Political Economy category archive

The ultimate foreclosure:

When people can’t pay their mortgages and lose their homes, or are forced to downsize, they entrust their extra belongings to one of the 52,000 cinder-block-and-prefabricated-metal self-storage emporiums that dot the landscape. When they can’t afford to pay for the storage, their belongings get sold to the highest bidder, often at a pittance.

It’s impossible to get a precise statistical grip on the extent of these sales because the industry is fragmented, and the local owners are loath to discuss it, but anecdotal data confirm it is a surging phenomenon. “Every auctioneer I talk to says storage-unit sales are up considerably over just last year,” says Chris Longly, a spokesman for the National Auction Association. “It’s a sign of the times. A Denver auctioneer told me he had 900 in 2007, 1,200 in 2008, and in January 2009 alone, he had 200.”

Remember, these are the same people who have been flooding my mailbox (yes, flooding, still) with offers to issue me business credit cards because I am legally a business and pay a little business tax.

Almost three-quarters of U.S. companies with fewer than 500 employees are experiencing a deterioration in credit or credit- card terms at a time when half of them depend on credit cards as a primary source of financing, according to a December survey by the National Small Business Association, a trade group with more than 150,000 members.

The increase in credit-card costs has forced some business owners to stop using their cards, and at the same time declining credit limits are cutting their access to cash, said Todd McCracken, president of the Washington-based NSBA. Twenty-eight percent of small businesses surveyed by the NSBA said they had their card limits or lines of credit lowered in the second half of 2008.

Bank loans are drying up as an estimated 70 percent of U.S. banks have tightened standards for small-business loans, based on a Federal Reserve January survey of senior loan officers.

Susie has more (her intro to the post is worth clicking on the link).

nagflation: The incessant gloom-and-doom predictions from economic analysts who feel compelled to issue updates even if nothing has changed.

Courtesy BuzzWhack (http://www.buzzwhack.com).

Republican Economic Theory at work:

The WSJ reports that Americans have seen 18% of their wealth vanish in 2008. That’s a rather conservative estimate because they go on in the piece to note some folks have lost upwards of 35% of their wealth. I’ve talked to friends who have lost 40% or more in the past few months.

. . . except for those who did.

They give good value for the money, but who’s buying new clothes these days?

Men’s Wearhouse late Wednesday reported fourth-quarter profit fell as sales of its dress suits and tuxedos slid. Men’s Wearhouse posted net income of $1.5 million, or 3 cents a share, compared to net income of $14.8 million, or 28 cents a share, in the year-earlier quarter.

Credit card accounts, the next frontier:

Credit-card delinquencies and losses have risen with higher unemployment and personal bankruptcies, according to Moody’s Investors Service. Those trends will continue through 2009, even as issuers reduce credit limits and scale back on offers to entice clients.

Canadian card losses in the third quarter rose to 3.1 percent of average balances, the seventh straight period of year- over-year increases, according to Moody’s. By comparison, U.S. card losses rose to 6.6 percent of balances.

In the U.S., consumer credit is shrinking faster than estimates and credit-card line reductions are the greatest on record, analyst Meredith Whitney of Meredith Whitney Advisory Group LLC said yesterday in a note. About $2.7 trillion worth of credit lines will be removed from U.S. consumers due to the credit crisis and regulatory changes, 35 percent higher than her November estimate, Whitney said.

Digby:

I’m being driven nearly mad by the new Republican line propagated by McCain and Shelby that we need to “let these banks fail” instead of nationalizing them. I’m an idiot when it comes to economics, but even I’m not that dumb. (And I didn’t have nearly 50 million people vote for me for president either.)

(snip)

Others much smarter than John McCain and I don’t understand why the Treasury Dept is so reluctant to nationalize these big banks after all this time and money has been spent propping them up to no apparent avail. But the fact is that nationalization is exactly what will happen if these banks are “allowed to fail.”

The campaign showed that McCain is one of the dumbest members of congress on economics and it’s clearer ever day that the world dodged a bullet with that one. It’s bad enough that we are all feel like our minds are swimming in quicksand when it comes to understanding this banking crisis. To have these “leaders” out there saying completely stupid things in the face of it is simply breathtaking.

A soon-to-lawyer surveys the job market.

The fruits of Republican Economic Theory (emphasis added):

The job market may get worse before it gets better, according to the latest Manpower survey of U.S. employers’ hiring plans. For the first time since the survey started in 1962, the seasonally adjusted net employment outlook — the number of firms hiring minus those firing workers — turned negative.

A net -1% of firms expect to hire in the April through June period, down from 10% in the first quarter and 15% for the second quarter a year ago, on a seasonally adjusted basis, according to Manpower’s quarterly survey. The previous low point was in 1982, when a net 1% of firms planned to hire in the third quarter.

When the lights go out, all over the world . . . .

The global economy is likely to shrink this year for the first time since World War II and developing countries will face a financing shortfall as private sector creditors shun emerging markets, the World Bank said Sunday.

In a paper for next Saturday’s meeting of the Group of 20 finance ministers and central bank governors, the World Bank said its forecasts show the world’s economic growth will be at least 5 percentage points below potential. Global industrial production by the middle of 2009 could be as much as 15% lower than 2008 levels.

Headline:

Some banks try to escape TARP trap

Excerpt:

Wells Fargo’s decision Friday to slash its dividend may help the bank repay its $25 billion government investment sooner.

However, analysts say it will still take years, not months, for big banks to extricate themselves from the Treasury’s Troubled Asset Relief Program, or TARP.

More accurate headline:

Clowns trapped in clown car; regret designing it

Furrfu.

Bonddad analyzes the unemployment figures. Follow the link for the full analysis:

1.) The best read of job growth for the last expansion is a total of 8.2 million jobs created. 2.6 million jobs were lost in the last 4 months, or 31%. Since the recession began, we’ve lost 4.4 million jobs or 53%. There is no way to spin those numbers as anything except terrible.

2.) The number of people who worked part-time for economic reasons increased by 787,000. That’s also a ton of people. That number has increased by 3.7 million over the last 12 months — also a ton of people. That facts tells us two relevant data points. First, businesses are still cutting back sharply. Secondly, there is probably at least one more month of horrible job losses in the works; that number is simply too high for there not to be another serious round of job losses coming down the pike.

3.) Year over year, the unemployment rate of service occupations has increased from 6.7% to 9.1% the unemployment rate of natural resources, construction and maintenance has increased from 9.1% to 17.7% and the unemployment rate of production, transportation and material employment has increased from 6.6% to 13.1%.

4.) Hours worked is decreasing across a wide swath of industries.

Simply put, this is an incredibly ugly report.

It’s about time.

Calling it a “very difficult decision,” Wells Fargo & Co. on Friday slashed its quarterly dividend 85%, to 5 cents a share from 34 cents, in an effort to save $5 billion and help the company pay back the government’s recent investment in the firm.

Companies that are drowning who pretend they are still healthy by paying normal dividends act like fools.

No, wait.

Companies that pretend they are growing by selling boxes of air act like fools.

No, wait.

Wall Street bankers act like selfish gits.

There. Got it right.

Lloyd’s.

Bloomberg explains how certain Wall Street practices encourage the destruction of companies.

When you cut through the gibberish, it means, “The hell with stockholders, employees, customers, and the economic health of the country. I got mine.”

“Say you’ve lent $100 million to a company and you had bought $100 million in credit-default swaps,” said Henry Hu, a law professor at the University of Texas in Austin. “In that circumstance, the creditor really doesn’t care whether or not the company goes under.”

Following a meltdown last year in the relationship between prices on bonds and credit swaps after the Lehman Brothers Holdings Inc. bankruptcy, basis traders often stand to make the most money if companies default. They can also profit by holding the trade until the debt matures or unwinding the position after the market value gap between the bonds and derivatives closes.

This, my friends, is fiduciary responsibility and good financial citizenship at its best.

And pigs fly.

The Promised Land of Republican Economic Theory. Bloomberg:

More than 600,000 Americans filed first-time claims for unemployment benefits last week for a fifth straight time as companies kept trimming costs.

First-time unemployment applications decreased by 31,000 to 639,000 in the week that ended Feb. 28, less than anticipated, from a 26-year high of 670,000 the prior week, the Labor Department said today in Washington. The number of people staying on benefit rolls eased from a record.

It’s not thousands of banks. It’s JPMorgan Chase, Citigroup, Bank of America and Wells Fargo who possess 64% of the nation’s banking assets. Paul Krugman:

One objection you keep hearing to nationalization pre-privatization as part of a bank restructuring effort is that the US financial system is just too big and complex.

(snip)

So as far as this discussion is concerned, we’ve got, like, four banks. The “thousands of banks” line is just a diversion.

Via Susie.

Writing resumes for a fee.

From Atrios:

There really is a growing disconnect between the world portrayed on the teevee and reality. For most people getting booted out of their homes and losing their jobs, or just being underemployed, is a far bigger deal than a crashing stock market.