Avoiding a Deep Recession

The EDFRED Corp Solution

As a consumer chemical cleaner manufacturer our sales have been just fine. But our credit line providers continue to revise terms due to no fault of ours (other than doing business with them). Clearly they wish to alleviate their bad debt expense on the backs of their good customers. So bailing out that industry has some distaste to me, and I will never forget this in my lifetime.

How about stimulating hiring this way? Use a portion of the stimulus money to subsidize for a time employers bringing on new employees. We know the talent is out there. It could look like moderately paid internships.

When people have jobs they will spend. They will feel good about themselves and will maintain their skills instead of suffering the grind of unemployment and fruitless job searches. Some of our politicians should experience how demeaning it is for our workers to submit endless resumes online that drop into the black hole of who knows where?

No wonder consumer confidence(read spending)are on the slide.

Thanks Mr. Zuckerman,

Don Brown, President

EDFRED Corporation

www.edfredcorp.com

The Economy

We need less government regulation not more. What good is regulation if politically driven bureaucrats enforce them. Anyone who hasn't seen financial debacle caused by over-leverage is too clueless to regulate anything or write about it.

Isn't it time that the Fed, Treasury and FDIC admit that bank foreclosures are dramatically under-reported and that loan payment delinquencies are sky-rocketing? All we get from policy makers is the lie that the recession is over. It is time to face problems directly. Our non-term limited Congress must wake up to the fact that China is now dictating our foreign price by holding us hostage to the debt we owe them.

McLaughin Group, Saturday, October 19

Mr. Zuckerman, Although I am a very serious liberal, I have had great respect for you and your opinions, because I have believed you are a serious, thoughtful and insightful person. While I might not agree with your positions, I often believe they come from a serious investigation of facts. Therefore, i was so very disappointed in your comment on McLaughin Group about the stimulus package, when you stated the inaccurate position about a high speed rail from Las Vegas as being part of the stimulus package. This has been an inaccurate statement, used as propoganda, by the republican party. The stimulus package calls for support of high speed rail, with NO INDICATION WHATSOEVER as to where it should occur. This high speed rail would definitely be in keeping with supporting infrastructure, which you claim to endorse. I am very disappointed that you would merely parrot an incaccurate claim, rather than deliver the usual insightful opinion you normally share.

Zuckerman on msnbc today

Mr. Zuckerman worries that banks will lose talent if there is a cap on pay vs an overall cap. The executives and management have been paid very well up until now - and they have not done well - so the high paid talent has not proven to be talented.

Having them leave can only help.

When the market hits 6500, buy( as in good by)

My official prediction on the low is 6500. That is 52% of the high or there abouts. The Lib's will raise taxes, impose tarriffs and generally muck things up, Definately an L.

How To Survive In Any Economy

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Political support is needed

McCain's proposal to buy back over-extended mortgages from "homeowners" that may walk away from their home is at its root an important step to stabilizing the housing market. Without price supports in the market, this financial crisis has the potential of wiping out a great deal of the monetary system in the United States and the rest of the world.

The problem with his plan is that it cannot be politically supported by one of the basic tenants of the free-market, individual responsibility. However, if McCain has any shot left of winning the Presidency, he must find a way to sell this idea and put a floor to US home values.

Perhaps there is a simple political solution...

An example of the problem:

A troubled home-owner Ed purchased a house at $500K, 10% down with an interest only loan and is sitting on a mortgage of $450K. The value of his home has dropped 30% and the home is now only worth $350K. He has lost $50K plus he's upside down $100K and would probably be much better off financially walking away. But keeping the Ed's of this country in these homes is the single-most critical element for fighting this financial mess.

John McCain would have the tax-payer eat between $100K and $150K of Ed's lost equity and re-write a mortgage in line with the value of Ed's home in today's market. However, his next-door neighbor George doesn't like that idea at all. He also is losing the same relative value in his property and cannot understand why he should subsidize his next-door neighbor's loss in equity while experiencing the same exact loss himself.

Again, the solution may be simple.

When John McCain offers Ed a refinancing package that is in line with today's valuations, Ed must meet all the qualifications Mr. McCain has outlined and in addition, must agree to one important stipulation.

WHENEVER ED DECIDES TO SELL HIS PROPERTY, ANY APPRECIATION GAINED ABOVE $350K AND TO THE ORIGINAL LOAN AMOUNT OF $500K CAN NOT BE REALIZED BY ED. ED WOULD NOT GET TO KEEP THAT PORTION OF HIS HOME'S FUTURE APPRECIATION. THAT PORTION OF THE PROCEEDS ON A FUTURE SALE WOULD BE PAID-BACK TO THE TAXPAYERS IN THE FORM OF A SECOND TRUSTEE TO THE PROPERTY.

This would change the dynamics of the discussion from a bailout to government-backed loans for distressed homeowners. While it may take several years for those values to realize any pay-back to the taxpayers, they in fact would be on the books much like the government loans to AIG. And from a political perspective, it's a much easier sale to the voting public.

The objective of Mr. McCain's program will be intact, but it will give it political legs that the conservative voting base will understand. Much of this money may in fact not be paid back, but it will give McCain's idea the political back-bone it desperately needs.

And without price support in the US housing market there will be millions of more Ed's and a DOW more likely to be below 4000 within 24 months.

Privately issued money caused the crisis

I do not agree with his proposals to resolve the difficulties because they simply do not address the fundamental cause of this financial crisis -- privately created money.

Because the government has privatized the creation of our money supply, delegating its sovereign monetary authority to create money to the privately owned Federal Reserve and the commercial banking system; America uses privately issued money in our economy.

With the exception of coins (about 0.002% of the M3 money supply), the US government has not issued money for several decades, retiring the last US currency note in 1971, according to the US Treasury Dept.

Privately issued money caused the financial crisis, because our nation’s total money is created as debt, extended into the economy as bonds and loans, requiring the repayment of principal and the payment of interest, lacking the additional money to pay the interest, paying the interest from the existing money supply leaving insufficient money to repay the principal, resulting in a collective contract that is impossible to fulfill.

Over time, the banking system originated a series of new loans, making up the interest shortfall, creating the illusion of solvency, growing an expanding pyramid of new debt, reaching the mathematical limits of the scheme, resulting in the banking system’s collapse that we see today.

is anyone listening?

Mortimer Zuckerman has been commenting for the last year that the finantial sector was headed for a serious downturn . Before that John McCain was warning that Fannie Mae and related housing programs were not on sound footings. Long before that The Military brass and the State department warned the President that That there was not enough troops or international agreement for the proposed invasion and rebuilding of Iraq.

Does anyone who makes these decisions in Washington learn from history and at least consider the opinions of disenting voices?

Historians that study politics and religion realize that sometimes they are the same thing in the mid-east. They know, for instance, that Osama bin Laden patterns his organization and conducts his jihad as Rashad al-Din Sinan did against the third Crusade. This hero of the Shi'te fadai warrior cult also was succesful in disrupting Saladin plans to compromise with the Crusaders. (Rashad al-Din's pack of assassins is the model for all organizations that conduct suicide missions in the name of Allah.) The first attacks of these finatical defenders of the true religion were against the towers that the second crusaders erected on their castles. Then; when The third crusaders pressed on with their attacks in Arab Lands,and continued negotiations with Saladin, the assassins sent a succesful suicide mission against the king-appointee of Jerusalem. These reverses sent Richard the Lion hearted cowering toward home.

I fear that We, who do not learn from history, nor listen to learned advice from dissenters, may suffer from far more shocking setbacks. Let us at least hear the voices of those crying out in this wilderness.

Adopt what works

Canada's financial system has largely escaped from the global financial meltdown. For good reason. Mortgage-loan lenders are required to purchase insurance if the amount borrowed by the home buyer exceeds 80% of the market value of the property. The insurance may be costly - especially in the case where the percentage is greater than 90%, but it protects the lender from a decline of up to 20% of the market value of the property. Moreover, as a result of this insurance requirement, sub-prime loans in Canada are rare - about 3% as opposed to the pre-meltdown 35% in the U.S. Of course, the 80%-rule is effectively a 20%-down-payment rule, but how else does a country protect its financial system from bad mortgages?