Worst Xmas Evah!

No rescue in sight for what ails economy

http://www.latimes.com/news/printedition/front/la-fi-econ5-2008oct05,0,353217,full.story

"The wheels seem to be coming off the economy right now," said Brian P. Sack, vice president of the respected forecasting firm of Macroeconomic Advisers. "It's hard to see how we avoid a recession, and it could prove a tough one to climb out of."

Even if the financial bailout plan begins to work, the nation will be lucky if all it experiences is a bad slowdown. The alternative, economists say, is something much worse -- a contraction that might go on for years.

The latest sign of trouble came Friday when the government reported that American employers sliced September payrolls by 159,000 jobs, the ninth straight month of losses and one that puts the country on track to shed a million jobs this year.

But jobs are only part of the trouble; almost every major player in the economy -- which had been growing until recently, if only slowly -- is now beating a hasty retreat:

* Consumers, who account for more than two-thirds of the nation's total economic activity and who boosted their spending earlier in the year thanks in part to more than $100 billion in government stimulus checks, have reversed course and begun cutting expenditures. Real consumption, after adjustment for inflation, slipped two-tenths of a point in June, a half-point in July and flat-lined in August, the latest month for which numbers are available, according to the government's Bureau of Economic Analysis.

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As for retail, it had grown into one of the major employers in the economy as Americans saw their incomes and wealth rise and wanted to buy more stuff.

But with the incomes of the majority of Americans flat-lining and wealth declining as home values and investments plummet, the retail industry is likely to shrink as well.

"We expect 8,000 stores to close this year, which is probably a record," said Howard Davidowitz, head of Davidowitz & Associates Inc., a New York retail consulting firm.

"This will be the worst Christmas shopping season in a century," he predicted.

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Comment:

Um, yeah...the bailout is not designed to do anything but force the taxpayer to hand over billions, possibly trillions, to the very same financial gurus that wrecked their own investment firms. If you have tracked this story at all, we are literally handing over a minimum of $700 billion to people who modeled tranches of bad mortgage securities instruments on the track record of good mortgages in order to slap on the veneer of a blue chip investment onto them and thereby woo unscrupulous investors into parting with their hard-earned cash.

There is no planned oversight to speak of in the bill that has already been passed. It's all bullshit. It is one big giveaway. There is no provision to make the taxpayer a future stakeholder in any of the wealth that may later be generated by these companies. Say bye bye to billions.

In your nightmares you might imagine that the very wealthy share their wealth with the rest of us - but that is the same sad, bullshit "trickle down" economic theory that is always trotted out to justify this exact same strategy every time. These people have more money than they can realistically spend in their lifetimes even if they spent all of their time trying to do that instead of trying to get their hands on even more money.

What the bailout doesn't do, and was never designed to do, is stimulate the economy in any meaningful way. All it does is prop up some investment firms that were going under.

Why should the American taxpayer care about that even slightly?

Where is aid for middle-america? Where is the help we need to give to people in foreclosure? When people lose their homes, and then possibly their jobs because they have become financially unstable, they go on welfare and other kinds of public assistance. Did you know that people with bad credit find it difficult to get jobs because prospective employers consider them a security risk? Isn't it better to take over these bad mortgages, renegotiate them, allow people to stay in their homes, help them keep their jobs and thereby keep the wheels of the true economy rolling along? That's how you manage a slow-motion disaster: one family at a time.

The upshot here is this: the real bailout is yet to come.