US Living Standards To Decline

US non-farm payrolls plummeted 533,000 in November, the largest drop since December 1974, as the credit crunch's toll on businesses mounted. But downward revisions to jobs figures for September and October suggest fierce global cost competition is also a factor, and one that may
persist beyond a credit market recovery.

“Largest since 1974” in a negative economic number is much more profound than the usual “largest since 2001” -- there have been some good-sized recessions since 1974. The November figure results partly from the credit crunch, which has begun to cause more companies to hit the wall than would be the case in a crunch-less downturn. However the September-November job
loss of 1,257,000 is an even more impressive number, and suggests that factors beyond the credit crunch are also to blame.

Economically, the intensification of globalisation since 1995 should have had two effects. It should have increased global real incomes, as billions of new productive workers began to fully articipate in the global economy. It should also have compressed income differentials, as emerging market workers gained skills and experience that made them more competitive with their US counterparts. Its overall effect on US living standards would depend on whether global differentials were compressed more or less rapidly than global incomes improved.

The stock bubble of 1996-2000 and the housing bubble of 2002-07 masked globalisation’s pressure on US living standards, because they artificially increased the US capital stock and in housing’s case provided substantial employment directly in construction and mortgage-related businesses. With those bubbles now popped, the effect of intensified global competition on the US workforce should be easier to see.

In a friction-free economy, US wages would decline as necessary, without increasing unemployment. However as Keynes pointed out, wages are sticky on the downside. Thus in November, wage rates actually increased 0.4%, even though unemployment skyrocketed.
Employment increased only in education, healthcare and government, all sectors that are protected from foreign competition. Similar wage stickiness was a problem in the 1930s, when unionised and government workers won chunky improvements in living standards while unemployment topped 20%.

Cyclically, Great Depression II still seems highly unlikely. However, globalization may be causing a longer-term secular decline in US living standards.

AIG owes $10 billion on trades gone bad: report

Fallen US insurance giant American International Group owes financial firms some 10 billion dollars on speculative trades that turned sour, the Wall Street Journal reported on Wednesday.

The trades have not been explicitly revealed before and would not be covered by the US government's bailout package of more than 150 billion dollars for the troubled company, the Journal reported, citing unnamed sources.

Details of the trades mark the first indication that AIG may have been gambling with its own capital, the Journal wrote.

The government intervened to rescue AIG from collapse in September and has since dramatically expanded its rescue funds as the firm suffers from failed bets on complex financial instruments.

An AIG spokesman told the Journal that the trades were not speculative bets but "credit protection instruments."

He said the trades have been fully disclosed already and amount to less than 10 billion dollars of the firm's 71.6 billion dollars exposure to derivative contracts on debt pools, or collateralized debt obligations, as of September 30.

AIG was the world's largest insurer before the global credit crisis brought it down.

The Third Phase – Hyperinflation

We are going to enter into the third phase of the crisis. Some economists worry about the way Fed is funding the bailout's. Fed officials could find it challenging to remove the cash from the system once markets stabilize and the economy improves. It's not a problem now, but if they're too slow to act later it can cause inflation.

From News Source:

Throughout the series of crises, politicians will attempt to interfere in the game, but the third stage of the crisis will nevertheless begin. Since banks were “saved” with large bailouts, politicians will also begin to lavish corporations with various aid packages. The recent charade of automakers begging for money is only the beginning. Thus, measures will be undertaken that, in the opinion of politicians, will help the economy and save jobs, something that will likely become known as Obama's “ New New Deal”. This will include a multitude of spending programs and, above all, the loaning of credit with astronomical increases in the money supply, together with the classifying of the corresponding numbers into the trillions. Just like now nobody talks any more in terms of millions, so in the not so distant future no one will be talking any more in terms of billions. Trillions will be the order of the day. Perhaps bank lending standards will be relaxed. Perhaps the government will lavish the banks with a lot more money than it does today, just to keep them lending. Perhaps the central bank will directly monetize private debt. Perhaps the government will guarantee many more corporate loans, just like it recently guaranteed the securities/loans of the GSEs. Perhaps GSEs will proliferate throughout the economy, transforming the U.S economy into the “GSE Economy”, transforming a former great capitalist economy into a modern-day nationalsozialistische economy. Perhaps the government will implement all of the above.

It will seem for awhile that peace has arrived, that the crisis has been overcome, as if the bankrupt companies have been “saved”, although this will only be the calm before the storm. If there is already more money in the financial system than actual goods, then after the subsequent injections of money, more like dropping money from helicopters or showering corporations with money, the economic ship will begin to heel.

In this stage, the third stage, the hyperinflation scenario will begin when people realize that the money in banks will buy them next month half as much as it did this month. Then panic will ensue. People will begin to buy essential and non-essential items, just as long as there is something of value that can be obtained in exchange for their colourful pieces of worthless paper. Manufacturing enterprises would no longer want to sell goods, because the money received in exchange for the sale of their goods is not sufficient to purchase the new raw materials. Everyone who sells an actual object or good for paper money is a loser, since the same money is no longer enough to purchase again the same goods. Money created out of thin air electronically has brought tremendous benefits to the initial users and issuers, but at the expense of the wider masses through the collapse in their standards of living in this stage.

The third phase will be chaotic and difficult. The details are difficult to predict, but if history is any judge, the politicians won't be asleep. They will likely pass a number of important laws, prices will be fixed, wages will be standardized, foreign currency accounts will be frozen; in general, everything that could be done, will be done, and this will only serve to extend the agony. Social upheaval and riots will be suppressed by brute force; many democratic freedoms and values will likely be lost. As of today, the hyperinflation spiral and Zimbabwe Syndrome have reached the point of no return.

A huge downshift.......

Employment is the #1 barometer to measure growth of any economy.

US companies slashed payrolls last month at the fastest pace in 34 years as the economy headed for its deepest and longest recession since World War II. Employers cut 533,000 jobs, bringing losses so far this year to 1.91 million, the Labor Department said on Friday in Washington.

• It’s unbelievable numbers, it seems US is on thier way to the worst recession of the postwar period.
• The plunge may spur incoming President Barack Obama to come up with an even bigger fiscal stimulus package than economists’ projections of about $700 billion.
• Friday’s figures also will add to pressure on the Federal Reserve to take radical steps to revive credit markets and on lawmakers to bail out the auto companies.
• This is a huge downshift, much larger than anyone thought. The upper bound on a stimulus package is going up, not down. As the hole gets larger, the amount you need to fill it gets larger.
• Payrolls are likely to keep sliding into next year as the collapse in credit and slump in spending hurt companies from General Motors Corp to Citigroup Inc and AT&T Inc, it will eliminate 8 per cent of its workforce.
• Obama said in a statement the job loss demonstrates the “urgent” need for a recovery plan and offers an “opportunity to transform our economy” through investments in infrastructure and alternative energy technology.
• Fed Chairman Ben S Bernanke this week outlined unorthodox policy action that officials can take beyond lowering interest rates. One option would be to purchase longer-term Treasuries on the open market to inject more cash into the financial system.
• US automakers have been particularly hard hit as sales last month dropped to the lowest level in 26 years. The top executives of General Motors, Ford Motor Co and Chrysler LLC this week appealed to Congress for as much as $34 billion in government assistance.

Rising Underemployment Contributes to Pain of Jobs Slump

The nation's unemployment report, released yesterday, was even worse than many economists had feared. But some say it was also incomplete. Workers like Toliver who are stuck in jobs for which they are overqualified went largely unnoticed.

In one of the worst recessions since at least the early 1980s, economists say, the ranks of the country's underemployed workers are growing. They include not only skilled laborers who are working in unskilled jobs, but also workers who are seeking full-time employment yet have had to settle for part-time alternatives.

Their misfortune, experts warn, is the economy's misfortune, too.

"It's a huge disservice to the economy, in that it means there are highly productive, hardworking people who are not maximizing their potential," said Heidi Shierholz, a labor market economist for the Economic Policy Institute. "They cut back on their consumption. That reduces demand. It's a downward spiral. It's a huge drain on the economy."

The government does not count some types of underemployed workers -- those who are overqualified for their current work, for instance. But it does count people who are working part time when they would prefer full time. That count has jumped by 2.8 million in the past 12 months, to 7.3 million.

Top Stories of The Day

According to Reuters, the Senate will return to auto bailout talks this week.

Reuters reports that Merrill Lynch (MER) CEO Thain is seeking his $10 million bonus.

Reuters reports that unsold cars are piling up, including formerly profitable hybrids.

Reuters writes that the Fed's Kroszner said that banks need to broaden their view of risk.

Reuters reports that 3M (MMM) will cut 1,899 jobs.

Reuters reports that The New York Times (NYT) will borrow against its new building.

Reuters reports that The Tribune Company is filing for a possible bankruptcy.

Reuters reports that UBS (UBS) may cut another 4,500 jobs.

The Wall Street Journal writes that pressure is growing to fire GM (GM) CEO Wagoner.

The Wall Street Journal reports that ad-spending forecasts are glum.

The Wall Street Journal reports that Kroger (KR) is about to post a solid profit.

The Wall Street Journal reports that hedge fund redemptions are picking up speed.

The Wall Street Journal reports that Deutsche Börse held exploratory talks with NYSE Euronext (NYX) about heightened cooperation -- including a possible merger -- but they ended without success.

The Wall Street Journal reports that HP (HPQ) has announce further plans to integrate EDS.

The Wall Street Journal report that Intel (INTC) say it has made further advances in silicon components.

The Wall Street Journal reports that mayors are lobbying for US bailout money.

The Wall Street Journal reports that venture capital investors are beginning to renege on their obligations.

The New York Times writes that the economic downturn has decimated the market for recycled materials.

The New York Times reports that new data show the recession is likely to be the longest and most severe since WWII.

The New York Times reports that The Big Three have to wrestle with the total cost of the car company bailout which could be as high as $125 billion.

The New York Times reports that Obama warned of further economic pain.

The New York Times reports that online shoppers are spending much less per transaction this year.

The FT reports that private equity firms are being asked by their investors to reduce commitments.

The FT reports that the trouble in Detroit could undermine development of green cars.

The Manhattan Project of 2009 by Jeff Wilson

In 2002, oil was $22 a barrel. Now oil is well over $100 a barrel, and has spiked to nearly $150. The total cost of this country's oil addiction is well over one trillion dollars a year. We are sending hundreds of billions of dollars overseas, making nutcase pertrodictators wealthier by the day, as we make the dollar weaker and weaker. We are driving off a cliff; something must be done and done fast.

"I wanted to find out for myself just what our situation really is, and what our options are," says author Jeff Wilson. "I dug deep to get the facts, I ran the numbers, and it became clear -- first, that our situation is far more serious than anyone seems to realize, but second, that there is a way out." The Manhattan Project of 2009 examines our situation in detail, studies our options, and crafts a detailed plan to get us off of oil.

Topics covered in this book-
- Are we depleting our oil reserves, and if so, at what rate?
- Who is competing with us for the world's oil supply, and just how serious
is this competition?
- What is the total cost of oil to our society?
- What does the oil situation mean for our nation security?
- What are the different uses for oil, and how much does oil does each one
need?
- What is the realistic potential for the different sources of alternative
energy?
- Wind
- Solar
- Biofuels
- Hydrocarbon synthesis
- Wave energy
- Ocean currents
- "The hydrogen economy"
- What electric cars are on the market now, and what ones will be availble
in the near future?
- What about conservation?
- Will the Cap and Trade legislation that is pending in Congress help?
- Why don't we just increase domestic production?
- What about drilling in ANWR
- Can the Pickens Plan work?
- What would it take to replace oil?

The final outcome of this book is a proposed legislative agenda. One that is bold, but realistic.

The plan needed to deal with the oil crisis is not for the faint of heart.

But, if devised with skill and executed with determination, it can lead us into a new world of affordable energy, national security, and a stable environment.

This is the Manhattan Project of 2009.

Obama warns economy will get even worse

U.S. ‘fragility’ tied to worldwide financial crisis, president-elect says

The economic recession will get significantly worse before it starts to improve, President-elect Barack Obama said, seeking in an interview broadcast Sunday to tamp down expectations as he prepares to assume the presidency in 44 days.

Financial Crisis has hit Santa Claus!!!!

Amidst news of bailouts, bankruptcies, layoffs and the like, it seems people from all walks of life — even Santa Claus — are feeling the impact of the current economic crisis.

Sad but true. And did you hear how many kids are sitting on Santa’s lap asking for a job for their daddy for Christmas?Not enough credit has been given to the role the high cost of fuel has played in our economy.

This past year’s historically high gas prices has directly resulted in a record number of jobs and homes being lost. Of all the many that have lost homes in my area none have been because of adjustable mortgages.Most families have gone broke this past year at the pump alone. Then the increased cost in fuel was passed on to the consumer through increased production and shipping costs of every single consumer product imaginable.The average family cut back this results in even more jobs being lost.

And while we are doing the happy dance at the pumps OPEC is planning more production cuts. It would cost the equivalent of 60 cents a gallon to drive an electric car. The electric to charge could be generated by wind or solar power. Bail us out of our dependence on foreign oil.

Use some of those billions to get some infrastructures set up, get some solar and wind projects going, Create clean , cheap energy, create badly needed new green collar jobs. It would be a win-win situation all the way around. I just read a book called The Manhattan Project of 2009 by Jeff Wilson. I suggest anyone concerned about these things read this book.

Santa Claus! | Funny Jokes at JibJab

‘Peace Of Mind’ Investing With Stock Indexed Annuities

How long does it take your portfolio to recover after a devastating bear market?

It took a little over a year to get even after the stock market crash of October 19, 1987, over four years to get back your money after the treacherous 2000 to 2003 bear market, and more than five years after the 1973 to 1974 debacle.

This time around, with the Dow down 40% from its high of a year ago, it may take three to four years to get back to even. Ouch! If you are waiting for the new administration to bring you back to even, you may have a long wait.

A Powerful "Peace of Mind" Investment

An indexed annuity is a tax-deferred annuity that combines the downside protection similar to a fixed annuity, money market or CD. But unlike these safe money investments, your interest earnings are calculated based on the performance of a stock market index such as the S&P 500, Nasdaq 100, or even European or Asian stock indexes. It enables you to profit from a market recovery.

Of course, you pay a price for eliminating your downside risk.

In exchange for the guarantee, indexed annuities typically pay slightly less than the full return of the S&P 500 Index. For example, an indexed annuity using “participation” might offer a “50% participation rate.” This means you'll earn 50% of the increase of the selected stock market index. If the index is up 20% for the year and your participation is 50%, your return would be 10%.

But in the long run, the total return can be outstanding because in years the market drops, your capital is preserved. You are ahead of the game when the market moves back up.

"Fixed annuity sales in the United States hit $27.1 billion in the third quarter, up by 54% from the third quarter of 2007, according to data from Beacon Research of Evanston, Ill."