Tuesday, December 16, 2008

Economic Woes

The Federal Reserve Bank today cut it's target interest rate to near zero, a record low for this key indicator. Strategists indicate that it's likely that within the month the Fed will further lower the rates--likely all the way to zero--in order to spur lending in the various frozen credit markets, and might even start buying up long-term treasury securities (a bizarre method of pushing money into a frozen market when the interest rate can't be forced any lower; it's like saying, "we'll loan you money for free; no, wait! We'll PAY you to borrow our money").

In other related news, the stock market, today, showed signs of life again (after eons of bad news--and a net loss of about 1/3 its total value), and actually gained a few percent. Don't hold your breath though.

Home construction starts dropped even lower last quarter--to record lows--and showed no sign of stopping. Unemployment continues to rise; over 2 million jobs have been cut since the beginning of 2008, and there's no sign of a slowdown.

The government continues to pour money into the economy, hoping to inspire lenders to get back into the game (so to speak) after losing their shorts over the past few years.

The federal deficit is at an all time high.

30 year mortgage rates are back into reasonable levels--which is great for all 37 of us Americans who still have a home mortgage; does nothing for the vast numbers of folks who had hopes of buying a home or lost a home in the recent crisis.

In the city I live in, approximately 1 out of 30 homes is in foreclosure.

The State of California is within weeks of insolvency, and borrowing is out of the question; their credit rating has junk status.

And Mervyn's is going out of business.

Which begs the question: how is the government going to survive? Based on the facts above, tax revenues should be down by approximately 387% this year (those are my rough calculations, and are based solely on the quantity of bad economic news being spouted in the media).

Blogojevich has the right idea: boot all the politicians out, and sell their seats to the highest bidder. Pour that cash into the government coffers, and we could probably get rid of the budget deficit and eliminate the national debt in about 2.7 years.

And the folks who buy the seats can't be any less principled than the folks that are there now.

It's a win-win situation, if you ask me.

But nobody ever does.

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