Nothing to worry about here

[Straw Man]

.

[Hedgehog]

So what you're suggesting is that it's basically not gonna get much worse and best case scenario, we got 10 months until it gets better?

With the worst case scenario it will take 20-24 months?

[Straw Man]

So what you're suggesting is that it's basically not gonna get much worse and best case scenario, we got 10 months until it gets better?

With the worst case scenario it will take 20-24 months?

My only interpretation of that graph is that the rate of job loss is much faster and deeper than the last two most recent recesssions.  Something else to keep in mind is that in the last two recessions the Fed had the ability to lower interest rates to stimulate the economy.  That option is completely unavailable this time.  Personally,  I wouldn't draw any conclusion about how low it will go or how soon it would end.    I do think it's clear that drastic measures are necessary

[240 is Back]

Mccain remarked in the campaign that he'd like to see interest rates at zero.

What a great example of forward thinking!

[a_joker10]

.

I think you missed the point.
The recession was going to be less then 1990 before the intervention.
Now it is much worse.

It would appear that giving money to banks does not stimulate the economy.

Who knew.

[Soul Crusher]

I think you missed the point.
The recession was going to be less then 1990 before the intervention.
Now it is much worse.

It would appear that giving money to banks does not stimulate the economy.

Who knew.

Many people knew and we said so at the time.  McCain lost the race when flew back to DC to support TARP along with Obama. 

[Straw Man]

I think you missed the point.
The recession was going to be less then 1990 before the intervention.
Now it is much worse.

It would appear that giving money to banks does not stimulate the economy.

Who knew.

The first part of the bank bailout was an almost complete failure in terms of loosening up the credit markets (IMO) but I don't think you can draw the conclusion that it made things worse.  If anything it was inert. 

[Soul Crusher]

The first part of the bank bailout was an almost complete failure in terms of loosening up the credit markets (IMO) but I don't think you can draw the conclusion that it made things worse.  If anything it was inert. 

Yes it was worse, they looted the treasury and we have to pay for this for years to come.

[Straw Man]

Yes it was worse, they looted the treasury and we have to pay for this for years to come.

I agree but I don't think it's responsible for the acceleration of job losses in the last few months

[a_joker10]

The first part of the bank bailout was an almost complete failure in terms of loosening up the credit markets (IMO) but I don't think you can draw the conclusion that it made things worse.  If anything it was inert. 

I was just taking the inference from your graph.

The biggest problem right now is still the freeze to credit market.
like you said TARP didn't solve this.
Neither will this stimulus package.
As a matter of fact if you impose salary caps to bankers, they will even be less likely to give out loans.

The government should be back stopping small business loans and spending money on infrastructure, Tax breaks aren't the answer right now.

Also Fannie Mae and Freddie Mac should become a government agency.
After the bailout and all the problems they caused keeping them independent is foolish.

[Straw Man]

I was just taking the inference from your graph.

The biggest problem right now is still the freeze to credit market.
like you said TARP didn't solve this.
Neither will this stimulus package.
As a matter of fact if you impose salary caps to bankers, they will even be less likely to give out loans.

The government should be back stopping small business loans and spending money on infrastructure, Tax breaks aren't the answer right now.

Also Fannie Mae and Freddie Mac should become a government agency.
After the bailout and all the problems they caused keeping them independent is foolish.

I really wasn't trying to suggest anything from that graph other than (what appears obvious) that job losses are happening much faster and deeper in this recession than the two prior onces.   

The stimulus package is not supposed to fix the problem in the credit markets.  It's supposed to create jobs and stimulate consumer spending.

The mess in the credit markets is a completely different issue

Fannie/Freddie also a completely different issue (though part of the larger credit market problem)

[Bindare_Dundat]

So what you're suggesting is that it's basically not gonna get much worse and best case scenario, we got 10 months until it gets better?

With the worst case scenario it will take 20-24 months?

According to that chart things should improve by next week. 

[a_joker10]

I really wasn't trying to suggest anything from that graph other than (what appears obvious) that job losses are happening much faster and deeper in this recession than the two prior onces.   

The stimulus package is not supposed to fix the problem in the credit markets.  It's supposed to create jobs and stimulate consumer spending.

The mess in the credit markets is a completely different issue

Fannie/Freddie also a completely different issue (though part of the larger credit market problem)

The problem as I tried to point out is that you can't stimulate an economy if the banks won't lend money.

Its fine to put out a proposal for a  500million dollar highway project for example.
But if the banks won't loan money to the company building it. Then nothing will happen.
This is because people work, then get paid, not the other way around.

It is all much more intertwined, then many people think.

We have a few buildings then I am working on that are not being built, not because of a lack of stimulus capital, but because there is not credit.

Freeing credit would credit more stimulus then any thing else in the construction world.

Heck money has never been cheaper then it is right now. 0-.25% prime and yet things aren't being constructed.

Major projects in Boston and Chicago are being taken over by their respective cities again not because there wasn't a desire or money to build them, but because there was a lack of credit.

[Straw Man]

The problem as I tried to point out is that you can't stimulate an economy if the banks won't lend money.

Its fine to put out a proposal for a  500million dollar highway project for example.
But if the banks won't loan money to the company building it. Then nothing will happen.
This is because people work, then get paid, not the other way around.

It is all much more intertwined, then many people think.

We have a few buildings then I am working on that are not being built, not because of a lack of stimulus capital, but because there is not credit.

Freeing credit would credit more stimulus then any thing else in the construction world.

Heck money has never been cheaper then it is right now. 0-.25% prime and yet things aren't being constructed.

Major projects in Boston and Chicago are being taken over by their respective cities again not because there wasn't a desire or money to build them, but because there was a lack of credit.

The Highway project you use in your example would be funded by the US Tax payer and buy extension who ever is buying our debt.

It won't be funded by a bank

The problem in the credit markets is crisis of confidence and distrust among the players.  They're also concerned about unstable asset values (i.e Real Estate) which makes them unwilling to lend. 

[Soul Crusher]

The Highway project you use in your example would be funded by the US Tax payer and buy extension who ever is buying our debt.

It won't be funded by a bank

The problem in the credit markets is crisis of confidence and distrust among the players.  They're also concerned about unstable asset values (i.e Real Estate) which makes them unwilling to lend. 

Its also that these banks are sitting with a ton more bad debt that they have not yet disclosed and know that defaults are going to be rising far into the future.

These banks are also exposed to the commercial R/E meltdown yet to occur.   

We are screwed for a long time. 

[a_joker10]

The Highway project you use in your example would be funded by the US Tax payer and buy extension who ever is buying our debt.

It won't be funded by a bank

The problem in the credit markets is crisis of confidence and distrust among the players.  They're also concerned about unstable asset values (i.e Real Estate) which makes them unwilling to lend. 

Thats not true.
When a highway contract is tendered, one company wins the proposal.
This company then bills monthly after it has installed each section of the road.
It does not get any money from contract until after it has performed a service.
That is why the company needs credit. Often contractors are 3 to 4 months behind in payment, which means that it would need credit for 4 months of work, this credit comes from banks.

That is why the government would be much better served back stopping the credit market.

In construction the lack of credit is the single biggest thing stopping people from building.

That is why this stimulus bill won't help and why TARP made things worse.

TARP failed because rewarded banks for not lending money and the government bought over valued assets which only rewarded the banks further.

[Straw Man]

Thats not true.
When a highway contract is tendered, one company wins the proposal.
This company then bills monthly after it has installed each section of the road.
It does not get any money from contract until after it has performed a service.
That is why the company needs credit. Often contractors are 3 to 4 months behind in payment, which means that it would need credit for 4 months of work, this credit comes from banks.

That is why the government would be much better served back stopping the credit market.

In construction the lack of credit is the single biggest thing stopping people from building.

That is why this stimulus bill won't help and why TARP made things worse.

TARP failed because rewarded banks for not lending money and the government bought over valued assets which only rewarded the banks further.

OK - I see your point on that so you believe that if the govt funds are available that still nothing will happen without the local bank (or whatever bank) extending a line of credit for day to day operations?  For some reason I'm not worried about this.  I'm sure some bank will find a way to extend credit.  Maybe that will be a requirement for contract approval or maybe there will be some coordination btw the govt and the banks.  I doubt that hundreds of billions will just sit idle because a construction company cannot get a line of credit to cover payroll, equipment etc...  If that happens then you'll be correct and I'll be wrong but somehow I don't think that will be a problem

[a_joker10]

OK - I see your point on that so you believe that if the govt funds are available that still nothing will happen without the local bank (or whatever bank) extending a line of credit for day to day operations?  For some reason I'm not worried about this.  I'm sure some bank will find a way to extend credit.  Maybe that will be a requirement for contract approval or maybe there will be some coordination btw the govt and the banks.  I doubt that hundreds of billions will just sit idle because a construction company cannot get a line of credit to cover payroll, equipment etc...  If that happens then you'll be correct and I'll be wrong but somehow I don't think that will be a problem

There is always money, but the people lending it might not be who you want.
For example the Saudi's are still funding some major capital projects, but that means money that should stay in the country is now going to the Saudi Arabia. Not only that but they are charging 5% to 9% over prime. Which only hurts American contractors more. It also ties the hands of the same local contractor from bidding on projects and instead will require many projects be run by large international companies. The ones that don't really need stimulus help.


Sorry this just came in today.

http://uk.reuters.com/article/topNews/idUKTRE5195CA20090210

Looks like another 2 trillion dollars and it is open ended, which means it could be a lot more.
This is  to open credit and isn't included in the stimulus bill the price will be in the trillions.

I still don't know why Fannie Mae and Freddie Mac aren't roled into the government, as well as the FED.

It would be cheaper then what they are proposing.



Financial Stability Plan

1. Financial Stability Trust

· A Comprehensive Stress Test for Major Banks

· Increased Balance Sheet Transparency and Disclosure

· Capital Assistance Program
2. Public-Private Investment Fund ($500 Billion - $1 Trillion) (342 billion pounds - 680 billion pounds)

3. Consumer and Business Lending Initiative (Up to $1 trillion)

4. Transparency and Accountability Agenda - Including Dividend Limitation

5. Affordable Housing Support and Foreclosure Prevention Plan

6. A Small Business and Community Lending Initiative

FINANCIAL STABILITY PLAN

1. Financial Stability Trust: A key aspect of the Financial Stability Plan is an effort to strengthen our financial institutions so that they have the ability to support recovery. This Financial Stability Trust includes:

a. A Comprehensive Stress Test: A Forward Looking Assessment of What Banks Need to Keep Lending Even Through a Severe Economic Downturn: Today, uncertainty about the real value of distressed assets and the ability of borrowers to repay loans as well as uncertainty as to whether some financial institutions have the capital required to weather a continued decline in the economy have caused both a dramatic slowdown in lending and a decline in the confidence required for the private sector to make much needed equity investments in our major financial institutions. The Financial Stability Plan will seek to respond to these challenges with:

· Increased Transparency and Disclosure: Increased transparency will facilitate a more effective use of market discipline in financial markets. The Treasury Department will work with bank supervisors and the Securities and Exchange Commission and accounting standard setters in their efforts to improve public disclosure by banks. This effort will include measures to improve the disclosure of the exposures on bank balance sheets. In conducting these exercises, supervisors recognise the need not to adopt an overly conservative posture or take steps that could inappropriately constrain lending.