What the Second Depression Will Look Like

[Mullenite]

YouTube - LA Riots - Gunfight In Koreatown

Thanks to my self for digging up this video from the 1992 Riots in LA - a reminder of how quickly society's rules can crumble. From 1992, what similar attitudes and actions could result from upcoming severe economic hardships. Such episodes of sporadic explosions of crime and violence in dense population zones coming back soon to a city near you?

[Canuck Mormon]

You're just full of uplifting information aren't you.

[Mullenite]

Hey Canuck Mormon; Keep your Head up..........

[Moksha]

What will it look like?

[Canuck Mormon]

Hey Canuck Mormon; Keep your Head up..........

What's that supposed to mean??

[Mullenite]

Hey Canuck Mormon; don't Worry

[ruthiechan]

If we enter another Great Depression, because the federal government is in the red thanks to Bush's tax cuts, the government will NOT be able to help us. There will also not be a popular war to help get us of it the way WWII did. Therefore to prepare you really need to follow the council of building up your personal/family food storage.

[sixpacktr]

Ruthie,

You were so close. We do need to follow the counsel of the Prophets and be prepared.

'Bush's tax cuts' are not the reason we are having the problems we are having. Since when is it bad that people keep the money they earned?

The problem is that the libs, both in the Dem and Repub party, don't have the sense to NOT spend what they don't have! Instead they give money away to everyone without a care in the world.

Try living that way in your personal life. Spend like a drunken sailor, and then when the bill collectors show up at your house wanting all you own, try telling them that it is your boss's fault for not paying you enough (like the libs try to do by demonizing the rich).

And yet, we keep electing these dolts that do not have the best interests of us or the USA in mind, but rather how they can be elected again, and again, and again. And that way is to take YOUR money and give it to someone else.

I for one wish that the conservatives would rise up and demand that the income tax be done away with, or at least not taken out of your check automatically. That way, about April 15 of every year when you have to cut that check to good ol' Uncle Sam, people would be shocked and then probably do something about this confiscatory tax burden we are under.

The Boston tea party happened over a 1/2% tax rate hike. Sam Adams and the boys must be rolling in their graves at the wussiness that is us today...

[ruthiechan]

I do know that before the tax cuts we were no longer in the red. It's one of the few good things that Clinton did. I don't think it helped at all. It certainly isn't the only reason.

If we do have taxes we should have it be like tithing but have it apply to the profits that businesses make as well. Everyone pays 10%. But that would make too much sense. . .

[sixpacktr]

Ruthie,

I will agree with that. The answer is the 'FairTax'. Get the book by John Linder and Neal Boortz. But it will never become law. As you said...it makes too much sense...

[jjrogers]

The biggest problems in our economy have been caused by the government spending money they don't have AND individual people spending money they don't have. We are reaching a point where the people won't be able to bail out the government and the goverment won't be able to bail out the people.

The Prophets have told us for YEARS to get out of debt, stay out of debt and get our food storage. Yet as members we keep ignoring that council.

[Mullenite]

I'm glad you Worried!

Read this one! (click on the link there too)

Monetary Statistics by Gary North

The fed has actually been dramatically deflating real dollars it seems in order to combat the massive inflation of credit that created the bubbles we see.

News to many I am sure!!!

Given that and given the credit contraction that is underway and likely to get much much worse (if you cannot pay for your house who is going to give you a car loan either, or a credit card if credit defaults spread? I believe they will spread!!!)

I would say that we are a little ways into a deflationary period that will prove very ugly.

If we can see it now (and i hope that others eyes will be opened to it), we are either being lied to (by those who publish the various stats, the fed and the new M3 predictors, or Mish and the M' predictor etc...) or the cat is very much out of the bag. I very much think that the cat is out of the bag.

The fed has known and seen it for a long time (hence the monetary tightening) but they have not bothered to say anything about it, that is protectionist or deceitful or both! Who else knows and how have they (and will they) react?

But my answer is that we just went through a period of massive bubble creating inflation and are now seeing the pendulum swing the other way with a lot of momentum!

[Hemidakota]

Bank of America posted a 77-percent lost over last quarter....sounding bad.

[Mullenite]

UPS, FedEx Decline Points to Continuing Recession (Update1)

By Mary Jane Credeur

April 22 (Bloomberg) -- Falling shipments at United Parcel Service Inc. and FedEx Corp., which together deliver 80 percent of packages in the U.S., show the economy is in a recession and unlikely to rebound this year.

UPS, whose domestic volume has outperformed the gross domestic product for almost a century until last year, said April 8 that deliveries dropped in the first quarter. UPS also said earnings for the three months through March will miss its previous projection by as much as 7.4 percent, just the third time the Atlanta-based company has made a new forecast that was below an earlier one.

FedEx's U.S. shipments dropped 2 percent last quarter, and the company said last month it would have ``limited earnings growth'' this year because of the slowing economy. Both companies are also struggling with soaring jet-fuel, gasoline and diesel costs after crude oil surged 80 percent in the past year.

``This is what a recession feels like,'' said Steven Marco, who manages $800 million including UPS shares at Marco Investment Management LLC in Atlanta. ``The trucks are not as full as they used to be.''

UPS's profit excluding one-time items may drop 12 percent to $902.9 million for the first-quarter, according to the average estimate of six analysts surveyed by Bloomberg. The company is scheduled to report earnings tomorrow. Chief Executive Officer Scott Davis declined to comment because of the ``quiet period,'' spokesman Norman Black said.

`Risks Have Increased'

UPS Chief Financial Officer Kurt Kuehn said at a March 12 investor presentation that 2008 will be ``challenging'' because of the cooling economy and that the ``downside risks have increased'' for volumes.

FedEx's profit for the fourth quarter ending May 31 may drop 14 percent to $525.1 million, according to the average of five estimates in a Bloomberg survey. Chief Financial Officer Alan Graf said last month that lower demand for express shipments in the U.S. will continue into fiscal 2009.

UPS, General Electric Co. and Union Pacific Corp. are among the bellwether companies economist Chris Rupkey considers when making forecasts. Union Pacific's automotive volume fell 13 percent and lumber is down 27 percent for the first 14 weeks of this year. Two weeks ago, GE said 2008 earnings will miss its previous forecast.

``All three have seen a slowdown in their businesses, and this could presage a sharper downturn in the economy than we are anticipating,'' said Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``It was likely a very weak first quarter based on UPS and FedEx shipments.''

`Coincident Indicators'

UPS and FedEx's customers include Ford Motor Co., Dell Inc., and Amazon.com Inc., as well as banks and law firms. That gives them exposure to almost all industries, making them ``coincident indicators'' of economic health, says Rajeev Dhawan, director of the economic forecasting center at Georgia State University in Atlanta.

Drops in U.S. shipments, coupled with job losses and tighter bank lending standards, signal that the economy probably entered a recession in November or December, and may have a period of no growth for 9 or 10 months, Dhawan said.

The volume decreases for the two shippers confirms ``the outlook that we are projecting for the rest of 2008 as being very bleak,'' said Satish Jindel, president of SJ Consulting Group Inc. in Sewickley, Pennsylvania, whose clients have included UPS and FedEx.

Rethinking Needs

Fuel is partly to blame for earnings erosion at UPS and FedEx, since they typically have a two-month lag in recovering expenses through surcharges. Both companies plan to boost their surcharges for air shipments to 25 percent next month, from 20 percent, which FedEx's Graf said is causing some customers to ``rethink'' their shipping needs.

Shipping now makes up 5 percent to 10 percent of most manufacturers' costs, up from 3 percent to 5 percent a couple years ago, said Norbert Ore, chairman of the Institute for Supply Management's manufacturing survey committee.

``It takes the overall cost up and that leads to scrutinizing those expenses,'' Ore said.

More companies are looking for ways to reduce shipping costs, by choosing less-expensive options such as ground delivery, Ore said.

Sending a 2-pound package from the Empire State Building in New York to the Sears Tower in Chicago can cost as much as $82.50 for UPS's Next Day Air Early A.M. service that guarantees delivery by 8 a.m., according to UPS's Web site.

That same package can be delivered within two days by the U.S. Postal Service for $6.20.

Circuit City's Response

Circuit City Stores Inc., the second-largest U.S. electronics retailer behind Best Buy Co., has lowered its shipping expenses by encouraging customers to order items on line and pick them up at one of its 1,500 stores, spokesman Bill Cimino said.

More than half of Circuit City's $1.35 billion in sales through its Web site last year were picked up at stores instead of being shipped to customers, he said.

Circuit City also offers free shipping on Internet orders of $24 or more, using UPS. To keep costs down, it takes as many as 10 days for orders to arrive.

``If it's the free service, there is a longer window'' for delivery, Cimino said.

UPS fell 37 cents to $72.15 at 10:03 a.m. in New York Stock Exchange composite trading. The shares gained 2.6 percent this year through yesterday. FedEx declined 42 cents to $95.03. It advanced 7 percent this year before today.

To contact the reporter on this story: Mary Jane Credeur in Atlanta at [email protected].

[Mullenite]

Asia Times Online :: Asian news and current affairs

Bank of England misses the point

By Peter Morici

Speaking Freely is an Asia Times Online feature that allows guest writers to have their say.

The Bank of England (BoE) announcement of a 50 billion pound (US $99 billion) lending facility for British banks and building societies (mortgage providers) will do little to open up lending and help the United Kingdom to avoid a recession.

The facility will permit British banks and building societies to borrow against mortgage-backed and other securities for terms of up to one year, and renewable by the BoE for up to three years.

The market for mortgage-backed securities and other collateralized debt obligations (CDOs) has essentially closed,

making the extension of new mortgages and credit by banks to worthy homebuyers and businesses in the United States and Britain very difficult.

Unfortunately, the BoE action will, like similar special lending facilities created by the US Federal Reserve in recent months, have limited impact on the present banking crisis.

Over the past two decades, banks have moved from a "deposits into loans model" to a "loans into bonds model". The shift is a good thing because it eliminates the kind of risks banks bear when they borrow short and lend long, which mightily contributed to the US Savings and Loan Crisis of the 1980s and 1990s. Properly done, the loans to bonds model permits banks to greatly expand their lending capacity.

However, in recent years, banks have created increasingly complex and difficult to understand securities. Banks sold, bought and resold securities, and engaged in credit-default swaps that did not lay off risk in the manner advertised. Insurance companies, pension funds and fixed income investors, having been stuck with risky securities, are no longer willing to finance bank loans in this manner. Banks can no longer sell CDOs to these investors.

These practices did permit banks to earn outsized profits on transactions fees and pay executives much better than in comparable non-financial firms. However, it is simply impossible to borrow at 5% and lend at 7%, the essence of traditional banking, and skim off the kinds of profits and executive bonuses bankers now expect and still provide for loan servicing, insurance and the other costs involved in lending and securitization.

Unfortunately, bankers are not much interested in returning to traditional lending practices and are looking to other lines of business within their larger financial services firms for opportunities that may permit continued outsized incomes.

Central banks, by taking mortgage-backed securities and other CDOs off the books of banks, may temporarily relieve liquidity pressures, but such measures do not resolve fundamental structural problems within contemporary financial conglomerates.

The Bank of England and Federal Reserve would do better to bring banks and fixed income investors together to define the kinds of simple mortgage- and other loan-backed securities that insurance companies, pension funds and the like would accept, and condition access to the discount window on banks making and securitizing loans in such a rebuilt market for collateralized debt obligations.

[Mullenite]

Citigroup Bank

Create Alert at: $24 $26 $27 ...

Rank: 8 (Previous rank: 8)

Compare tool: Citigroup vs. Top 10

CEO: Vikram S. Pandit

Address: 399 Park Ave.

New York, NY 10043

Phone: 212-559-1000

Website: Citigroup

Risky subprime loans delivered a huge blow to the financial services giant. The mortgage meltdown forced Citigroup to post the worst fourth-quarter loss in its 196-year history: $10 billion. The company also had to write down $18.1 billion on mortgage-backed securities and cut its dividend by 41%. Chief Executive Charles Prince was shown the door, and the company's shares fell 47%, making it the worst-performing Dow Jones industrial average component in 2007.

To solidify its balance sheet, Citi has raised about $20 billion since November from investors in Abu Dhabi, Singapore and New Jersey.

[Mullenite]

Wal*Mart

Rank: 1 (Previous rank: 1)

Compare tool: Wal-Mart Stores vs. Top 10

CEO: H. Lee Scott Jr.

Address: 702 S.W. Eighth St.

Bentonville, AR 72716

Phone: 479-273-4000

Website: Wal-Mart Stores, Inc.

A facelift and even lower prices kept the world's largest retailer afloat in a troubled economy.

Staring down the barrel of brutal fourth-quarter retail forecasts, CEO Lee Scott dramatically cut prices on 15,000 items - including popular toys and electronics - by 20% more than usual to lure holiday shoppers. That rocked the industry, pressuring other retailers to squeeze already tight margins.

The tactic worked: Wal-Mart grossed $100 billion, breaking its fourth-quarter sales record, and soundly beat Target in same-store holiday sales for the first time in nearly a decade. --Christopher Tkaczyk and David Goldman

[jjrogers]

I Definately think the next couple of years are going to be interesting for the economy. Raises were lower at my husband's job this year. It will be interesting to see how it affects most people. I forsee them creating another kind of bubble.

[Hemidakota]

As I told people back 2003, expect not to retire. Enjoy life now for greater changes are coming. We are facing too much greed and callousness with the global economy.

[sixpacktr]

And Hemi, we are selling our soul for money (not that that is a new thing). I work for a company that is investing heavily in Communist China because it is 'cheaper'. And driving US companies out of business because of lack of work. One day, the commies are going to say 'hey, thanks for all of the investment and machinery, now get the hell out of our country' and then they'll use all of our technology against us in a war. To believe that they are somehow 'reformed' is naive. Almost Chamberlain-esque.

But, as was said many many moons ago: 'you can buy anything in this world for money', and we have gone downhill ever since...

[JohnBirchSociety]

I'm glad you Worried!

Read this one! (click on the link there too)

Monetary Statistics by Gary North

The fed has actually been dramatically deflating real dollars it seems in order to combat the massive inflation of credit that created the bubbles we see.

News to many I am sure!!!

Given that and given the credit contraction that is underway and likely to get much much worse (if you cannot pay for your house who is going to give you a car loan either, or a credit card if credit defaults spread? I believe they will spread!!!)

I would say that we are a little ways into a deflationary period that will prove very ugly.

If we can see it now (and i hope that others eyes will be opened to it), we are either being lied to (by those who publish the various stats, the fed and the new M3 predictors, or Mish and the M' predictor etc...) or the cat is very much out of the bag. I very much think that the cat is out of the bag.

The fed has known and seen it for a long time (hence the monetary tightening) but they have not bothered to say anything about it, that is protectionist or deceitful or both! Who else knows and how have they (and will they) react?

But my answer is that we just went through a period of massive bubble creating inflation and are now seeing the pendulum swing the other way with a lot of momentum!

The only solution is a return to real money.