Friday, February 8, 2008

SAR #8040

Middle class people are ill-suited for life
under a freeway overpass.

Up is the New Down: "US drivers pumped 1% fewer gallons of gasoline Jan 08 vs Jan 7, according to the Energy Information Administration." You probably saw some version of this someplace; USA Today, Fox News, whatever. Problem is that the EIA data actually shows a 1.0% increase in gasoline consumption.

Short Straw: The Koreans booked an 83% loss on CDO's, a Chinese state bank wrote down 70% of their mortgage derived bonds, Bank of America announced a 60% write-down, yet Citigroup, one of the bigger boys in this sandbox, claims its losses were only 30%. Is there another shoe, about size 40% or so?

Upside: The price of synthetic fertilizer is spiking upwards all over the world. The production of nitrogen, a key fertilizer ingredient, is very energy intensive. When energy prices rise, so do fertilizer prices. Without man-made fertilizer the world could not support six billion peope, much less the nine billion waiting for us in 2050. On the bright side, it will soon be cheaper to grow food without artificial fertilizer ( organics ) than with it.

Tasteful: TV talking head David Shuster claimed that Chelsea Clinton was "being pimped out" to work for her mom's election. Did they call it a Ménage à trois when the Bush girls worked to get daddy a job?

Watch Your Step: Despite the economic numbers, people - especially realtors and home owners - maintain that it's not that bad and it's not happening here. Until the media and the public come to realize it is not just sub-prime tract houses in Las Vegas and start accepting that “every home in virtually every area needs to be prepared for depreciation,” will we be near the bottom of this hill.

The Optimists: Energy "expert" David Yergin says there is no oil problem; the world just needs to invest $22 trillion in energy exploration and development over the next 25 years. No problem - but bear in mind the entire annual economic output of the US is only $11 trillion a year. How long can you stand on one foot?

Company: In the UK, it is expected that 10 million Brits will default on their payments for mortgages, credit cards or personal loans by the end of 2008. Yet their government wants to rescue every bank and every depositor that may fail. Might as well nationalize the entire economy. Monkey see, monkey do.

Oracle: The national debt plus future payments for federal pensions, Medicare and Social Security amounts to $455,000 per household. Currently our median household income is $48,201. Not only do we have deficits in our national budget, our balance of payments and our national savings, we have an astounding deficit of leadership.

Here's My Plan: As the subprime crisis has grown, banks have backed away from buying mortgages in the secondary market. This has left Fannie and Freddie to pick up the slack. As a result, they now carry $6.3 trillion in debt. If they fail, the government will have to bail them out using taxpayer money. The taxpayers don't have the money. You get this one, the next one's on me.

Contest: Submit the best name for the economic period we are entering and win the usual prize. Early entries: The Second Great Depression, Greater Depression, Great Decline, Permanent Decline, Greatest Depression, Great Freefall, Slippery Slope. The End.

Sittin' on the dock: Last year's excitement came from writing off $110 billion in subprime mortgages. Banks are now sitting on $160 billion in bridge loans for buyouts that are quickly becoming pier loans because there's nothing in sight at the far end of the bridge. Already marked down to 88 cents on the dollar they're just sitting there watching the tide roll away.

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