The Wright Perspective℠
Social Commentary from the C-Suite to Main Street℠
A Blog by Gary Wright II
Update on our economy, employment, and details of the $9 trillion bailout
Wednesday, December 1st, 2010
I've written about the dire state of our nation in several previous blog entries, but I wanted to update you with the latest numbers that were just released today. It should be no surprise to anyone that our nation is facing great peril in the years to come. The leaders of our nation have failed us, and it will take several generations to repair the damage. With each day that we delay taking action, the problem is compounded.
I've previously discussed how we got into this mess, and both Republicans and Democrats are part of the problem. To be fair to both parties, our economic trouble actually started back in the 1970's. The recent failures of our leadership have only accelerated our ultimate economic demise. With the Democrats under Clinton, we had a huge budget surplus, but we didn't use it to fix our broken education and health care systems. The Republicans under Bush initiated two wars that we can not win and can not afford, so the country voted for change and elected Obama. He was able to slowly turn the economy around, but much of the damage was already done. The last election, the Republicans were put back in charge and now they are doing everything in their power to make Obama fail so they can keep control. It is our citizens who are ultimately paying the huge price for this mess. If Obama fails - all of us who are not wealthy will lose the game.
It is very likely that the Republicans plan will backfire on them, since they will be unable to keep any of the promises they made in order to get elected. First, the deficit problem: our largest expenditures are on defense, social security, and health care. Those three areas are so large that all other budget cuts would not even make the slightest dent in the budget. No one will even talk about cutting the defense budget. Social security is a safety net for the disabled and a promise made to our elderly. The program is paid for through deductions in your paycheck, so it should not be cut. In fact, the amount paid to recipients should be increased in relation to the rising costs of living.
That only leaves cutting the cost of health care, which affects many other areas. The Republicans can not, and should not, repeal the health care reform that was recently passed. They "can not" because they don't have enough votes. They "should not" because it needs to be reformed - not repealed. The analogy of "throwing the baby out with the bath water" comes to mind. The reforms have many parts that are good ideas, and some that are bad ideas. We need to keep the good and fix the bad. A full repeal would add more uncertainty to the equation and would cause most businesses to avoid hiring new employees until they can plan their future expenses with any confidence.
Speaking of employment - there is nothing but bad news to report in this area. Companies are sitting on huge piles of cash right now, but they have no plans of hiring more people in the near future. Chief Financial Officers (CFOs) now say they are ready to invest money, but they say it will all be invested overseas in China, India, and other "emerging markets." Damn! There wasn't even a period of mourning for our country when we lost our world dominance?
Yesterday, over 2.1 million families lost their only source of income as their unemployment benefits expired. I know that unemployment benefits shouldn't be perpetual, but these are special circumstances. It is like a slap in the face to say we can't afford it when you consider the money being spent (and wasted) in so many other areas. That brings us to the federal bailout:
A report released today shows that the fed gave over 21,000 "emergency loans" for a total of over $9 TRILLION. That is right: $9 TRILLION! For the mathematically challenged - that is $9,000,000,000,000! The annual interest rates on these "loans" were between 0.5% to 3.5%, while our people are trying to pay off credit card debt at over 20%. How can we spend that much money on bailout loans, yet we can't help raise our citizens above the level of poverty?
Most people know that the bailout was to save banks from failing, but did you know many loan recipients are hugely successful companies? Just to name a few: Caterpillar, GE, Harley Davidson, McDonald's, and Verizon. The largest single loan was to Barclays Capital, who borrowed $47.9 billion and then financed a purchase of Lehman Brothers' remaining assets. Merrill Lynch received $2.1 trillion which spread across 226 loans. Even with those loans, the company still failed and was bought by Bank of America. Morgan Stanley received $1.9 trillion through 212 loans. Citigroup borrowed $2 trillion through 279 loans. JP Morgan Chase received three loans for a total of $3 billion.
Fun with math: Let's divide up the $9,000,000,000,000 by the US population of 310,828,459 = Each person in the US would pay $28,954.88. Hell, even if we divide it up with the world population of 6,885,116,798 = Each person in the world would pay $1,307.17.
Next, the housing market: A healthy market has a six month supply of homes. We currently have a 22 month supply on the market, but there are millions of homes that have been foreclosed and not yet placed on the market. The law of supply and demand means that a housing market with low demand and a huge supply means the prices will continue to fall. Those lucky enough to stay in their homes will now owe more than their home is worth because of falling home prices. While millions of families are left homeless, there are empty houses in every neighborhood.
It is times like this that we must all work together in order to survive. Not just as families and friends, but the churches and other organizations must come forward to help each other through these challenging times.
For those struggling through these tough times: Hang in there and NEVER give up! I have been through hell and I'm still here. I'm not still standing - but I'm still here. I had medical bills from a disability that forced me to file bankruptcy. On top of that, an error in my VA pension caused me to lose my truck and my home. Despite my mortgage company receiving a huge bailout to stop foreclosures - they foreclosed on me anyway. It sounds cliche, but now every day for me is Thanksgiving day. One of my favorite quotes is: "I cried because I had no shoes until I met a boy who had no feet."
Every life is precious and you are here for a reason. I love each and every one of you. Always remember that your "self-worth" and your "net-worth" are not related to each other.
If I don't give up - neither can you!
-- Gary Wright II
My sister sent me a link to a real-time debt clock: usdebtclock.org