Friday, November 21, 2008

The Santa Claus Effect "Something For Nothing"

“The new President will hit the ground running.”
“This will be the smoothest transition of power ever.”
“They will get the country going.”
“The President’s choices of personnel are pure genius.”

The newspapers are full of these quotes. Is this a religious event? Is there going to be a miracle? Who writes this blather?

Three car manufactures just hit the wall. Congress went on vacation. 401K jokes are not funny anymore. There is no housing bailout. The banks don’t have any money and the stock market is behaving like a mad dog.

The consumer can’t be anything but confused. The extreme optimism that the newly elected president and his entourage will save the day, defies common sense. This country has lost a hell of a lot of money so far in this last year and there is more to follow. The easy money times are gone.

Dreams are a great thing to have, but to dream that the punch bowl will be returned to the party isn’t being real about the present situation. You hear people in the stock market saying, “Don’t get out of the market, no one can call a bottom, you’ll lose when it goes up” (talk about greed). If you bought in 1929, you were probably dead before the market returned to the same level in 1954. So yes, the stock market will go up again after it is finished going down.

People fail to realize that the world has changed and the assumptions they use as a measure haven’t. The housing speculators weren’t stupid, the real estate world change while their perception of it didn’t. Things are not going back to the way they were. The country is broke and the people in it are broke (only they don’t know it yet). If you live from paycheck to paycheck, you won’t even feel it; you’re already there.
Who ever is in control, is going to try hard to address the situation. To suggest that we are, “Going to get things going again,” doesn’t mean the same exact thing to the person standing next to you. Each one of us has different needs and that statement will fail a lot of people (like those who end up unemployed). I can see optimism if you are getting married or having a baby, but when they go out and shoot three car manufactures, the warm an fuzzy feeling just isn’t there.

I think that the biggest mistake being made right now is by Congress. They think it is business as usual and it isn’t. “Let’s wait until next year when the new government gets sworn in. They blew it on the 700 billion dollar bail out and the 150 billion dollar tax stimulus. Have you ever heard of spending money you haven’t even collected and pay it to people that you normally tax? Let’s call it the “Santa Claus Effect.” You put nothing in and get something out.

Copyright 2008 All rights reserved

21 comments:

Shankar said...

Yea, and our beloved President-Elect is no different.

"The consensus is this, that we have to do whatever it takes to get this economy moving again, that we have to -- we're going to have to spend money now to stimulate the economy," he told the CBS television network's 60 Minutes news program.

"And (consensus is) that we shouldn't worry about the deficit next year or even the year after; that short term, the most important thing is that we avoid a deepening recession."

Sackerson said...

Well, at least it wasn't Obama's fault. And his landslide victory will give him the authority to take appropriate action, so then it'll be down to him and his advisers. But including Hillary - was that a masterstroke?

Anonymous said...

Obama-meet the new boss, the same as the old boss. His works about change we can believe in are neutralized by appointment of all the old insiders to his cabinet.
Not surprising but to betray trust so blatantly even before inauguration...cant imagine how much different his Presidency will be versus what he promised the sheople that voted for him.

Cranky said...

I figure the honeymoon will last about two years. By then, just about every person in the USA won’t care who he is, or what party he’s from, they’ll only want answers and solutions.

I just read this…
“Obama economic plan aims for 2.5M new jobs by 2011”
There is only one way, right now, to accomplish that goal. And it’s not going to sit well. He’ll have to address the illegal alien problem, head on. American citizens won’t tolerate being out of work very long before they demand the next president to do something about the “others“ holding fair paying jobs. Unless the government says those are “jobs Americans can’t have” (opposed to “the jobs Americans won’t do”).
To create jobs out of thin air in this environment, they’ll have to come from the governments “horn of plenty“.

“They will get the country going.”…they’ll have to start pumping money (real money, not credit cards) into the pockets of everyone. I think people are pretty much credit card shy now and have begun to wake up from this comatose spending spree.
You can’t just flip a switch and get the country back on it’s feet. Not when we’re entering a “buy what you need, not what you want” period.

Jim, you gotta love the way the media and the likes treats this down bouncing… “the Dow rallies back to 10,000... the Dow rallies back to 9000... the Dow rallies back to 8000” Talk about false hope.

This Democratic Dream Team will shine, but only so long. They will go into this with good intentions, but they’ll pull all the wrong levers and push all the wrong buttons, only to aggravate the problems more.
I’m not a gambling person, but I’d lay money down on Obama NOT getting another 4 years in office. That’s a realistic view, not personal. Dang, I guess I should have bet against McCain… I knew he wouldn’t win.

Jim in San Marcos said...

Hi Shankar

They are hell bent to save us.

On CNBC I've heard several references to "rearranging the deck chairs."

That phrase brings to mind one ship and an iceberg. It appears to me that a lot of people are not saying what they are really thinking.

In this case, the cure could be worse than the disease. He still has 59 days before they turn him loose.

Jim in San Marcos said...

Hi Sack

Thanks for dropping by.

Its comforting to know as we fall out of the sky in flames, that it wasn't Obama's fault;>)

I looks like the new administration is at the library reading up on The Great Depression for ideas on what to do. That scares me.

I can't figure Hillary as Secretary of State. I can see why she would jump at the post, several past appointees have become President later, none recently. Our biggest problems are in the Arab world, where women are considered property. It seems like a very poor call.

Jim in San Marcos said...

Hi Anon 4:08

You hit the nail on the head. Politicians can promise the moon, but when they get elected, the only thing that they have to do after the election is pay the bills and keep the country running. The big problem now is how to pay the bills.

Jim in San Marcos said...

Hi Cranky

I think the problem is far more serious.

When I was a kid, my Dad worked and my Mom stayed at home to raise the kids. In todays world, both parents work. So when the say they need to create 2.5 million new jobs by 20011, they are way off of the mark. Its going to have to be 8 to 12 million jobs.

It's hard to say what Obama's plans will do, I guess we have to give him some time to try his best.

I don't see a government type solution to this mess. What we are talking here is clean up of the financial destruction.

As for the stock market, we can have an orderly decline to 4000 with no panic. The mutual funds are not individuals so they can relax, the markets will come back, just probably not in my lifetime.

Sackerson said...

Hi Jim

Maybe Hillary is given this as a sinecure, while she advises Obama (and introduces him to her contacts) on the health treatment program she wanted to introduce when her husband became Prez.

And looking at a later comment of yours - so you, too, think the Dow is heading for 4,000 at some point. Last year 9,000 looked like it was never going to happen, despite Robert McHugh's prediction.

Anonymous said...

Jim,
Why do you think Congress is nitpicking Detroits' Big-3, but didn't bat an eyelash with all the destructively managed banks? I mean, the Big-3 is only asking for a loan of $25billion (only...LOL), but AIG for example has already received $150billion with no questions. How many FLEETS of corporate jets does AIG have? I don't recall Congress bringing that issue up with AIG.

Is Congress just trying to shake off the embarassment of falling for Paulsons evil boondoggle?

John in Texas

Anonymous said...

I agree, why can't we bail out Detroit? I was against all bailouts per se initially but, I certainly don't understand the financial bail out with no " middle class " bail out. Is it really that elitist? Where is all that money going?
Is it being secretly diverted? "cold war " stuff ?
I don't know, it all seems so "managed".
As far as Hillary goes, stupid decision for Barack and brilliant move for Hillary. In DC it's all about power- Hillary will be running her own show and manipulating like crazy- and have a WORLD stage on which to operate. Barack on the other hand just gave away the foreign policy of this country and his administration for the duration of her appointment. He will have to fire her to get her to do as he desires. Maybe he is over his head, maybe he wants someone else to answer that phone call in the middle of the night.

Anonymous said...

ps- that above comment was from me:)
Catholic girl

R2K said...

: )

Jim in San Marcos said...

Hi John in Texas

I think Congress got had by Paulson and Bernanke. They signed the first package on faith and don't like the results.

I don't think Congress is going to be in a bailout mood. The car companies retirement plan needs more funding. With the market down 50 percent it's just not possible to cover projected payouts.

Bankruptcy for the big three kills the retirement monster that they can't fund.

Bankruptcy doesn't kill the company. The labor union gets taken out and shot. So next years cars could be a lot cheaper. You don't have to pay a high school grad $80,000 a year to turn a wrench.

Jim in San Marcos said...

Hi Catholic Girl

The only thing I can figure is that Obama has dropped the push for free health care as being unaffordable. By giving Hillary this post, she can't focus on pushing her health care agenda through Congress.

If that's the case, Obama might be more of a Republican than we think;>)

Anonymous said...

First let me say I am decidedly Conservative in nature. However, I doubt seriously there are many 80k/yr wrench turners... or being the intelligent college grads that we are - we would have all long ago have gone to work for GM. But if I am liberal at all it is in the area of worker's pay. I honestly believe the values of pure capitalism do need a temper somewhat and that a "worker is worth his hire". Call it my Catholic roots or whatever- but I believe long ago we as a country started to abandon this philosophy and we are paying for it. I am a true believer in the "Bell theory" concerning IQ and giftedness. I believe we all have something to contribute to society and to our industry and that it should be valued. Strong families send strong sons to fight for this country- and a strong economy and country honor these people who get up every day and arrive at work on time to work difficult and at times boring jobs but skilled jobs. Maybe in the course of economics they don't deserve 80k but would you not agree that working middle class people deserve say some retirement benefit and health insurance in return for company loyalty for say 30 yrs of work. My God, who are we as a people is this is not so.
In addition to being gun ho capitalistic we have to still strive for as just a society as possible. It is in everyone's best interest to have not only an educated electorate but also an economically sound electorate. The problem with the US is not the " get up at 5 am workers " It is the people who do not work and who now have no incentive to do so and the wealthy set who live so far above the rest of us- even us "college grads" and yet somehow get their hands on the 700 billon.
just a few thoughts :) We slightly disagree on this one :) Best wishes-:)
Catholic girl.

Jim in San Marcos said...

Hi Catholic Girl

There is no disagreement here. The problem is the American consumer. The lower price wins out every time.

If you can build it cheaper somewhere else and make more money, that is capitalism.

Here is link to the wages paid in the auto industry. I was being kind by using the 80K amount. It figures out closer to $156,000 per year.

The going joke is that we don't make anything anymore. I just ironed a dozen shirts for work, and each one was made in a different country, not one was US made.

Our jobs are moving overseas. This can be a real unemployment problem. Forget about working for one company for 30 years, it will probably outsource to India.

I think that the basic reality not faced in the US, is that we need to compete globally to keep our jobs. Current work regulations and taxes in this country make that all but impossible.

The only solution that I can see, is one I dread to mention, a 100% tax on imports. Smoot-Hawley anyone?

I guess our differing views kind of explain why these problems weren't solved hundreds of years ago. Thank you for your comments

Anonymous said...

Heh...y'all worried about Obama just a little too early.

In the unfinished business department, Citigroup is walking the plank. The sharks are splashing around waiting for them, as the bleeding has attracted them. The government is working on a bailout plan as we speak...UH OH. How many people get fed to the sharks in the process of saving Citigroup?

Anonymous said...

Hi Jim
ah the legacy costs
point taken :)
however, we'll have no problem
bailing out Citi will we-
maybe they could give Detroit the 25 billion
just to make us all feel like
the new socialism is fair :)
Catholic girl

Jim in San Marcos said...

Hi Catholic Girl

It's going to get worse, Bank of America and JP Morgan Chase are next. The car companies are petty pikers.

The only two turkeys not on the menu this Thanksgiving are Ben and Hank.

joshua said...

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.


Sharon

http://www.autoloans101.info