Archive for October, 2008


Get Ready For the Global Financial Crisis

October 25th, 2008 admin

The failure of major US investment banks and insurance companies, and sharp declines in stock market indexes are affected the value of the world’s major currencies. At present, major banks, central bankers, hedge funds, and home-based investors are in uncertain condition. Generally, when people feel unsure about market direction they will sell off their riskier assets and they buy safer investments.

When investor confidence collapse they will start buying US government debt. This is brings benefits to U.S dollar because they need dollars in order to buy US Treasury’s. Investors are buying US Treasurys, which are viewed as safe investments because they are backed by the US Government. The riskiest investments have produced the biggest returns. This is the art of investing, the more risk you take, the larger your potential returns. (more…)

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300 Points Lost on Wall Street As Investors Fear Recession

October 25th, 2008 admin

Stock markets moved lower on Friday around the world, as investors are liquidating risky positions, mounting evidence of global recession.

U.S stock indexes fell 4 percent, European stocks fell 6.5 percent and Japan’s Nikkei plunged 9.6 percent.

Oil moved lower as well to $63 per barrel while commodities copper to zinc, sugar and coffee were battered by sharp selling.

The gloomy outlook convinced investors that economy is headed for a severe recession despite government efforts to help financial system. Investors have been saying that we are in recession and this is time to realize that we are in recession right now. (more…)

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2nd Bailout Plan of $40 Billion Plan to Help You Refinance

October 25th, 2008 admin

The Federal Government is working on $40 billion plan to help homeowners refinance their mortgage and avoid foreclosure.

Sheila Bair, chairman of the Federal Deposit Insurance Corp., told the Senate Banking Committee that the government can do more to help homeowners to avoid foreclosure.

“Specifically, the government could establish standards for loan modifications and provide guarantees for loans meeting those standards,” Bair said. The FDIC is working “closely and creatively” with the Treasury Department on such a plan, she said.

First bailout package of $250 billion allows government buy preferred shares directly from banks in return for injected capital. Nine of the largest U.S banks were signed into $125 billion capital infusion. (more…)

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Saving Our Beloved Cars and the Automotive Industry

October 25th, 2008 admin

Once again the US automotive industry is in dire straits. It did not learn from the 1973 energy crisis. It did not learn from the Chrysler experience. It did not learn from Toyota. It continued to depend on old, worn out concepts and on CEO’s that are kept in their positions by nepotism and by boards that do not understand the automotive business.

In a joint effort the Big Three are asking the US government for a $25 billion loan. They argue that government demands for increased fuel efficiency are too expensive to implement and require huge amounts of capital for retooling.

Let’s assume for the moment that the argument has some merit. But how can companies with worldwide manufacturing facilities fail to notice the steady increase in fuel prices and not see the warning signs hoisted by governments across the world that want to limit greenhouse gas emissions and fossil fuel consumption. This neglect is inexcusable.

Efforts of US and European governments to limit fuel consumption are misdirected, counterproductive, and coercive. A comprehensive analysis quickly reveals that we must indeed limit and eventually halt greenhouse gas emissions.

OPEC countries will continue their unstoppable increases of petroleum prices. Electric cars, CNG powered cars, and hydrogen powered cars cannot stop carbon dioxide emissions perceptibly and will not make our country independent of OPEC imports. (more…)

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After the Global Financial Crisis Comes the Global Humanitarian Crisis?

October 25th, 2008 admin

What is the plural of “crisis”?

It seems like 2008 is becoming the year of global crisis. First we were faced with the worldwide food crisis, swiftly followed by, what now seems to be, a collapse of major financial institutions.

But it might not stop here. As FAO, the UN Food and Agriculture Organisation, calculated the cost to deal with the current food crisis at US$30 billion per year, donors stepped up their financial support.

But that was before the current financial crisis. At this moment, the governments worldwide concentrate their financial resources in keeping their banks and financial institutions afloat:

* The Belgian, French and Luxembourg governments put in US$9 billion to keep Dexia afloat.
* Previously Netherlands, Belgium and Luxembourg put up US$16.1 billion to save the Fortis bank.
* Britain is working on a US$87.7 billion bank recapitalization concentrating on Barclays, HSBC and the Bank of Scotland. (more…)

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Universities and College Students Affected by Financial Crisis – Future of Nation at Stake

October 25th, 2008 admin

The financial crisis is severely affecting our colleges and universities. Currently, tuition costs have risen out of control and even if students can get student loans to attend college, it puts them into the workforce under a pile of debt, essentially subjecting them to economic enslavement for decades. In fact, many government agencies are now offering to pay off tuition debts if the graduating students do a rather long stint with government employment.

The Universities have been unable to control costs and due to supply and demand issues, coupled with the easy money of government guaranteed loans to college students. Academia is broken, just like the Health Care System, Banking System and Housing Markets, worse the runaway costs have the taxpayers holding the key. Academia has abused their status like the leaders of the other groups. (more…)

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Financial Crisis Understanding From the Ground Up (Part 3)

October 25th, 2008 admin

Traditional commercial Bank vs Investment Bank

The simplest definition among them is: A commercial bank takes deposits for checking and savings accounts from consumers while an investment bank does not.

A commercial bank may legally take deposits for checking and savings accounts from consumers. The federal government provides insurance guarantees on these deposits through the Federal Deposit Insurance Corporation (the FDIC). We have mentioned the definition and how a traditional commercial bank makes profit in before. So, how about investment bank(I-bank)?

An investment bank operates differently. An investment bank does not have an inventory of cash deposits to lend as a commercial bank does. In essence, an investment bank acts as an intermediary, and matches sellers of stocks and bonds with buyers of stocks and bonds. For example, if company needs capital, it may get a loan from a bank, or it may ask an investment bank to sell equity or debt (stocks or bonds). (more…)

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Financial Crisis Understanding From the Ground Up (Part 1)

October 25th, 2008 admin

What is going on to the global financial market? This probably is the question being asked most frequently in the mean time. I am not an economist. But I do really concern about the current financial crisis and the economy like the other people. I want to understand the current situation. I want to see the complete picture. Therefore, I try to understand and analysis the whole event in a simplified way, and prepare to express my idea in laymen text.

Let’s start thinking from the ground up

In the society, reasonably, trades among people are negotiated by the participants as a fair exchange of goods and services. However, it is not easy to match the same values of different goods and services every time. Therefore, money appeared. What is money? It is a recognized medium of exchange, agreed by all the participants. In other words, it is an IOU or a credit for the seller and a debt for the buyer. For example, A sells goods in the market. When B comes to buy the goods from A, B gives an IOU to A as an exchange. With that IOU, A can buy goods back from B or other parties with the equal value. The IOU is the money. It gives people a flexible way in trading. (more…)

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2008 Retail Christmas Sales Sketchy – Consumer Confidence Could Cause Christmas Chaos

October 16th, 2008 admin

Many things are leading folks to wonder if the 2008 Christmas Retail Rush is going dive into a dismal and destructive ditch. With the current mess in the stock market many American families are quite worried about their financial viability in the upcoming future. Indeed, even those who are relatively safe might be severely cutting back this holiday Christmas shopping season.

Not long ago consumers were told to spend and go shopping to save the economy, but it does not look like the credit card indebted consumer will take such a mission as seriously as they have in the past. You see consumer confidence is at an all-time low, which is really unnatural during a Presidential Election Year, generally the economy does very well prior to the elections and drops afterwards.

Now that is not say that it will not drop significantly after the election, it still might and depending on who gets elected we will see some changes which will affect both businesses and consumers, (more…)

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Financial Economic Crisis & Bailout Bill – What to Expect 2008

October 16th, 2008 admin

There is no doubt the US is in a great economical financial crisis, probably the worst since the ‘Great Depression’. But one can’t help but ask; just how bad are things going to get? And exactly who is going to feel the worst of this crisis?

The sure thing you can bet on is that taxes are going to go up and the financial burden of this bailout will be felt nationwide. It will be felt not only by the banks themselves (nationwide), but their infrastructures and communities as well. Even the auto loan industry and credit card companies are at risk as well as insurance companies, as individuals drop existing policies and refused to take on new ones.

About 9.8 million people or 7% of the American workforce are employed in the financial, real estate, and the insurance sectors and they have an even larger spending potential. (more…)

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