god", also with hammer of Scandinavia. and in italian "gazette" is to harvest and to courier to proper places.

in one of his poems, Anagnostakis has verbalized as "Words have to be hammered like nails, If they're not to be lost in the wind" i love Russia and Portugal. i just write to make a strong bond amongst the accents of minorities.

congratulations Author Profile Page :

about economics and hot spots, especially after the cover of US Weekly, let me write about MAtthew McConaughney, from Texas.

congratulations Author Profile Page :

and i asked my colleague who sent his poems to me to invite me to a marksist communist conference, to meet with the apostels : )

she shall visit Greece this monday on for a week.

congratulations Author Profile Page :

the name of the poem is "marks on the barks of trees" and verbalized after i read a few of the poems from the Target of Manolis Anagnostakis (1925), translated by DAvid Conolly.

congratulations Author Profile Page :

one week is merely a lot of time to meet your parents
to see how the tree is after branches have been pared

the garden is available for height of the man to walk
one should wish to visit her family slightly prepared

regardless of maturity, but with love and longing for
thinking of how many years have fallen onto the floor

i shall be in Greece on Monday too what a coincidence
in case You wish to stay in Sainta Sophia's residence

5 February 2009, Bursa

her family's lightly pre-pared : elders of her ancestors. the format of the text is in "courier new" character font.

poetry is the most of economy : )

congratulations Author Profile Page :

the messages in Turkish are within the PostGlobal project i contribute to, kind regards.

congratulations Author Profile Page :

katilmak (huzur bulmak, bereket gormek. kat: huzur bereket) guzeldir, dokulurken yaslar gozunden sakin saklama.

Amiral Gemisi sefere ciktiginda bekle bir sonraki limanda, sevgilisiydin emir gelir yine gorusursun.

congratulations Author Profile Page :

Filistin ve Irak'a yumurta yollansin, mumkunse Turkcell yollasin. bir yumurta kirilir sofrada en azindan. yanlis mi?

congratulations Author Profile Page :

Yesil CAmii degil de Setbasi camii. bu arada ben sabah Yesil Camiini kırmızı renkte tuglalarla catisi varken ve iki yaninda bitisik yapi ile uzatilmis gordum. bir de, misralar "courier new" yazi karakteri ile yazilmistir.

congratulations Author Profile Page :

this shall emanate to Iraq, this shall emanate to Iran, this shall emanate to Pakistan, this shall emanate to Russia, this shall emanate to PEru, this shall emanate to Canada.

Bursa Yesil Camiinin tuvaletini isleten amca, kaslari ve gozleri itibariyle Kalaslardan, Atlas Dergisinin Ocak ayinda konu edilmisti.

congratulations Author Profile Page :

i did see President of USA with the Chairwoman of the Senate around a TAble with Meals. His Arm was around Her Shoulder on Her Chair and the Bright White FAce of the President was in Company with the Sweet Tenderness of the HouseLady with Her Fingers had granted the Gentle Touch to each and every one of the Contributors.

we thank to Tony Blair for this moment. God offered to, God contributed to, God shared with.

the economy shall be around the table guests with meals. and conversation shall be exchanged in company of sweet tender eyes, love shall be in the air, and fullfillment shall be sustaining any one hungry.

bir gecenin sakinliginde isittim dolastigim gibi sehirde
bir bardak suyun icimde mutlulukla dolastigini ictigimde

yanimda benimle yuruyen bir yolcunun burnunun duzlugunde
gordum saclarini omzuna incecik parmaklariyla koydugunda

benim de icim gitti biz otururken yagmurun yagdigi gunde
gozleri ile caglarcasina uzerimde dolastigini gordugumde

ve herbir gulucukte kirmizi sarabin biraktigi bardagimda
beyaz kazak icinde konusurken guzelligini hatirladigimda

7 Subat 2009, Bursa

yeolds Author Profile Page :

To those who did not see it from Davos:

Mr Putin's remarkable sppech on energy, international finance, etc [conservative and did not pick on USA]

yeolds Author Profile Page :

Blund and all:

correct url for the OILDRUM is:

Zolko/TOOT... thanks for your view re Saudis/USA IRan

tototiti Author Profile Page :

it's me, Zolko, but the subscription process is weird:

@ Yeolds: I believe that the reason that Israel has not been allowed by the US to attack Iran over it's nuclear program is already because of the Saudi regime: they basically said to Dick that should the US begin a new war (itself or by a proxy) wit Iran, it's the end of the post-Bretton-Woods accords where they agree to only sell oil in exchange of US dollars.

The Saudis might not like very much the iranian regime, they dislike even more another bloodshed at their doorstep.

So yes, I believe the US foreign policy in the Middle-East is more and more forged in the Arab countries ans less and less in Israel. Wich doesn't make the situation less explosive because the Israelis know their window of action is closing: with the US shifting alleigence and Iran launching satellites, the times of their military superiority is counted.

yeolds Author Profile Page :

To all:

Question: If Arab OPEC members get upset with the lack of progress in the Israel Palestine Issue as per King Abdullah's suggestion what are the possible consequences for USA economy?

As Prince Turki [brother of the King, occasional Ambassador to USA and UK] has written in the Financial Times of London [UK]:
Saudi warning
Published: January 25 2009 19:00 | Last updated: January 25 2009 19:00 [suscription required]

To me the article almost saounded as an ULTIMATUM!!!

What if instead of oil embargo, these princes decide not to buy USA treasuries, or decide that oil has to be paid in Euros [Saddam and IRan did propose such ideas]yuans or whatever?

any ideas?

Shiveh Author Profile Page :


I do not have the actual data but I have seen published articles suggesting that our Ivy League graduates and other top university "Best and brightest" have disproportionately chosen carriers with financial institutions in resent years. They did it because the rewards are tempting; but I do believe that young graduates that inter the society have a high standard of morality. It is the corruptive financial system that brings out the worst in them. This system’s stark difference with “the American system” that values hard and honest work is quite evident.


Thank you for the kind words.

blund Author Profile Page :

I don't think there is any doubt arrogance played a big part in our (world's) financial downturn. Even those of us who said this was coming were told over and over not to worry. Systems were in place to avoid the type of meltdown we're seeing today. Statements like we learned from the depression and that can't happen anymore were used ad naueseum. People like Paulsen are sitting back today still wondering how this happened. What we're hearing from most major economists today is this meltdown is equivalent to the perfect storm. Now there's a cop out explanation if I ever heard one.

Arrogance, greed and a misguided concept that private markets would always be better prepared to deal with market crisis's brought us to where we are today. Now the entire planet is suffering.

Having said this I find it strange that the very people/businesses that put us in this position today are being pandered to. Banks and Investment Banks caused this mess. Nobody put a gun to their heads and said you must lower underwriting standards and securitize junk product. They did this simply for short term profit with little thought to the day of reckoning that had to come. Now they want to be bailed out? Bailed out for what? Bailed out for causing this depression? Color me silly, but isn't that like allowing the fox to watch the hen house?

Having been in banking for the last 30 years I am now a believer in the US nationalizing our banking system. The sooner the better. Obviously, the best and the brightest were nothing more then the arrogant, greedy and overpaid.

Zolko Author Profile Page :

@ Shiveh: "A year could be all the time we have to bring back the American system."

Some people say that the UK is going broke by mid-2009 and then hell breaks loose.

from the Financial Times (!!!) "Reykjavik-on-Thames":

"Breakdown of the Global Monetary System by Summer 2009"

daniel12 Author Profile Page :

Pretty powerful post Shiveh. But bad times deserve strong words. Keep it up.

Shiveh Author Profile Page :

America’s most brilliant distinction is her incredible ability to make any mixture of cultures and capabilities work their best within a system that is uniquely American. The American system is a smart and balanced mixture of laws, freedoms and opportunities for all people. It brings out the best in people and because it is harmonious, it is built to last.

Financial institutions in America employ the best and smartest minds in this country. They can do this because they have set up a system of compensation that favors people with sharp innovating minds over mediocre employees. It is a great system for making incredible amounts of money in a relatively short period of time; a great system for people who have the desire and the drive to reach new heights and shatter old limits. It is a great system for today ……… and a sure bet for destroying tomorrow.

We are familiar with this system. This is a system that has thrown away the old concept of salary as compensation for employment and has substituted it with sexier concepts of bonus, incentive, percentage of the profit, and it measures success by stock values and by comparing this quarter’s net income to the last quarter’s numbers. It is a great concept for the “NOW” generation that is accustomed to moving ever faster thru life. Yes, it is a great system for today ……… and a sure bet for destroying tomorrow.

This is a system that sets quotas and insists that they be met each and every month. It keeps you on your toes for the entire duration. Two strikes and you are out. Exceed the quota and you will be promoted. There is no reason to think long term. Next year is someone else’s boom or gloom. Today’s profit is too valuable to be spent on next year projects. By then you are either out or in a different position in another corporation. Next year is hidden behind that thick haze of uncertainty that covers your future if you fail to produce this month’s quotas.

Our financial institutions with their crooked system of compensation took in our best and smartest and corrupted them. Now that tomorrow is here by cashing in favors that our representative government owes them, they are filling up their emptied treasure boxes with our kids money. A year could be all the time we have to bring back the American system.

mibrooks27 Author Profile Page :

I brought this topic up with a friend and their comment about the bright spots was what they get when they hit their head, those cartoon stars dancing around the head of a cartoon character who has just been hit over the head with a very big hammer. How appropriate!

blund Author Profile Page :


I would agree several US industries, especially Wall Street, is run on a model where 3 months is a long time. However, interestingly enough, other industries like energy are run the exact opposite. Almost all I have read about take a long term view. I know given our current mess this is hard to believe, but stick with for second and it will make sense. There has been a considerable amount written about Exxon/Mobil lately. This a corporation that has always been profitable and returned outstanding dividends to it's stockholders. What have they been doing in the last 5 years making one record profit after another? They've been expending billions to repurchase their stock. At the same time they have cut way back on exploration and drilling. They seem perfectly fine with acting more as a oil broker then anything else. Their investment in alternative energy has been woeful. This is a company that is acting like it will become a dead industry at some point in the future (20-40 years) and is positioning itself to liquidate down the road. That's not short term thinking. All indications they are they know oil/petroleum will become a thing of the past and they are positioning themslves to dissolve the corporation at some point. They aren't interested in becoming an alternative energy company and are dumping the least amount of money into this field as possible and I'm sure with an eye on selling off whatever assets they have in this field when (and if) they decide to shut down the corporation and pay off their investors (stockholders).

I will grant you electricity, gas, oil, water, public transit and rail are at the far end of our spectrum for planning ahead. While a Wall Street is at the opposite end. It is typically true most financial industries are very short term in planning. They are constantly adjusting to meet conditions. Most other industries fall somewhere in between depending on how market conditions will effect them. However, I'm sure this isn't fairly true in most parts of the industrialized world today. As Orlov pointed out long term production plans in the Soviet Union didn't work very well in most industries. There's the old story about a manager of a nail factory in the Soviet Union that was going to miss his production quota and didn't want to get reprimanded for it. So he had the workers make one 5,000 pound nail so he could send in his report saying he made his quota. (True or not, I don't know. However, the point still stands)

It is true if we left Iraq and Afghanistan today our total costs once medical care and disability payments are factored in is about 2.5 trillion. Since we know we're not leaving today this number will rise. To what? I don't know, but if I was to guess somewhere in the 3.5 trillion range before we're out of there. (Tom Wonacott thinks it's a good use of the money as it translates into safety for our citizens. I don't think this is the case, but it's a moot point since we're there and have spent the money already and it takes time to disengage)

The cost of the financial rescue (rescue? probably a bad use of a word) is already well above 2 trillion. When you add in all the money the Federal Government through Treasury, The Federal Reserve and FDIC have pumped in from their funds, along with what Congress has already appropriated we're into this for around 6 trillion now. That number could easily end up at 10 trillion and possibly more with no reasonable assurance it will fix anything.

I don't think any rational person would argue the US will not have to modify it's life style downward. Just the sheer amount of debt we're building up at this time will necessitate this. There has been no question in my mind for the last 5 years the US was headed for a recession. The only question I had is how severe this recession would be and how well our government would act in dampening the effects. Well, I have to admit the US government has done about as poor of job managing the downturn as was possible given the circumstances. They sat back and waited for the markets to correct themselves and hoped it wouldn't be too bad. Only once it became obvious this inaction was counterproductive did they step in. Once in the game they were so far behind they virtually no chance of catching up and managing the downturn. Now, they are doing the only thing they know how to do which is throw money (they have to borrow) at the problem and hope it works. I'm guessing Obama is hoping for another boom only this time in the energy field or any other new technology that excites people enough to invest in. Other then this happening it's going to be years to recover from this economy world wide.

yeolds Author Profile Page :


your observation on USA politics - driven by daily weekly etc polls, is correct. Unfortunately your industries, businesses are similarly run on 3 monthly polls, a.k.a. net income [if any lately] which defeats the strategic interst of the citizens [and the country] NO LONG TERM PLANNING [especially noticable in energy exploration when inputs are cheap -steel, wages, etc].

As you observed, there was no action taken by business/government after 1973 re oil. Same applies to infrastructure [water, sewer, electric grid, bridges, etc] even though the issue became critical in the last few years. Nor was any attention given by governments regarding off-budget items [social security and medicare plans, private pension insurance, etc] though for years it was known that the liabilities thereof are beyond the capabilities of the state to surmount -- you will get less, the living standards will decrease. Finally, under the MAESTRO the financial bubbles grew in size [dot com to subprime, to commercial real estate, to credit cards, etc] til the system is almost self-destructive.

At this point you need large investments in alternate energy, transmission lines, and save the national econmy - at the very time the USA [UK , Iceland and a few post USSR nations] is effectively bankrupt - and the usual creditors, China, Japan, Opec, Russia have their plates full with their own economic problems.

Thus while the USA is looking at 2+ trilllion deficit this fiscal year, it is not clear that such debt can be finaced in shore or offshore, especially as the USA does not seem intersted in bringing back all her tropps and cutting the most wastefull expenditure: DoD. HEREIN LIES THE REASON FOR ORLOV's essay: cut back [decreased liviong standard] or print money [hyper inflation and decreased living standards].

I admit Orlov's essay is a little depressing, but he wanted to shock the reader -- no action it could even be worse in 5-10 years.


blund Author Profile Page :


Current provable oil reserves are in the 1.3 trillion barrel range today. We're consuming oil at the rate of around 80 million barrels daily world wide. These numbers give us another 40+ years on known reserves. Assuming no major finds in the future and no concerted effort to solve this energy problem then Orlov might very well be right (up to a point) in 30-40 years.

That the US is currently consuming appx. 25 million barrels of oil a day is not sustainable in the long term. It has left us with huge trade deficits which you'd have a hard time finding an economist who would say this is good. We have to adapt and the sooner the better. Having a society, any society, completely dependent on oil is a dead end policy.

There is no question extended suburbia came about in countries like the US, Canada and Australia not only because they had the land, but also they had cheap energy that allowed people to commute greater distances to work.

I'm just not convinced yet that the EU, China, Japan, US, Canada, etc. won't significantly switch to other forms of energy over the next 25 years. Electric comes to mind first as it is still cheap to produce and so far shows the greatest promise. (arguable point for some)

Will energy costs rise as conversions take place? Of course they will. There will have to be huge expenditures in constructing plants, switching systems and distribution. Will these costs push energy to a level that implodes our economy? I sincerely doubt it. Seems rather illogical to build an energy system that will lead to bankruptcy. Afterall, it is much easier to quantify the costs vs. benefits of an electrical grid then it is reign in Wall Street.

Hence, I'm not planning on running out to the store to buy guns and ammunition any time soon as I have serious doubts his energy theory is correct. In absence of either converting to different energy sources or being able to I think Orlov would have a point.

What really annoys me about this whole discussion as I was in college in 1973 during the first oil embargo. Those of us who were old enough to remember this event knew back then something needed to be done. There were continual discussions about being at the mercy of foreign producers, trade deficits and a belief there was only about a hundred years of oil left on the planet. Our generation knew a day of reckoning had to come over this issue and for the last 36 years we've done very little to solve the problem other then to acknowledge it and live with it.

I believe Orlov would have had a better argument our culture would implode due to our short term political climate then any one particular issue such as energy. Politics in this country has come down to daily polls. If it isn't a current event happening now there is little interest in fixing anything that isn't broken today. It doesn't mean it won't break tomorrow, but it won't get any meaningful attention until it breaks. Our current financial crisis (which has spread worldwide) would be an example of what I'm talking about. Literally thousands of people have been saying for years easy credit backed up by underfunded credit default swaps would result in serious economic difficulties down the road. What did our society do? Pretty much nothing until it collapsed. Now all of a sudden it's a current event and we're throwing money at it in truck loads because we don't know what else to do. I view a system run like this more dangerous to our way of life then any particular industry.

daniel12 Author Profile Page :

To Blund, Zolko and Salamon--good conversation.
Thanks Zolko for links. I am thinking about a friend of mine who has been interested in native American lifestyles since a boy. He knows how to knapp arrowheads, construct bows, make pottery, shelter etc. Zolko, the link you provided makes me want to make sure I am in touch with him at all times. It might be all his knowledge could save my life some time.--In fact it might be wise all Americans take up a survival class. We should have perhaps the native Americans employed in teaching us how to live if technological civilization collapses. I hope things will not get too bad, but we all should be thinking clearly and preparing for the worst. I hope things will turn out right for the economy.

mibrooks27 Author Profile Page :

Well, India has shown publicly what a barbaric and society it is, so, in the near future, we will be rid of their hordes of guest workers, poisonous pharmaceuticals, dangerous toys, and crappy products. Being rid of that collection of parasites once and for all is well worth almost anything.

yeolds Author Profile Page :

Zolko: thanks for the links


The idea behind Orlov's commentary was: technological society is not possible withop0ut CHEAP ENERGY.

The supersize oil fields were fairly inexpensive to "mine" probable benefit ratio was about 9:1, that is costs were aboput 10% [refining, transport, land degraqdation, steel usage etc]

the cost ratio of newer fields is lot worse, 4:1, as fileds are smaller, takes more energy to pump, explore/produce [USA Canada][deep under sea [Brazil, Gulf of Mexico etc]refine [eg. heavy oils, tar sands] No one knows the ratio of the Colorado Shales, as that project is just starting to be scientifically analysed - the water use will be major problem as it is in a very dry area of the world\]

It appears that bio fuels in temperate zones [corn/canola biofuel] is at best 1:1 when all costs and land degradation is considered. In other words it is a lost cause]
Wind solar are also problematical, for the areas which have the source are often very far from heavyly populated ares -- cost of transmision [new high voltage lines, switches, etc]and line loss, are costs related to the efficiency of such sources.

The REASON THAT ORLOV CHOSE USA [as opposed to EUROPE] is that he lives in the USA, and the USA was the other superpower beside USSR - both facing very serious financial problems 20 years apart.

Europe will be also effected, but it has a falling populatoion, and many parts more socialized with services [public transport] steadier residences [people do not move as often as in the USA, and have many just reached middle ground between developed and developing economies, so their adjustment will not be as greatly traumatic. They also have less guns, less prison population and more adherence to close community, for they live there for long time - thus will help each other [as happened in Communist countries till the 1960-70]. Conversely, the German economy depends on consumers' spending for 53% of GDP, as opposed to USA 70-72% [Keep up with the joneses], thus requirement for "good life" is far less in energy costs.

The above are my ideas, though some of it was gleamed form numerous blogs, especially OILDRUM, and also based on personal experience, for I grew up in Communist Hungary, ere I lived in Canada - so was exposed to different lifestyles, one energy poor, and the second the highest [or almost so] energy user per person.

Moreover, I have posted on this blog a number opf times that the USA/W Europe living standards will have to decrease due to limitation of Earth's resources -- sometimes these entries were deleted by the powers to be, at other times they did not notice, or did not care.

Good Luck

Zolko Author Profile Page :

Blund & Yeolds,

If you liked Orlov's essay, here is another interresting link (I posted it here before but it didn't go through censorship, may-be this time Big Brother is not watchning).

"Zeitgeist Addendum":

Part 1:

Part 2:

Part 3:

It basically explains how the current private monetary system, where public money is created by private companies that can charge interrest on that, is a world-wide pyramidal Ponzi scheme. (The principle is the following: money is created by private banks through credit and the fractional reserve, and they charge an interrest on that credit. BUT since money is only created by that means, the money to pay back the interrest is not created, only the principal, so you need new principal to pay back the former interrest and so on) Which, as any such construction, is bound to an ever growing base. Base which has hit the physical, thermodynamical limits of it's expansion. no growth ==> end of the pyramid.

There are 10 times more U$ dollars in circulation than the underlying economy. There is simply no solution to an imploding pyramidal scheme: the last off the boat loose everything. Blund, I believe you're right that no country wishes the US economy to implode... but that will not prevent it from happening, only delaying.

Think2 Author Profile Page :

The bright spots won't appear until it is widely recognized that the old dog won't hunt anymore. A new economy is being born, based on cooperation, sharing of resources, sustainability, and, to drive this new economy a sense of honesty, brotherhood and responsibility. These ideals are going to become the ideas which will transform the world, leading to justice and the trust which will ensure a future for all of us on this planet.

This pain is very educational and is serving to open the door to this new way of living. See:

yeolds Author Profile Page :


Other writings by Orlov can be found at: some are satirical, others are important.

While Orlov choose energy [that which is the cornerstone of xxi-st century economics, not money] as his central argument for the probable collapse of technological societies, We face exhaustion in many other filds, or at least just marginal production: some rare earth metals, many common metals only in very low grade, deteriation of sea stock [fish], degradation of agricultural land [monoculture and poisoning by fertilizer, pesticde, herbacide] potable water supply [aquafiers are depleted too fast, too much pollution added to water [e.g TVA ash spill] etc.

for comprehensive discussion on all aspects of energy [bio, sun, tide, oil, coal, nuclear, etc] please visit:,

where many experts relate their knowledge, etc, also has regular reports on oil, gas any where on earth, depletion rates,. new discoveries, etc, vasrious measures to fight energy asbuse [public transport, well insulated/ energy neutral housing, etc

I personally do not think that the USA will sink to the level described by Orlov in the near future, however, without immediate effort on energy and global warming issues by the USA and others the future looks very bleak,

That the USA, Uk and some other developed nations could not cut their CO2 production even though they have outsourced most of their polluting industries to China, Vitnam, etc does not bode well for the future.

Good luck

blund Author Profile Page :


Orlov's article was an interesting read. Obviously, this recession or depression in the making wasn't brought about by energy, but that's a minor point.

My major issue with his logic is his failure to address the great depression. The US financial system has lived through devastation before and utimately, for a variety of reasons, came out stronger. (WWII and European devastation had much to do with this, but we'll never know without those events taking place what the outcome would have been)

I'm not sure I buy his assertions we will be incapable of developing alternative energy sources. His dismissal of technology being able to significantly impact weaning the US off of foreign oil in the next 20 to 30 years is just an opinion and not backed up with any data to prove his point.

I think he's right on target when it comes to trade deficits, budget deficits (especially in the last 8 years and foreseeable future) and loss of production capabilities in the US.

By nature I'm not a doom and gloomer. I think viewing a complete meltdown of the US economy while an interesting read isn't in any countries best interest. Certainly, it is not within Europe, Asia or South Americas interest. They hold too much of our debt and export too many products to the US where our financial ruin would equal their financial ruin as well. That being said I believe they all would like to see a gentler kinder US with less political, business and military interference around the world.

Going back to Orlov he never does address what would emerge as a political/social/economic system from a US collapse. I only bring this up since it is an important point. What's the alternative? If, as many believe, societies are formed for the welfare of their citizens and the sense of welfare needs to include the opportunity of having certain quality of life standards what direction do we (or any country) go to insure the probability of this happening?

yousufhashmi1 Author Profile Page :

The bright spot next year this time will be that world economy will cross the bottom line and start rising upwards.

The problem is in money sector. they were giving the wrong forecasts and spending money recklessly. this phenomenon is already stopped.

The people will start learning to live modestly. And most probably by next year we will be living in more peace when the war in east asia will be closing.

Zolko Author Profile Page :

I doubt very much that any good news will come from the world economy in a year. I rather suggest to read this essay (if it gets through censorship, that is):

"Post-Soviet Lessons for a Post-American Century"

by Dmitry Orlov

Part 1:

Part 2:

Part 3:

AnjuChandel Author Profile Page :

Wall Street "shameless" sharks would have gulped down another few billions in bonuses with the "bailout" money!

daniel12 Author Profile Page :

I agree with Blund that it is difficult to see anything positive ahead for the economy for awhile. But I have one concern that people might overlook: For all of us in the world it is extremely important to maintain a "humanistic" sense, an "universalistic" sense, which perhaps is best reduced and held in everyone's minds as the need to have everyone treated equally, that human rights are necessary, that pressure must be over the world as a whole to provide the basic necessities to all people--which is to say food and shelter and medical care, etc.

Well with the downturn in the world economy we are threatened with having the ruthless calculus of people's worth in the economic sense rising beyond all sense and threatening the humanistic moral sense. In other words, we all are familiar with how a modern economy--in general the inevitable progression of economics--results in every person having a price on his head. Some people get paid this amount, other people get paid that amount. It is a routine expression to ask how much a person is worth--meaning how much money he makes.

And behind this routine expression there is the acknowledgement of the cold calculus of economics affecting all of our lives.--And in fact always at war with the humanistic sense that all people are really equal and deserve to be treated equally. It seems with every downturn of an economy the ruthless economic view takes precedence--and with the success of the economy the humanistic sense rises to the fore. But now we are seeing an economic downturn which is affecting everyone in the world--and this economic downturn is occurring before we really have a humanistic sense of people fully established and spread around the world.

So imagine this: not only the humanistic sense over the world put on hold--in fact receding--but the wave of the ruthless economic sense coming in to shore. We can expect nations to become somewhat more self-contained, becoming less concerned about humanistic plights here and there. In fact we can expect nations to put the humanistic sense on hold within themselves and to treat their own citizens with the ruthless economic sense over the humanistic sense.

To put it bluntly, I have never been more aware of earning 10 dollars an hour as I do as a security guard. These days everyone it seems except the well off are not only threatened with feeling insecure, but threatened with feeling worthless in employers eyes--in fact superfluous, expendable. So as you can imagine I hope things get better so the "better angels of our nature" as I wise man once said takes precedence again over the cruel calculus of economics.

May we all say a prayer to whatever God or not God that things get better, so we all can look one another in the face and reassure ourselves and others that we are worth something to others and ourselves.

blund Author Profile Page :

I sincerely wish there was one, but I have serious doubts. Bush's team tried what they knew and it hasn't made a significant difference. I can not believe a stimulus package modeled after Roosevelt's dismal results of his WPA projects will do any better. Hence, while it pains me to say it, I think we will sink lower over the next 24-36 months before we begin to stabilize.

There is no doubt easy and cheap credit resulted in an artifically high property valuation market that couldn't be sustained. The US was going to have to deal with some type of recessionary period no matter what. The only question that remained was how this going to be handled. That question was quickly answered by the Bush Administration. They were willing to sit back and let the markets correct themselves. Once the Feds allowed mortgage backed securities to default the die was cast as to what the inevitable outcome would be. All that could happen was a major recession/depression.

The aftermath has been both investors in the US and overseas lost trillions. When this happened they lost all confidence in our economy and our governments willingness to stand by the economy. They pulled the money they had out. Banks and investment banks were stuck holding non-saleable assets that were declining in value daily. Had Bush/Paulson not basically given the banks 325B we would have seen more collapses. However, this cash infusion was far too small to make banks solid again. In fact, in only a couple months time they are asking for more to keep themselves afloat. All this led to the credit markets freezing. The freezing of the credit markets combined with the general atmosphere has led to people becoming frugal and not spending as much money. This has led to a reduction in work forces in most sectors of the economy. At the same time all the people that had sub-prime loans couldn't refinance them as the programs to do this no longer existed and once their adjustments hit couldn't afford the property. This has led to record numbers of foreclosures and a sharp down turn in home values thus creating more foreclosures and job losses.

In summation all we're going to see in the next couple of years is the continuation of frozen credit, further declining real estate values, more job losses and higher numbers of foreclosures. Nope, positive economic news isn't something we're going to see for a few years. Buckle up because it is going to be a very bumpy ride for a while.

tropicalfolk Author Profile Page :

Davos did have one shiny spot: David Ignatious' forehead.

washpostcom1 Author Profile Page :

Rel. "...Mistakes Obama...", Daoud Kuttab.

I would wish that Mr. Kuttab had been more emphatic and specific in the first sentence of his comment. To wit:

The biggest foreign policy mistake that Obama can make is to continue our special relationship with Israel, beginning with the a priori condition in every argument that Israel is a legitimate state.

And there is a very self-interested reason for this concern: When the end comes,we will be otherwise drawn into Israel’s apocalyptic demise, which is a foregone certainty, and probably not distant.

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PostGlobal is an interactive conversation on global issues moderated by Newsweek International Editor Fareed Zakaria and David Ignatius of The Washington Post. It is produced jointly by Newsweek and, as is On Faith, a conversation on religion. Please send us your comments, questions and suggestions.