Monthly Archives: October 2008

Personal P & L

I know most people don’t keep a budget, but most know if they have money at the end of the month or not.  Let the following example help you understand the current economy. 

Suburban Family 2005

All numbers are AFTER-tax because that’s all that really matters.

Income:  $6,250 per month $75,000, dual or single income family

Cost of Living:  $5000, rent/mortgage, food, cable – EVERYTHING

Toy/Entertainment Budget $1,250

 

40% INFLATION

(ex. eggs go from $1.49 to $2.09, gas from $1.95 to $2.73

Suburban Family 2009

Income: $6,250 per month (assume wages have been stagnant since 2005)

Cost of Living: $7,000 (40% growth of $5,000)

Toy/Entertainment Budget: negative $750

 

What if inflation has been worse then 40% cumulative since 2005.  gas per gallon has gone from $1.74 on January 3rd, 2005 to $ 3.64 on September 29th, 2009, over 100% increase.  Have you noticed anything else that has doubled in price the last four years? 

So not only do we have irresponsible borrows to blame, but any responsible person who is now being pushed into poverty by inflation is hurting the economy.  No one is sending them $700 billion dollars.

Trickle down may not work, but the market is telling us that trickle up is working just fine.  The push down exerted on the middle class is bringing down some in the upper class finally.  But the more we focus our energy and resources on the wrong problems the deeper we all get. 

And you think the current government is going to help.  Arrow Shafts and Rum; get drunk and teach your children to hunt squirrels.

Well, at least the squirrels are free.

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Drill Baby, Drill

So much for zero environmental impact:

http://www.usatoday.com/news/nation/environment/2008-10-05-ike-environment_N.htm

Following Goldman

via Calculated Risk:  Goldman Sachs Forecasts “Deeper” Recession

 

Does Goldman becoming a Bank indicate their expectation of a strong regulatory backlash at the end of all this?

If so, won’t they exert positive pressure in Washington toward more regulation. These guys are the smartest guys in the room so if they see a deeper recession they will have begun planning already.

As with any de(e)p recession, we can also expect deeper economic pain and the resulting political tide of reform. If Goldman is now predicting just that, then they need to adapt quickly and insure the rules change with them to force out competitors.

They now have billions of dollars and the political control to buy as many assets as it can as they get cheaper and cheaper.

On another note, are they still predicting $200 oil by the end of the year…I wonder if they can start a war?

Verify THEN Trust

This a response to an OP-ED by Thomas Friedman: Rescue the Rescue 
Just like Iraq, Mr. Friedman is forgetting that the people executing a strategy are just as important as the strategy.  This is something that Main St. understands very well even if they are unable to articulate their distrust of both the competence and motives of the architects of this “rescue”.
I think everyone can agree that no one is infallible, least of all Congress and Wall St.  But the establishment had their chances over the last year and half at ending this crisis and all the people calling for this rescue for Wall Street can’t seem to remember their own calls of success after Bear Sterns, FNMA/FHLMC, Lehman, and AIG.  Forgive the public if they are questioning this next attempt.
Perhaps they might gain some credibility were they to add people like Joseph Stiglitz, Nouriel Roubini, Paul Krugman, Warren Buffet, or any CEO/President of a SOLVENT community bank, to the next congressional panel on rescuing Wall Street.  For the knowledgeable, the absence of any contrary voices these last two weeks speaks louder then any cries from Paulson and Bernake.
You don’t ask the batter who keeps striking out how to hit a baseball.