More bad economy news: Your daughter isn’t buying enough phones

My daughter is 9, and every week she spends some time drooling over my phone. She lives for the day that she can have a phone of her own.

Me, as a proper father, have done everything I can to convince her that it’s just not going to happen so she may as well get used to it. And that’s the exact attitude that is driving mobile phone growth to “flatten” for Ericsson’s sales worldwide.

I never knew how I was going to effect Ericksson. I should feel bad.

Well, I don’t – my daughter’s not getting a phone until she’s, like, 20! And she’s never getting a TV for her room. You hear me, Emily? Never! Bwahahahahaha!

Is 2008 really like 2009?

Historian Maury Klein has an article where he compares 1929 to the 2008 fiscal crisis. He makes some good points about how the stock market has crashed before without it actually causing an economic downturn – first doesn’t cause the second, but the conditions now may be ripe for it.

HUD Chief: McCain’s Mortgage Plan Sucks

McCain’s plan to buy up bad mortgages evidently sucks so bad, the current Housing and Urban Development Manager thinks it’s a bad idea.

I know what you’re thinking – “John, isn’t the whole Federal bailout plan to buy up bad mortgages?” Yes it is – but at the value that the Treasury sets. Suppose that someone has a mortgage for $500,000 on a $300,000 house. If the Treasury buys up the mortgage – under John McCain’s plan – they’d buy up the mortgage for $500,000, so the taxpayers just wasted $200,000.

Under the current bailout plan, the treasury would buy the mortgage for $300,000 – or, if they leaned a bit, maybe $200,000 – then they could renegotiate with the homeowner to set the new mortgage at $300,000 – or they can just hold onto ownership of the house and sell it later. If the house goes up in value (and over time it will), the taxpayers make money.

So basically, McCain’s plan is a stinking pile of poo, and even the current HUD chief thinks so.

Economic Theory: Everything Old is

When I was in economics in school, it was a pretty established idea that the way the government worked financially was when times were bad, they ran up deficits. When times were good, they pay off their debts and save for a rainy day. Markets were regulated and kept from getting too big (banks weren’t allowed for operate outside of state borders for the longest time).

It seemed like a plan that worked pretty well – up until the 1980’s, when a new plan came in: trickle down economics and unregulated markets. The idea was the markets work best when they correct themselves. Instead of taxing the rich, reduce taxes on them – especially capital gains taxes – they’ll generate more business, which will employ more people.

It seemed to work for a bit – there was the energenic 80’s, and more money came in after cutting the capital gains tax. But this was followed by a massive saving and loans scandal that killed some 800 banks (turns out not regulating the banks was a bad idea after all – they tended to do stupid things without people watching them), and that “you earn more tax dollars cutting the capital gains tax” only worked fro about 18 months as people took advantage of the lower tax rate to sell off some stock – then the tax revenues dropped pretty significantly. Cutting the capital gains tax doesn’t magically cause investors to start building businesses like crazy.

So, now with the current financial crisis and a $700 billion bailout (plus the $87 billion for AIG, and who knows how much for Freddie/Fannie Mac), it seems that the old ideas are coming back again. Liberal economists John Kenneth Galbraith and Arthur Schlesinger Jr. had their ideas mocked during the 70’s, 80’s, and 90’s, only to have their theories now accepted as correct as government practices. The idea of “limited government” is now being reexamined in a time when strong, bold federal level government action is needed to save the markets.

There is, of course, a need to balance the budget. Government contractors need to be cut down, waste is still a bad thing. But it seems that the old ideas that worked to get America through the Great Depression are being reexamined and embraced as the “new” economic plan.

Zombiecon on Wall Street

I’m sorry, but the shot of people dressed like zombie’s eating the brains of the brass bulls on Wall Street is just too funny.

One solution to the financial crisis: Let the Japanese buy it all

Well, at least that’s one idea. Evidently, Japan is sitting on a lot of foreign currency, and can use it to buy up other countries debt:

“We are in a special position because we have huge money,” Tamura said, referring to about $950 billion in government foreign reserves, $1.5 trillion in public pension funds and $15 trillion in personal financial assets, about $8 trillion of which is on deposit at shockingly low interest rates in Japanese banks.

The likely hood is, in my mind, probably somewhere between Nill and Squat, but hey, any port in the storm, right?

So what did the mortgage bailout of the Depression look like?

The folks over at the Freaknonomics blog have a ripper of a post about how the mortgage bailout worked under the Great Depression.

This is something that I, as a homeowner of barely a month now, am curious about. How can we insure fairness for those who have been faithfully paying their bills, those who fell into hard times but tried, and those who are just taking advantage of everyone else’s largess?

So to look forward and do it right, we’ll have to look back and see what went right, and what went wrong, and how to avoid the latter. This may be the big key to the whole thing:

The borrowers aided were all considered prime loan candidates when their loans were made. They typically had made down payments of 50 percent of the house price and faced more stringent loan terms than found for current prime loans. The HOLC rejected over 800,000 applications — some because the household was not in dire need, others because the borrower was not likely to repay the loan.

French bank loses money – but still have health care

Groupe Caisse d’Épargne, a bank who’s name I will not even try to pronounce, has announced a loss of $800 million dollars. This is how wide the financial crisis is spreading – pretty much everywhere.

We have found the next big bubble to invest in!

Or, at least Paul Krugman has.

Pawn shops *love* economic slowdown!

Two businesses tend to do OK during bad economic times. Groceries (no matter how bad things get, you have to eat), and pawn shops. Evidently pawn shops are buying people’s old stuff like gangbusters, like Mercedes.

On the one hand, I guess this is a good time to look for bargains. And on the other hand, that’s still pretty damn sad to read about people selling the wheelchairs they’re riding in on.