Red Plague Epidemic Continues its Spread

November 23, 2008 in Economic chaos, Markets, Personal Finance
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Excluding the rally in the last hour on Friday that drove the markets up by 4-5%, the past week was dismal and full of horrific news, statistics and activity.

We saw that the beautiful morphing of Sir Paulson’s plan into a help any entity that could form a nationally chartered bank or buy an existing bank.  He has protected large conglomerates, GE, Goldman Sachs, Insurance Companies, and numerous others, but he let Congress send Detroit pied pipers home (via individual private jets) with responses that absolutely did not sound like yes.  If American cars were made in California, I bet the response would have been different.  (But don’t get me started on Mz. Nancy….)

While Detroit burned, folks at Citi started jumping from the roof and windows, those that still had jobs and company stock.  As the price per share stumbled to $3.10, it looked like the world was going to end.  Did it?  Will it? We will find out soon, or not so soon……

The government closed and took over more banks this past week than they have any other week!!!!

Based on a very informal survey of professional New Yorkers, it seems that unemployment in the Big Apple will be skyrocketing, if the unemployed actually go and claim unemployment compensation.  How much do you get if you are laid off from a $300,000 job????   Somebody let me know….

Folks in our town started to celebrate when they started to be able to buy gas at less than $2 per gallon.  They got more excited when food prices started to fall and when turkey went on sale for less than $1 per pound.  They then realized that unemployment is at 16 year highs and only beginning to move higher.  That labor prices also follow the basics of economics pricing, based on supply and demand.  They heard about the government workers in some towns and cities taking a 15% pay cut to help balance the budget and looked at their friends who are paid not based on hours worked but on values of production or levels of sales, etc.   They then realized that incomes in general have started to go down.  They realized that if their income does not go down, likely their neighbors’ will, or their spouse or brother of cousin, etc….

People are beginning to realize (if they have not already) that the economic future of tomorrow is highly uncertain.  This is a mindset we have not seen in the US since the 30’s.

Let me tell you the story of a society without any hope for economic future…..  In the mid 1990’s I was blessed to have the opportunity to work in the countries of the former Yugoslavia’s.  This was a region going through war, economic upheaval, hyper inflation, supply shortages, complete non-existence of credit, and barriers to trade and travel.  It was amazing how families, with no incomes, and needs of food, drugs, etc. would “find” money.  The economy went from controlled behind the cash registers and through the payment systems, to cash, to barter, to personal exchanges.  People congregated on corners, not to socialize in the sense that we know, but to problem solve for themselves and their families.

Between the hyper inflation, which caused each unit of curreny they had saved to become worthless, and the bankruptcy of their banks, people literally and figuarively had nothing but a pot or ceramic basin to piss in….  College students went to school, because it was free and they could get financial support from the government, but they had not hope for the future.  They did not understand what it meant to work hard, get promoted, accomplish something, get financially rewarded and “move forward”.

Our children can face this risk of the lack of motivation.  They can get stymied by the layoffs and economic losses of those around them.  They can get stuck and just live for the day…. and not save and build for tomorrow…    This is a major risk.

What will happen to our childrens’ vision of tomorrow if our confidence in the economic system becomes trashed?????????? Share your thoughts……