Deep Doody.

My study of economics goes slowly, but I got a little much needed help in the form of a cute finance guy. He writes to me:

The dollar is being eroded by irresponsible and unchecked government spending. Inflation will rise tremendously in the next few years which will coincide with a depression in the Real Estate market. Oil will shoot back up again and go much higher in the next few years until we can finally come up with a real and affordable alternative.

In the meantime, gold and other commodities will go through the roof. Actually, silver and copper even more. Oh and the US economic institutions and Corporations will eventually be all foreign owned, and by that I mean the Sovereign funds--i.e. Foreign governments. We're in deep doody.

I'll make him explain more when we have coffee later this week. Till then, we also have an election happening soon. Check out this petition to the UN, calling for their monitoring of the US presidential elections. Considering some of the shit that went down in 2000, the UN's help would be appreciated. I don't know if these online petitions work. I'll do some investigation.

FLOW

Our invasion into Iraq had little to do with liberating the Iraqis or avenging those lost on September 11th, 2001. I mean, great, Saddam Hussein is, like, dead, but we went into his country for his oil, not for him. I'm wondering how the shit's gonna go down when we're fighting for water.

For the Love of Water (FLOW) is a documentary from Irena Salina which "what experts label the most important political and environmental issue of the 21st Century - The World Water Crisis." It opens today in New York and LA. In 2002, NYC had a Stage 1 drought emergency which meant that restaurants couldn't serve water to patrons unless said patron requested it. But other than that, no one's ever blocked my access to water. Apparently, I'm very lucky:

• Of the 6 billion people on earth, 1.1 billion do not have access to safe, clean drinking water.
  (www.charitywater.org)

• While the average American uses 150 gallons of water per day, those in developing countries cannot find five. (www.charitywater.org)

• According to the National Resources Defense Council, in a scientific study in which more than 1,000 bottles of 103 brands of water were tested, about one-third of the bottles contained synthetic organic chemicals, bacteria, and arsenic. (www.nrdc.org)

• Water is a $400 billion dollar global industry; the third largest behind electricity and oil. CBS News, FLOW.

• Californiaʼs water supply is running out – it has about 20 years of water left in the state. Maude Barlow, author of Blue Covenant and co-author of Blue Gold, National Chairperson of the Council of Canadians, FLOW.

• In Bolivia nearly one out of every ten children will die before the age of five. Most of those deaths are related to illnesses that come from a lack of clean drinking water. Jim Schultz, founder of the Democracy Center in Bolivia, FLOW.

• The cost per person per year for having 10 liters of safe drinking water every day is just $2 USD.
  Ashok Gadgil, Senior Staff Scientist in the Lawrence Berkeley National Laboratory, FLOW

Go see the movie if it's playing near you. And turn off the tap when you brush your teeth. Short showers - no baths! And, um, if it's yellow, let it mellow. I'm scared of what human beings might evolve into when the water dries up.

Working My Assets Off

Lehman Brothers is planning to sell its assets.

God, I can't wait to know more about how business works, but education takes time. In the interim, here's a link to Floyd Norris's liveblogging of the Lehman Brothers conference call. And some of my favorite - that is, scary intriguing disappointed holy shit this country's in a hand basket - moments:

8:10 a.m. Dick Fuld started the call by saying Lehman was “de-risking” the balance sheet. That’s a new word to me.

8:30 a.m.We are assured they have applied stringent stress tests based on historic performance of commercial real estate in various markets around the world, and that REI Global is capitalized to survive the worst seen in each market over any two-year period.

Of course, we used to be told that residential mortgage backed securities could not run into problems, based on historical analysis. I hope they are right this time.

9:35 a.m.Lehman shares opened higher, although well below the levels before yesterday’s plunge. That should be cause for some pleasure at Lehman headquarters.

Unless I missed it, there was no talk of selling more stock to investors.

Commenting is a slippery slope on the Internet. But I'm grateful for they give me insight into aspects of the situation my narrow-view of the world wouldn't even think about otherwise. Despite the fear of receiving false or incomplete information, I like that my education about the world isn't just going to come from journalists and textbook writers. Let's face it: the information we get from them can be just as misleading. Here are some comments from the liveblog I found compelling:

The public is poorly served by a news media that cannot function. First, they cannot seem to prioritize news (witness the poor coverage of the biggest market melt-down since the depression); Second, they do not ask hard and insightful questions - they just take the “happy talk” at face value (witness - coverage of financial company CEOs, presidential candidates and the Federal Reserve); Third, they do not research and provide perspective (maybe not enough column inches) - for example, there is hugh litigation in the works related to losses from the credit debacle due to fraudulent activities but there is no mention of that in the news media - probably requires too much actual research.

Smart people are beginning to look to alternative and unexpected outlets for real and meaningful news. To illustrate, I recently saw coverage of presidential candidate flip-flops on both You-tube and on the Daily Show with Jon Stewart in which they are caught taking one position but then, in a different time or forum, taking an opposite position. It is a sad testament to news media failings that people must look to Comedy Central or You-tube for real meaningful news.

— Posted by Jim

It’s truly ironic. All the wailing about socialised medicine, and in the meantime the bankers and finaciers have socialised the financial industry. Just get big enough and you can do whatever you want knowing the government will bail you out so you can make mischief again.

— Posted by Eric

This whole thing is a real kick in the head. To think that there are companies who pay these clowns the big bucks for investment advice and to make analysis for dumping bad investments and they can’t even take care of themselves. Go figure.

And now the other clowns want to buy, but only on a leveraged basis, continuing the insanity that started this whole thing in the first place. Only when all the smoke blows away and the mirrors are broken will our economy get back in working order.

- Posted byClyde Jenkins

The night of the Fanne Mae/Freddie Mac takeover, Charlie Rose hosted a forum on his show. It helped clear up a few things for me. Also, scared me. Mohamed El-Erian, CEO of PIMCO,the world's largest bond investor with $692 billion of assets under management as of 2007, basically says the lawmakers in this country know there's a problem, but have no solutions.

Another of his guests, NYU professor Nouriel Roubini predicted the collapse of Fannie Mae and Freddie Mac two years ago. Here's his blog. I'm trying to read it everyday in the hopes it will help me make sense of our economic climate. So far what I understand is that few people understand and those who do don't agree with each other about what to do next.

You Still Have Time to Vote.

Polls close at 9pm.

Drowning in Confusion

According to Ann O'nymous, my whole post was wrong yesterday. Embarrassing as it may be, this is exactly what I started this blog for. I'm sure I hold tons of ideas about how the way things work that have no foundation. I appreciate being told when I'm wrong. I mean, I hate it and I'll probably think mean things about the person telling me I'm wrong and make excuses about how I'm not wrong. But after my initial pouting, I'll eat up correct information, absorb it, interpret it and write about it. I'm pretty sure this process is called something like "learning."

Unfortunately, Ms. O'nymous told me I was wrong, that I should take a basic econ. course and then left. Please don't do that when you leave comments. The Internet is full of comments pointing out others' ignorance without providing any guidance from ignorance. It's selfish to hold onto information that might lead to better understanding. Is this withholding based on the security that comes from feeling smarter than other people?

Yoga became important enough for me to start teaching it. I teach a lot of beginners and lemme tell ya, people come in wrecked. Not knowing their left from right, their head from their elbow. When I see them drowning in confusion, I want to help them, not because it's my job, but because I want them to find the self-awareness, compassion and curiosity that Yoga has helped me develop. Individuals possessing those qualities are going to make for a better world. Economic savvy will do that, too, but I don't have any of that. Our leaders would prefer that I never get any. I hope there's a benevolent economist out there reading this who understands that educating even the hopelessly ignorant like me will improve the economic health in this country.

I'm gonna go buy Economics for Dummies now.

Li'l Help Here?

I'm trying hard to understand the United States' economy. I've read more about economics today than I have since high school in an attempt to comprehend what's going on with Fannie Mae and Freddie Mac. But it's like starting to watch a soap opera. I know that soon I will be familiar with the important players and their history and relationships, but at the moment, I can only ask, "Wait, who's that? Why's she so mad at her husband?" Here's what I get so far. Maybe you can help me fill in the blanks.

Lorraine goes to the bank for a loan with a fixed interest rate. She gets it and is now a borrower from the bank. The bank has to pay a variable rate of interest to its depositors. This means the bank might have to pay more interest to its depositors than it's getting from its borrowers. Bad for the bank and its depositors.

The bank can fix this if it sells bonds to investors at the same interest rate at which it gave Lorraine her loan. But if Lorraine doesn't make her payments, the investors are screwed. Fannie Mae and Freddie Mac were created to guarantee these bonds even if Lorraine misses a payment. So investors feel safe till Fannie Mae and Freddie Mac go bankrupt.

Which, I think, is what almost happened. But our Republican administration bailed them out. This looks like socialism for the rich-only to me, but here's what the Treasury Secretary, Henry M. Paulson, Jr. said in the New York Times today:

“This turmoil would directly and negatively impact household wealth: from family budgets, to home values, to savings for college and retirement. A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance. And a failure would be harmful to economic growth and job creation.”

Commenters on the article seem to recognize spin when they see it.

Public funds will have to, in effect, subsidize the fraud and theft that took place in originating and selling mortgages.

Let's hope that we, the public, will make sure that new lending regulations are written and enforced, so that another bail-out of this sort will be avoided.

— David, New York

And who pray tell will bail out the US Government?

— Ed, Bronx

Think of the children who will die due to lack of health care (because lack of insurance = lack of care) while our tax dollars bail out stupid and/or greedy investors.

Will this at least be the death knell to privatization? Our and our children's futures now carry second mortgages already.

— New Yorker, NY

A Dismal Science thinks the bail-outs

[W]ill result in the housing market used as a deflationary counter to world inflation.

Why? Think about it. We've got huge current account deficits and can't control market action on all the foreign treasuries we have out there, but we CAN control domestic lending in the huge mortgage markets. This will mean further collapse in home prices, higher interest rates, less homeownership, and less credit in exchange for commodity price stability and currency stability. I would argue that this is exactly what America needs, but Keynesians would likely differ. Then again, Keynesian lending got us here.

My brain's a little mushy now, but I think Keynesian economics have to do with the government's spending for infrastructure and the reduction of the interest rate, in case you were wondering.

OK. I'm a smart person who has, till now, buried her head in the sand when it came to all things economic. I'm sure that as I continue to study, I'll be able to offer up some meaningful opinions and advice for the financial direction of this country. For now, I can only comment on my own personal economic disaster of a bank account. The bail-outs remind me not to spend money I don't have. As a yoga teacher and freelance writer, I don't have any money. That means I won't spend. Does that mean I'm slowing down the economy? Anyone want to help me out?

[NYT] [A Dismal Science]

Back to Work

Congress goes back to work tomorrow after two weeks of camera time and pretty words uttered prettily enough for us to pretend they meant something. This isn't going to be a time during which bills get passed in order to protect United States citizens. This is going to be the time during which Republicans and Democrats do as much to fuck up the opposing party's candidate as possible.

"With the unemployment rate at a five-year high, it is clear that we must take immediate action to strengthen our economy. The New Direction Congress will soon act on a second economic stimulus package and a comprehensive energy plan that will create new American jobs, invest in renewables, increase domestic production, make America more energy independent, and break free of the failed Bush economic policies that John McCain and Republicans in Congress have rubber-stamped for far too long." -House Speaker Nancy Pelosi

Here's what I get from the Washington Post article. If Obama goes for this bill, the Republicans are going to call him out for partisanship. If he doesn't, the Democrats are going to accuse him of pandering to get votes. (Since I want him to win in November, I say, "Pander on.") McCain's not in such a better position. Democrats are going to bring up measures that would increases funding for home heating in New Hampshire and Minnesota and a bill, previously turned down by Republicans, which would require equal pay for women in the workforce. If he doesn't go for these bills, those swing states might swoop back to Obama and any cred he got from women with Sarah Palin goes out the window. If he does go for those bills, he's going to get burned for voting to tax more.

The inadvertence of Congress pushes me one step closer to bitterness. I hope they remember they work for us when they go back to the office tomorrow.

[Washington Post]