Cross posted at the Democracy Cell Project
Now that you've watched the video, let's talk.
It looks like the financial wizards at the A.P. finally realized what we've been saying all along: A top-down bailout doesn't work! We need a bottom-up solution.
Read their belated words of wisdom and while you do so think about the video clip you just watched on how the banking/credit industry is run:
Washington's financial bailout plan is now law. So the credit spigot will start flowing again, banks will resume lending, and an economic recovery can begin, right?
Wrong. Experts say the most important thing that needs to happen before the $700 billion bailout even has a chance of working: Home prices must stop falling. That would send a signal to banks that the worst has passed and it's safe to start doling out money again.
The problem is the lending freeze has made getting a mortgage loan tough for everyone except those with sterling credit. That means it will take several months or longer to pare down the glut of houses built when times were good — and those that have come on the market because of soaring foreclosures — before home prices start appreciating.
Housing is a critical component to the U.S. economy and by extension the availability of credit. Roughly one in eight U.S. jobs depends on housing directly or indirectly — from construction workers to bank loan officers to big brokers on Wall Street. A turnaround in housing prices would boost confidence in the wider economy and, experts hope, goad banks into lending again.
"Housing traditionally does lead the economy through a recovery. I think it's going to be critical for a sustained recovery in this cycle, too," said Gary Thayer, senior economist at Wachovia Securities.
In my family we have a phrase for that, "No S*** Sherlock."
Look....the rich were stung by the massive de-regulation that they themselves had begged for and received. But we, the middle-class and the poor, were pinched even harder.
Why is this happening?
...because...
- There has been an ongoing forty year assault on the middle-class and labor unions.
- There has been a reversal of higher wages to lower wages--particularly in the last eight years.
- There has been incredibly high high inflation for our basic needs with a President and administration who told us we could help ourselves and the country by "Spending and shopping...or the terrorists win."
- The average person didn't understand how the banking system borrows money on credit to create loans and then creates more borrowed money in a vicious cycle.
- We didn't understand how much the de-regulation had created an inflationary housing bubble that would burst and send home values to the floor. So we borrowed against the home we had to pay down debt, or we bought a home that was presented to us as a sure investment in your future! and we, the-oh-so-gullible, payed more than we should have for it!
And now the A.P. admits what we've been saying all along--although they more politely phrase it as "Wait and see..."--
But when you read the rest of the testimonies in the article from people who aren't buying homes or cars and can't get the loans, it's clear that the remedy to bad credit wasn't simply to give more credit to the institutions who created the bad credit!
The correct remedy was one they didn't even put on the table. The correct remedy would have required a concerted effort across the board, beginning with the people on the bottom who are facing acute financial crisis and job losses and wage reductions and who need the bail out to pay on those loans to the same banks who wrote up those loans.
Jobs, wage reductions, rising costs for the staples in peoples' lives have caused good faith loans to go bad.
It's the economy stupid! It's Main Street, not Wall Street--stupid!
From the same article, here's some vomit inducing stats on our economy:
Jobs are another big concern. The stranglehold on credit has choked companies big and small that depend on regular inflows of borrowed money to pay employees and stay afloat.
The Labor Department said Friday that employers cut 159,000 jobs in September, the fastest pace of losses in more than five years. Experts say that number will grow as the effects of the credit gridlock course through the economy in coming days and weeks.
The nation's unemployment rate is now 6.1 percent, up from 4.7 percent a year ago. Over the last year, the number of unemployed people has risen by 2.2 million to 9.5 million.
The unemployment rate could rise to as high as 7.5 percent by late 2009, economists predict. If that happens, it would mark the highest since after the 1990-91 recession.
Boosting employment is critical to kick-starting lending because "if jobs are growing, then incomes are a growing, and if incomes are growing then people are consuming," Reinhart said.
Consumers and businesses have retrenched so much that some analysts fear the economy stalled or shrank in the third quarter that ended last week. The Labor Department report Friday showed wage growth for workers is slowing, meaning they'll be more hard-pressed to spend, especially for something as expensive as a home.
Many economists predict the economy will contract in the final quarter of 2008 and the first quarter of next year. That would meet the classic definition of a recession — two consecutive quarters of a shrinking economy.
So now we have one month until the election and three months until a new President is inaugurated. We are looking at mind-blowing job-less numbers, staggering grocery and gas bills, and a crushing weight of high pharmacy and medical bills. And to make matter's worse, we've had a sudden introduction into the world of high finance an banking by getting clubbed in the head with a bail out bill.
So what's a person to do when the D.C. Congress sends a longer-wider life-line to the wealthiest while they send a tiney-tiny thread to the bottom ninety percent?
Let's hear your thoughts on the bailout and the economy.