The WSJ just released an article foretelling that small to mid size banks will be losing ~100 Billion in capital this year due to commercial real-estate investments. Joe Weisenthal of Yahoo’s TechInsider goes on to say, it isn’t just the big banks that make bad investments.
Wow! I think Joe has forgotten trickle down economics. When big banks royally mess up and send the economy into a whirlwind downfall shouldn’t it be assumed that eventually the smaller banks will be impacted? It doesn’t mean the small banks make bad investments, it means that everyone is affected.
This too big to fail philosophy has some holes. The impact on the smaller banks is a glaring one. We should be letting companies fail that deserve to fail and saving companies that have good business practices that will be adversely affected by the Mortgage crisis. Investing in commercial real-estate was only a bad investment because of the economic down-turn. But giving loans for commercial real-estate is critical and necessary for a functioning economy. The smaller banks shouldn’t be penalized for keeping the economy going. Commercial real-estate will not be in a good place until consumer spending rebounds. Consumer spending is being impacted because of job losses and downturns of stock portfolios. It is all a vicious cycle. But right now, the big question is, where will economic stimulation have its biggest impact?
This is a time for disruption. We can’t assume that everything will or even should go back to the way it was. There were things that were broken e.g. population decreasing, housing development increasing, housing prices overly inflated, commercial real-estate also inflated, loans overly accessible by people and businesses that do not have collateral or sufficient income. Oh and don’t forget, our overall environmental impact and oil crisis. We needed something to shake things out. I just hope that we take this opportunity to build the economy of the future instead of trying to keep the status quo. Take the stimulus money and make it an opportunity for innovation and new leadership. I don’t have any faith in the incumbents in the big banks. Nor do I have any faith in the incumbents in the US auto-manufacturing. Let’s push for the new economy. Sustainability, fiscal responsibility and potentially even more small business.
Sadly, indicators tell me that the economy hasn’t hit its low yet. Take a look at what Howard Davidowitz has to say. Unemployment is high and shows no true signs of decreasing, consumer spending has not mended, foreclosures are continuing, credit is unaccessible to the individual etc., the commercial real-estate is on the verge of depression, the dollar is finally getting hit by Brazilian and Chinese trade and we are likely to start seeing some major inflation. But I am positive that the economy will turn around; however, I expect another major dip before that happens.
What will the signs be of an economy on the mend?
- Stop bailouts for companies that are failing
- Start paying off our debt, not just the interest for our debt
- Implement proper banking regulations and criminalize the behavior that made us get into this mess in the first place
- Decrease unemployment
- Increased consumer spending
- Foreigners renew faith in US government (Obama has been helping here) and the dollar (Stimulus packages doing major damage here)
I do not think this stock market rally is sustainable for some of the reasons you just cited.
“Trick down economics” is a liberal term. The term should be “supply side economics” Trickle down sounds like that the people on the bottom get the scraps that are left over when in reality what happens if a rich entrepreneur benefits with certain policy like tax cuts, then everyone benefits. People are employed, and it goes down the line.
Smaller banks don’t necessarily have to make bad investments. I saw on a 20/20 special where some smaller regional banks were actually thriving because they didn’t venture into the deals the big banks did. In fact, I think the bigger banks should be broken up so they can’t become too big to fail. The FDIC will go into smaller banks, but they can’t with these huge monstrosities, because they don’t have the funds.
I can’t believe you said population decreasing was a problem. Liberals don’t usually view that as a problem, I do. You need people to grow an economy, its also why Europe is becoming Islamized at an alarming right. White Europeans are not even producing enough to maintain a population, but Muslims are producing at a rate of 7 to 1.
I agree that we are far from over with this meltdown. But if you make policy mistakes, it can make the recession longer and deeper. Those are the lessons of the Great Depression, and I see Obama making the same dumb political mistakes.
Mark
New Government math “a million dollars – spend a dollar a second, 11 1/2 days its gone, a billion dollars, spend a dollar a second 32 years its gone, a trillion dollars spend a dollar a second, 32,000 years its gone”
http://mark24609.blogspot.com/
Mark, it is amazing how your religious beliefs ended up seeping in here. Yes, there are certain religions that have population growths at a pretty high rate. But what does this have to do with the economy?
I agree that they should split the banks up. Bloated organizations are too often poorly run.
I didn’t say that population decreasing was a problem. What I said was it is a fact. The problem is that developers kept building. Also, the baby boomers are retiring, so there is logically going to be a housing surplus.
With the current world economic meltdown the old business ideology will need to be transformation. The government has been forced to step in help our the banks, auto manufactures, home builders, and commercial real estate. Those industries are where I live, what I drive, where I shop, and banks are where I get my money to purchase where I live, what I drive and what I buy. That’s a bailout of just about everything that I physically touch in my everyday life.
The new president Obama ran his presidential campaign with one word attached to his name and face, change. This word change gave the people hope and this word change, helped install the first black man as the leader of my beloved country America. America a country that bases there values off freedom. And freedom is what I felt they took as I see future full of debt, not debt for health care reform, or Social Security, or eduction or world peace. Debt installed to me by poor policies to pay for the destruction of my air with SUV’s, my land with cutting down forest, and my water with there toxic pollutes.
The word change is to move in a new direction possible a opposite direction. A new pathway in thinking is starting to emerge as the old pathway has crumble from under our feet. The new money seems to be green living. Ted Turner and T. Boone Pickens two billionaires are seeing the light, a light that is powered with green energy. And these two are putting there money where there mouth is and investing in the future of our world. China is also seeing the green energy light as the future of there country. China disclosed a 585 billion package that has 51 billion in biological conservation and environmental protection. China said they would like to see a five to ten fold increase in solar energy by 2020. What isn’t that 500% -1000% growth in 11 years? Also the U.S. signed in more than 70 billion in clean energy as part of the American Recovery Act and Reinvestment Act.
Yes, the future is changing and the collective conciseness seems to be a world oneness and focusing our sustainability. Controlled growth over raw capitalism. Creation over destruction. Peace over war. With a future for our children pushing ahead over a oil slicked slide into a toxic filled pond. Change is good and change is what around the corner.
Becky,
I am not sure how you think my religious beliefs sipped in. What I stated was a fact and it has a lot to do with the economy and disappearing populations. Europe’s welfare state to give an example. Greece’s pension liabilities are 25% of GDP. The US is expected to rise to 6.8% of GDP. This is similar in France. Much of France’s welfare goes to unemployed Muslims, and the French are growing weary of it. Muslims do not assimilate either into French culture. The recent riots in France were caused by unemployed Muslim youth. This is the major reason Sarkozy was elected (I watched the debate between Sarkozy and Royale (his opponent). The US’s birth replacement rate is 2.1 which is right at replacement. You need 2.1 people to maintain a population. There are seventeen European nations (including Russia) that has a replacement rate of 1.3%. At that rate cultures disappear. Putin actually put in a plan to pay people to take days off to have sex because he realized the problem. If Muslims are supported largely by the welfare state, and they are producing at a 7 to 1 ratio and Ethnic Europe (non-muslims) is producing at a 1.3 ratio, you can figure out what will happen to the continent and the economy. No society has ever recovered from a birth rate that low. I have sources for all this demographic information too. Demography can tell you a lot about the future of a continent or a country.
So population decreasing presents a variety of problems
1) you cannot grow an economy – you need workers to grow an economy. You can become more efficient thereby needed fewer employees which is what we have done, but you still need to have workers to continue growth.
2) If you have a welfare system, you need to replace younger workers to support the older workers and it has to be more younger workers
3) Cultures will disappear. If you have other cultures entering in your country and they replace at a much faster rate the the ethnic culture, it will eventually be replaced.
By the way, Mexican reproduce at a much faster rate than Americans giving them much more power.
This is just a fact. Has nothing to do with my religious beliefs. I for one would like to see the cultures in Europe maintained not Islamized. Spain has a rich culture and so does France. They just need to get rid of a good portion of their welfare states, but I like the cultures.
By the way, I am not against all socialization. Some socialization is necessary in a growing economy to help older people and those unable to take care of themselves.