The Cellar - Does Anyone feel like Bailing

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A company I'm involved with got a contract to develop tracking software for a southern city. They wanted to measure the job creation from the stimulus training dollars they got. After a couple of months, they killed the effort, saying the resulting numbers might "confuse the public."

I saw the numbers. No confusion, much ugliness.

This municipality decided that in order to meet the mandate to spend this money fast, they'd better give it all away to local universities and colleges and let them worry about training. So they did, spending something north of $20 million. The mandate to invest quickly was met.

There's no reporting due back from those schools. And they're all public. No private schools got a nickel. Of course private schools have higher job placement records than the public outfits. Go figure.

OK, enough. I confess to having not read all 2,000 pages of this bill. In fact, I wouldn't have known about Section 2521 if a friend hadn't pointed it out to me.

But you've got to wonder how many other toxic paragraphs are threaded through this mammoth thing.

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Just a piece from one man's perspective on the "job creation"

A very good friend of mine just got a grant from the stimulus money to put a fence around 50 acres of property and run water to it from an existing well for....

3 cows.

Go figure. It was for something like 25k.

Did he pay a contractor to do it? Did it thus create even a short-term job? Did he buy the fencing materials from his local store?

All this talk about "documented jobs created" seems to me to be missing the point.

If you spend, say, ten million, even if you directly employ a few dozen people, that ten million is out there flowing around the economy, and every time it gets spent and respent, someone's job is made a little safer.

Until the money flows to China, of course.

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Originally Posted by ZenGum (Post 615786)

I would buy that if so much of the money has been documented to not have created any jobs. They may hire one guy to help them put in the fence. He is one of the undocumented helpers they have on hand. Maybe he can feed his wife and kids for another week. I guess you could say they did help by the purchase of goods, I mean help the guy in China, since almost all the steel posts, wire, and PVC comes from there. Sure we just stimulated China's economy again.

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Originally Posted by ZenGum (Post 615786)

If you spend, say, ten million, even if you directly employ a few dozen people, that ten million is out there flowing around the economy, and every time it gets spent and respent, someone's job is made a little safer.

Until the money flows to China, of course.

. . .or back to the politicians. They never pay for anything.

How would that differ from paying off the mortgages for people thus freeing up capital? Would people then have additional money to spend & respend without the worry of defaults?

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I mean help the guy in China, since almost all the steel posts, wire, and PVC comes from there

And China buys lots of iron ore from ... Australia! STIMULATED!

Thanks guys, love you! (Hope you figure out a way to pay it all off!)

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TOKYO -- Just over four years since it clawed its way out of a consumption-sapping cycle of price slides that sucked the vitality out of Asia's biggest economy, Japan is back in deflation, officially at least.

The feeling of deflation deja vu was compound by the nation's central bank response, which amounted to more of the same. The Bank of Japan is keeping the nation awash in corpuscles of cash in the hope that like an over-oxygenated athlete, the Japanese economy might burst into a sprint.

Many are happy to keep it that way -- after all, how many shoppers are going to complain when goods get cheaper? When wages are shrinking and taxation and social welfare costs are ballooning, people will insist on value for money, especially when they have been overpaying for goods and services for years.

The upside is that it will force Japan into the kind of structural change needed to boost productivity that its political leaders dare not suggest.

Their response to the latest bout of deflation from the top has been predictable and disappointing. The spend-our-way-out-of-trouble mantra is again being chanted in the cloisters of power and another government stimulus package to kick-start the domestic economy is on its inevitable way.

The new Democratic Party of Japan seems intent on shifting away from pouring concrete into roads, dams, ports and bridges to shore up the economy in favor of giving the money to consumers through subsidies and benefits, although bickering among ministers about how many billions of dollars it should splurge has delayed the package.

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Wow - is this the future for our bailout? We'll just bail our way out again. How many times has this already been done in Japan now?

Japan has its own problems, but I know some people who specialise in studying the Japanese economy and at least one insists that Japan is doing fine.

Their GDP is the same as it was 20 years ago. But since their population is also steady, their per-capita GDP is unchanged, and still very high. Unemployment is low, inflation is near zero, the vast majority of people are living comfortable lives ... what's the problem?

Adam Smith style economists demand permanent growth. In Smith's day (late 1700s) this made sense, because poverty was a great cause of human misery; poor food and water, bad housing, disease, infant mortality, etc. But once these problems have been addressed ... how much richer do we need to be? Why do we need permanent growth? Is, eg Japan, rich enough?

Another part of the problem (if there is one) in Japan is that they are pursuing extremely low interest rates - less than 1% - and have been for years. The idea is to make it easier to borrow and invest in new enterprises in Japan.

Millions of Japanese people have realised that they can borrow a big bucket of Yen at 1%, convert it into some foreign currency, and deposit it overseas and earn maybe 5%, thus skimming 4% of someone else's money. Australia and New Zealand are favourites for this "carry trade". Which is fine but it means a huge outflow of capital from Japan, which completely defeats the purpose of low interest rates, which was to make it easier to invest in Japan by making capital cheaper.

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Scott Talbott, who represents some of the country's largest financial firms at Financial Services Roundtable, said banks are still lending, but they've gotten more wary of potential risk.
"You've seen an increase or a tightening of the credit standards," Talbott said. "So banks are cautious now about lending in terms of who our borrower is.
We're looking to make good, solid loans that can be repaid."

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What a concept!

"Fat Cats", Obama last night on 60 minutes. That should help foster relations.

He was trying to mend fences with his supporters after disillusioning them by ramping up the war. Bash some bankers and the public will love you again.

NPR said the very same thing this am. I tend to agree with them.

It's obvious that Wall Street is back to business as usual, max profit at the expense of anything and anyone. They need a good whuppin.:eyebrow:

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How the Subprime Scam Works

By Chip Parker, Jacksonville Bankruptcy Attorney

I have written a few articles about the crash and burn of the subprime lending market, but why am I so gleeful about the suffering of lenders, such as the recently-bankrupt New Century Financial Group? After all, the subprime lenders were heralded by our presidential administrations, both Republican and Democratic, as the broker of the middle-class American Dream. In reality, these lenders are breaking the American Dream for the middle class.

The subprime scam goes like this: Subprime lenders offer “teaser” interest rates that jump significantly after two years or so, known as a “reset.” Additionally, many loans allow for the payment of interest only and terms of up to 50 years. The idea is to suck the borrower in with a low monthly payment. These loans usually have high closing costs and a large pre-payment penalty. So, when the loan “resets” after a couple of years, the monthly payment will skyrocket, as much as 50%, forcing the borrower to refinance. However, the borrower rarely has the cash to pay the prepayment penalties or the closing costs. No worries, however. The mortgage company happily rolls these fees and penalties into the new adjustable rate mortgage with the “teaser” interest rate that resets in two years. Ultimately, these loans are designed to require the borrower to refinance every couple of years, handing over home equity to the bank.

At first, the new loan programs boosted home ownership to an all-time high, but the entire industry relied on ever-increasing home values. Much like a Ponzi scheme, as soon as the bottom fell out of the housing market, home equity disappeared altogether. This means that these subprime lenders are no longer willing to roll the penalties and fees into a new mortgage. Without the ability to pay thousands of dollars out of pocket, most homeowners are realizing that they have bitten off more than they can chew. These homeowners cannot sell their homes in this housing market, and they cannot make the payments on their bloated mortgages. This “payment shock” is the reason that 60% of all foreclosures are subprime loans, even though they only account for 12.5% of all mortgages, and at least $300 billion in subprime adjustable-rate mortgages will reset this year to higher interest rates.

I recently had a bankruptcy consultation with a 14-year underwriter for the subprime mortgage industry who is sure that she will be out of a job by the end of summer. Like so many others, she was not even interested in keeping her house because her mortgage payments were unmanageable. She told me that, right around the new millennium, lenders “lost their minds.” “They completely forgot about the risk side of the equation. They were only interested big commissions,” she recalled.

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I just thought I'd share this persons opinion. You may take out of it what you will.