Cluster Cluck
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Head Above Water

Looks like cats have to finally shake off their denial and admit that we’re in a recession. If the dollar’s freefall over the last year and the rising unemployment rate (it stands at 6.1%, which means there are 94 million employable adults out of work right now) weren’t enough to convince the well-paid pundits, yesterday should have put things into perspective: The 504-point drop in the Dow Jones Industrial Average was the biggest single-day fall-off we’ll seen since the market reopened after 9/11.

It came on the heels of Wall Street investment firm Lehman Brothers’ bankruptcy filing, after defaulting on $600 billion owed to creditors. When brokerage firm Merrill Lynch saw that Lehman—a company that successfully weathered the Great Depression—couldn’t get it together, it sold itself to Bank of America for $50 billion like the expensive whore that it is. Massive layoffs have already begun in NYC and London.

“I still have my job,” you might say, and I’ll say, “Good for you, but do you still have your retirement money?” Today’s precipitous drop resulted in the loss of about $700 billion in 401(k) and IRA funds, nationwide…. I’ll wait while you check your account balance (I peeked at mine earlier; it’s not pretty—I’m already down 14% year over year). It will also likely make it harder to get a loan, as firms tighten their belts in an overreaction to their own failed mortgage policies during the housing boom.

But I don’t tell you this to make you panic. I tell you this because an informed citizen is a smart one. First, we should consider how our government reacts to these situations. The Treasury used tax dollars from the Federal Reserve to bail out Bear Stearns back in March to the tune of a $30 billion, and did it again a week and a half ago to save housing giants Fannie Mae and Freddie Mac—effectively drawing on public funds to support private enterprise. Treasury Secretary Henry Paulson says that saving Lehman was never an option, but I can’t say I believe him; I just don’t think this administration thought they stood to benefit enough from the salvation of this particular company, and they haven’t taken saving A.I.G. off the table….

And it doesn’t hurt to consider how we got here. When banking institutions are allowed to grow rich by taking advantage of the American dream of homeownership with sub-prime mortgages that put folks in houses they can’t afford, isn’t it a little like karma that they’re living through a nightmare now? I feel bad for the little people who got caught up in the madness of their employers, but I feel bad for my little retirement nest egg, too.

And it has implications that reach beyond your pocketbook: Many people think that the candidate who can come up with a workable plan to revive our economy is the one who will win this election. I’m not sure I necessarily believe that, but polls show that the economy is the number one factor on most voters minds. So who is best situated to handle the drama when he gets into office? Both candidates talked about the subject plenty yesterday, and McCain even released a commercial talking about “our economy in crisis.” But in a speech yesterday in Jacksonville, Florida (where the unemployment rate is 6.3%) he said, “I think, still, the fundamentals of our economy are strong.” Wow. Forgive me if I’m oversimplifying things, but how can a man who is that out touch be expected to fight for our economic well-being?

But don’t let me tell you what the candidates think; take a look at their economic plans and make your own decision. You can find Obama’s here, and McCain’s here, then come back and tell me what you think.

—Kenrya

If you like Kenrya’s opinion, check out the rest of her posts here.

Obama’s speech on the economy (sorry guys, but I couldn’t embed McCain’s video, but you’ll see it at the above link):

Obama on the Economy

Last 5 posts by kenrya

  • Diane

    Ah yes, if only the government would bail us out for cc debt. I am so conflicted over everything. On the one hand, the lack of oversight and regulation is at the heart of this debacle (did we learn nothing from the S&L stuff).

    Then again, people need to be a tad more responsible – and not be a bunch of 4-yr. olds wanting to be told what to do. You cannot tell me many folks did not know they were up to their armpits in debt and an interest-only loan is a good thing. It just ain’t so.

    Consumers need to rein in their spending – ah, now. Enough of the living beyond your means. So much of this could have been avoided had credit card companies simply stopped giving credit – again, lack of regulation/oversight.

    Since companies are at the heart of doling out too much to the ill-informed – they should pay the price. This is America – you live, or die, by the almighty dollar. If you don’t believe that, you need to live elsewhere. If you can’t swim in the shark-infested waters, you need to go. Lehman has gone. AIG is likely next. And Merrill was TOLD to sell themselves, over the weekend, by the Feds. They knew what they were gonna have show on their books THIS WEEK, and knew it wasn’t pretty.

    Maybe someone with a conscience (gee, Bill Gates with a bit of help from Pickens and Buffett) will start something new – a big company with brains. A company that won’t sleaze around, a company with integrity.

    Then again, how can a company with integrity compete with the cretins on the Hill… shame on every Congress person/Senator.

    Lastly, to the companies still in business, whose slovenly ways have compromised the security and information of almost every person in this country – shame on you. And I can’t wait to join the lawsuit. How dare you make me give you the most intimate parts of my life – to only have them copied/stolen/sold by an employee and/or thief.

    None of us is innocent in this whole thing. Consumers turned blind eyes because it was easy.

    The few who were truly taken advantage of are in an unfortunate position – and I don’t know what to do for them. But the majority CHOSE to make some pretty poor choices (overextending credit, mortgaging to the hilt, mcmansions they couldn’t afford) – and I really take issue with having to use my taxes to bail them all out.

    Sort of like choosing to build your home at, or below, sea level/river level, on a fault line, or on a cliff devoid of foliage to keep the mud from sliding. You CHOOSE it, and I have to pay for your loss and your rebuild. These lands should be OFF LIMITS to building, except for vacation-type things where people are transient – and thus there is little threat to life/property.

    OK, I’m in a very steamed up place. Canada is looking quite lovely – HA

  • Julie

    I second Diane, totally agree. The root of the problem is people’s ambitions to bite more than they can chew is screwing with a lot of things and contributing to the downfall of the economy. Of course, not to take the blame off of the financial institutions… But…