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Daily Digest - Dec 29

Monday, December 29, 2008, 1:29 PM
  • As if Things Weren't Bad Enough, Russian Professor Predicts End of U.S.
  • How Iceland Collapsed, (video)
  • Crisis deepens in Japan and China as Asian exports plunge
  • Cars leaving lots without drivers
  • Cars pile up at the wharves (video)
  • Fifty Herbert Hoovers
  • Venezuela to seize gold concessions as oil falls
  • Private Equity Firms Are Near Deal to Buy IndyMac
  • Kulongoski to pursue mileage tax
  • 21 Dumbest Moments in Business 2008

Economy

As if Things Weren't Bad Enough, Russian Professor Predicts End of U.S.

MOSCOW -- For a decade, Russian academic Igor Panarin has been predicting the U.S. will fall apart in 2010. For most of that time, he admits, few took his argument -- that an economic and moral collapse will trigger a civil war and the eventual breakup of the U.S. -- very seriously. Now he's found an eager audience: Russian state media.

In recent weeks, he's been interviewed as much as twice a day about his predictions. "It's a record," says Prof. Panarin. "But I think the attention is going to grow even stronger."

Prof. Panarin, 50 years old, is not a fringe figure. A former KGB analyst, he is dean of the Russian Foreign Ministry's academy for future diplomats. He is invited to Kremlin receptions, lectures students, publishes books, and appears in the media as an expert on U.S.-Russia relations.

"There's a 55-45% chance right now that disintegration will occur," he says. "One could rejoice in that process," he adds, poker-faced. "But if we're talking reasonably, it's not the best scenario -- for Russia." Though Russia would become more powerful on the global stage, he says, its economy would suffer because it currently depends heavily on the dollar and on trade with the U.S.

How Iceland Collapsed, (Video, 5:00+/- Experiment of Perceived Excess, 6:00+/- Inflation, Debt and Debt in Foreign Currencies)

Crisis deepens in Japan and China as Asian exports plunge  (Hat Tip PineCarr)

The shock data came as the Japanese Cabinet Office warned that the world's second biggest economy is now deteriorating at an "exceptionally high pace".

Shipments collapsed to almost all markets in North America, Europe, and Asia, following a pattern already set in recent days by South Korea, Taiwan, and China. Thailand on Monday said its exports fell 19pc in Novermber.

It is unclear to whether the violent drop is distorted by a "one-off" inventory shock as companies slash stocks, or whether it is the start of a trade slump that threatens Asia's entire export strategy.

"We think this is very serious," said Stephen Jen, currency chief at Morgan Stanley. "These export surplus countries are super-leveraged to the West, and now we're seeing a multiplier effect (in reverse) as the intra-Asian trade model is stress-tested. What's incredible is that Japan has run a trade deficit for two months in a row despite the fall in oil prices. The next country to watch is going to be Germany," he said.

Cars leaving lots without drivers

A half-dozen trailers rolled up to Eckenhoff Cadillac Buick Pontiac GMC in Jenkintown bright and early and wiped the lot clean of $8.4 million in inventory - Hummers, Cadillacs and all.

"Load up, leave. Load up, leave. . . ." The funereal rhythm of repossession transfixed the sales guys next door at Hopkins Ford Lincoln Mercury, who watched through their showroom window as the devastating news descended on their neighbor.

GMAC, the beleaguered financing arm of General Motors Corp., had called the loan that had enabled Scott Eckenhoff to stock new and used vehicles. Big trailers carted away the collateral from a Big Three retailer that had been hanging on by a thread.

GMAC also cleared out Eckenhoff's used-car lot in Maple Shade, which held another batch financed by a GMAC "floor-plan" credit line.

Car Market - total collapse

Fifty Herbert Hoovers 

No modern American president would repeat the fiscal
mistake of 1932, in which the federal government tried to balance its
budget in the face of a severe recession. The Obama administration will
put deficit concerns on hold while it fights the economic crisis.

But even as Washington tries to rescue the economy, the nation
will be reeling from the actions of 50 Herbert Hoovers - state
governors who are slashing spending in a time of recession, often at
the expense both of their most vulnerable constituents and of the
nation's economic future.

These state-level cutbacks range from small acts of
cruelty to giant acts of panic - from cuts in South Carolina's juvenile
justice program, which will force young offenders out of group homes
and into prison, to the decision by a committee that manages California
state spending to halt all construction outlays for six months.

Venezuela to seize gold concessions as oil falls (Hat Tip JoeManC)

CARACAS, Venezuela - Venezuela will seize several gold mining concessions that previous governments granted private operators, in a bid to supplement falling oil prices with proceeds from state-controlled gold, President Hugo Chavez said Saturday.

Chavez named no specific contracts or companies to be affected, but his mining minister has vowed to next year take over the nation's largest mine, Las Cristinas, which is operated by Canadian mining company Crystallex International Corp.

Private Equity Firms Are Near Deal to Buy IndyMac 

IndyMac Bancorp, one of the largest banks to fail as a result of the subprime mortgage crisis, is close to being sold to a consortium of private equity and hedge fund firms in a complex deal partly financed by the federal government, people involved in the deal said.

IndyMac customers waited in July to withdraw money from the bank, which teetered and collapsed after a senator questioned it.

The Federal Deposit Insurance Corporation, along with a team of former Lehman Brothers bankers who are now with Deutsche Bank and Barclays Capital, has been engaged in the sale process since federal regulators declared IndyMac insolvent in July and seized the company.

The deal is in the final stages of negotiations, which are private, and could be announced as early as Monday, these people said, though they cautioned that the talks could still fall apart.

Kulongoski to pursue mileage tax

A year ago, the Oregon Department of Transportation announced it had demonstrated that a new way to pay for roads - via a mileage tax and satellite technology - could work.

Now Gov. Ted Kulongoski says he'd like the legislature to take the next step.

As part of a transportation-related bill he has filed for the 2009 legislative session, the governor says he plans to recommend "a path to transition away from the gas tax as the central funding source for transportation."

The governor wants the task force "to partner with auto manufacturers to refine technology that would enable Oregonians to pay for the transportation system based on how many miles they drive."

The online outline adds: "The governor is committed to ensuring that rural Oregon is not adversely affected and that privacy concerns are addressed."

21 Dumbest Moments in Business 2008 
(21 Slides)

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9 Comments

Davos's picture
Davos
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Re: Daily Digest - Dec 29

Housing Bailout cartoons image illustration picture

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brjohnson789
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Re: Daily Digest - Dec 29

Re Krugman's article "Fifty Herbert Hoovers" I think he makes 2 poor assumptions that should be pointed out.  First, that its ok to run some budget deficits, because at some point in the future there will be some growth.  Second, that since these welfare programs really work in the nation's "best interest" then they should all be federal programs, and not state concerns.  Followers of this site obviously know the problem with the first assumption, and I think many here are not very pleased with the idea of giving even more economic planning powers to the federal government.  Why should we even bother having states anymore?  So that we can have one state's university sports team play against someone? 

Re the mileage tax in Oregon based on where you drive, please keep in mind the social security number was originally not to be used for identification purposes either.  I'm just guessing here but I would feel confident in saying that at least 90% of the time a government collects some personal information and claims that "privacy concerns are addressed", those concerns are in fact not addressed. 

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Damnthematrix
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Don't fix the economy - change it

http://www.thestar.com/comment/article/557976

Don't fix the economy - change it
TheStar.com - Opinion - Don't fix the economy - change it

PAUL LACHINE/NEWSART Sticking with the model that is driving us toward
ecological catastrophe will eventually kill us

December 26, 2008
Peter G. Brown
Geoffrey Garver

Amid the discordant clash of solutions being served up to address the global
financial crisis, a common refrain can be heard: Most global leaders and their
economic advisers key their policy prescriptions to "sustained economic growth."
The prevailing debate is how to get there most quickly. In Canada, how this
debate plays out could bring down the government in a matter of weeks.

Unfortunately, it is the wrong debate. Neither the Conservative minority nor the
opposition has proposed anything that will set Canada on a long-term path toward
the kind of economy that will both provide for the well-being of Canadians and
enhance and preserve the ecological community of which people are but one
dependent part.

All eyes may now be on the kind of fiscal budget the Conservatives might produce
next year, but a more essential budget also demands urgent attention: the global
ecological budget. The financial crisis has brought into sharp focus the need to
fundamentally change, not merely repair or rebuild, our economy. Because, quite
simply, sticking with an economic model that is driving toward ecological
catastrophe will kill us. So, it is essential to address the financial and
ecological crises together.

The ecological budget, on which all life and, consequently, the human economy
depends, is already in dramatic deficit. Why is this budget ultimately more
important than the fiscal budget? Sept. 23, 2008, was Earth Overshoot Day. The
period after Sept. 23 represents the time the human population causes an
ecological deficit, using up the Earth faster than it can regenerate.

Every year, Earth Overshoot Day comes earlier. This moving date tells the story
of a global environment rapidly losing its ability to support life: accelerating
climate change; the loss of species and habitats; declining fisheries; the
proliferation of ocean dead zones; diminishing freshwater resources; and more.
Ecological overshoot is climate change on steroids.

Here are six steps we can take toward a truly balanced budget that will allow
Canadians, and all people on Earth, to live fulfilling, healthy, yet more
ecologically compatible, lives.

Recognize that the economy is part of the biosphere. A comprehensive economic
plan must be based on the scientific fact that the global economy is a
subsidiary of the natural order. Economic policies should be attuned to the
limited capacity of Earth's biosphere to provide for humans and other life and
to assimilate their waste. Photosynthesis and sunlight are as essential to the
framework for economic budgets and expenditures as the laws of supply and
demand.

Acknowledge that we need new institutions. An economic renewal tailored to the
21st century would establish institutions committed to fitting the human economy
to Earth's limited life-support capacity. Canada, with its token efforts to
address climate change, is far off the track. We need something like the central
reserve banks, but which look after shares of the Earth's ecological capacity,
not just interest rates and the money supply. Money should be recognized as a
social licence to use part of Earth's life-support capacity. Some functions of
governance would have to operate at a global level, through a federation
modelled perhaps on the European Union, with enforceable laws designed to assure
that individual nations don't overrun Earth's limits. The rules for the
developed countries that are responsible for the current ecological crisis
should be different from those for developing ones.

Acknowledge that unlimited growth on a finite planet makes no sense. Most people
wrongly believe that unlimited growth and wealth accumulation are the "natural
laws" of the economy – inviolable, even though together they undermine the
Earth's ecological and social systems. We face a moral challenge: bring the
global economy into a right relationship with the planet and its human and
non-human inhabitants or suffer the increasing destruction of Earth's finite
life-support systems and social structures. Growth in consumption is a
nonsensical response to the sharp decline in Earth's biophysical systems that is
caused by overconsumption. Our new ecological and climate reality demands new
ways to live within the means of the Earth.

Fairness matters. A "right" human-Earth relationship would recognize
humans as part of an interdependent web of life on a finite planet. The economy
must recognize the rights of the human poor and of millions of other species to
their place in the sun. In a world awash in money, addressing poverty only with
growth reflects a tragic lack of moral imagination. Indeed, in pushing for more
"free" trade as it is currently understood, Canada would entrench an ongoing
addiction to consumption, pursued in a manner that often ravages the
bio-productivity of developing countries.

Expand the discussion. The new knowledge that will forever mark this period in
human history is the overwhelming scientific evidence that we are overconsuming
the planet and accelerating toward ecological catastrophe. The short-term
approaches of most ministers of finance and professional economists don't
account for how the planet works, or even that the economy exists on a finite
planet. Scientists morally committed to protecting the global commons and
researching ecological limits to the global economy need much more funding and
influence in policy-making.

Look beyond technological fixes. Bold new leadership is needed that will focus
on all four policy "theatres" relevant to human ecological impact and provide
the moral footing that will lead people, individually and collectively, to
choose lifestyles with radically lower impact. The four policy variables are:
technology; population; wealth and consumption; and morals and customs. These
factors should together shape Parliament's rethinking of the current economic
system. Technology can increase efficiency of energy and resources use, yet it
is overemphasized as a solution. Pushing technological solutions like hydrogen
cars and genetically modified agriculture is much easier politically than asking
people to consume less or have fewer children. Unfortunately, technology alone
cannot solve the ecological crisis. For one thing, efficiency gains often lead
to greater, not lower, consumption. An example is the squandering of Quebec's
underpriced hydroelectric power.

Investments in new "green" technology need to be coupled to a regulatory
structure that ensures that efficiency does not result in more impact, along
with massive investment in creating or restoring natural systems that build
bioproductivity. Economic policy must promote not more affluence as currently
defined, but more sufficiency for all Canadians – so that all may live with
self-respect, without overconsumption.

Perhaps most difficult to come to grips with is that Canada is an overpopulated
country – if you compare the individual impact of each Canadian with what the
Earth can withstand. We should escape from the current treadmill that considers
more people necessary for more growth.

Lastly, we must greatly increase investment in educational and civic
institutions that teach that we are not "consumers," but citizens of the Earth,
and guardians of life's prospect on a small, beautiful and finite planet.

Peter G. Brown is a professor at McGill University. Geoffrey Garver is an
environmental consultant and lectures in law at Université de Montréal and
Université Laval. They are co-authors of Right Relationship: Building a Whole
Earth Economy.

kemosavvy's picture
kemosavvy
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Re: Daily Digest - Dec 29

brjohnson, i quickly scanned the krugman article and knowing krugman he is a capitalist economist in favor of a welfare state. i think his point is that welfare issues should be handled by federal govt and not by state govt. i think history teaches us the federal govt isn't capable of handling anything... but krugman doesn't think the states should be fronting the bill. he's more or less switching the responsibility to the institution that is not required to keep a balanced budget.

as far as states running deficits in their budgets, i take the friedman approach, which is deficits don't matter as long as what you are spending your money on produces a return on your investment. remember from the crash course the difference between self-liquidating assets (education, infrastructure improvements) and non-self-liquidating assets (vacations, missiles). if states ran deficits with a well-identified plan for the future that would employ and sustain a population, how could that be bad?

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Re: Daily Digest - Dec 29

damnthematrix, touching article, but how can you compete with logic like this!

 http://money.cnn.com/2008/12/22/autos/trucks_back/index.htm?postversion=2008122215

suv sales are skyrocketing this month and probably will until gas hits $3.50 a gallon again (and for peak oil believers, it will surpass that) and then this pack of consumers will blame the car companies for not building what they want, cars that run on used tobacco chew. now damnthematrix, try preaching to this demographic the benefits of preserving the earth, they don't care! preach to them the benefits of k-fed getting custody of the kids and they all a sudden care! don't get me wrong i am with ya, but this is the reality.

 

forgive me, i'm in a bad place right now after reading that article.

 

 

SamLinder's picture
SamLinder
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Re: Daily Digest - Dec 29

kemosavvy wrote:

damnthematrix, touching article, but how can you compete with logic like this!

http://money.cnn.com/2008/12/22/autos/trucks_back/index.htm?postversion=2008122215

suv sales are skyrocketing this month and probably will until gas hits $3.50 a gallon again (and for peak oil believers, it will surpass that) and then this pack of consumers will blame the car companies for not building what they want, cars that run on used tobacco chew. now damnthematrix, try preaching to this demographic the benefits of preserving the earth, they don't care! preach to them the benefits of k-fed getting custody of the kids and they all a sudden care! don't get me wrong i am with ya, but this is the reality.

forgive me, i'm in a bad place right now after reading that article.

kemosavvy,

It's interesting how one can read the exact same article and come away with a different perspective. While you are utterly dismayed by the information in the above referenced link, and attribute the purchasers to a specific demographic (a negative stereotype to be sure), I came away with a different impression.

Based on the information presented (buying these vehicles now is probably the best deal they'll ever get), I would think that anyone who has a need for a large truck or SUV would jump on this opportunity. Those who immediately come to my mind are construction people, ranchers, farmers, loggers, those who live out in the country and need a strong vehicle to get from place-to-place in all kinds of weather, etc.

We both know that small hybrid, or electric, vehicles just won't cut it for the above list of people. I'm sure you accept the need for diesel trucks (18-wheelers) that haul our goods around the country - gas hogs all, but still necessary. There's also a need for something larger than the family sedan to accomplish many tasks.

Granted, there is a portion of the population (small I hope) that will buy a big honking SUV to drive to the grocery store to pick up a six-pack. One can only hope that they eventually get removed from the gene-pool through Darwinian selection.

Sam....

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Davos
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Re: Daily Digest - Dec 29

On perhaps a lighter note: I chuckled when I read and subsequently posted the Krugman article for even if spending will/would work leave it to our government to screw up its implementation. If it were a war won with bullets they'd loose by shooting themselves in the foot!

kemosavvy's picture
kemosavvy
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Re: Daily Digest - Dec 29

srlinder, i happen to be good friends with a car dealership owner and i have yet to discuss this increase of suv sales with him but i know that the only people buying suv's/trucks for the last eight months have been the types you speak of; farmers, construction workers and the like. they have been buying up the good deals all along. now, of course a slightly higher percentage probably came off the sidelines in the past month but there definitely had to be typical consumers looking to satiate their appetite for consuming.

 

davos, i just listened to krugmans dec. 19th speech to the national press corps. he doesn't seem to care what kind of stimulus spending we have, he thinks any stimulus would be good, he attributes our rebound from the depression after wwII to the massive spending on war goods; missiles, tanks, airplanes. i disagree with that on so many levels, specifically that wars are destructive and not productive, but i'm not the one drawing negative interest on nobel prize purse. 

Davos's picture
Davos
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Re: Daily Digest - Dec 29

Hello KemoSavvy:

I totally disagree with most of what Krugman says. 1930 was so different, deficits, manufacturing and the samount of the debt then to now. I couldn't agree with you more, take care

 

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