Destination: USA

After brushing away the Jappos with little fanfare, Chairmen Mao’s followers have now set their sights on those pesky Americans.

Apparently, 2025 is when we will all start speaking Chinese.

Since President Barack Hussein Obama took office in January 2009, with promises to fix the economy, our national unemployment rate has sky-rocketed from 6.0% to almost 10%, which is the highest in almost 30 years.

The American Observer has put together an excellent graphic to illustrate the worsening situation since the messiah was elected, and the following two images convey the deterioration succinctly. The darker the color, the higher the unemployment – click to see bigger images.

Unemployment, January 2009: Obama Inaugurated

Unemployment, May 2010: Obama Flailing

NYT has put out a nice graphic comparing this recession to previous ones. A simple explanation of the curves is the deeper the curve, the greater the loss of jobs and the deeper the recession.

Healthcare or Jobs?

As even an idiot can tell, this current recession has been the deepest among all the previous ones covered by the graphic. It is also the second longest already and we’ve only reached the bottom just now. Additionally, the NYT has tried its best to portray GWB’s entire first term as a horrible recession and most of his second too (the first recession ended in 2003) … there has to be a limit to liberal media propaganda.

Obama has been president for 16 months now – month 13-29 of the current recession above – and what has he done to ameliorate the situation? He passed health-care reform that doesn’t come into force for another 4 years. What a waste of a good opportunity!!

Waving it Ever Higher

In what seems to be the continuation of a long French tradition, Paris-headquartered Alcatel-Lucent has waved the white flag in its legal fight to defend some shady patent dealings.

After just 2 days into the lawsuit, ALU’s lawyers had had enough legal wrangling and decided to bring out the surrender card. They agreed to settle with the plaintiff and save the perennially loss-making company some amount of dough.

It’s always good to see the active continuation of a long and deeply held tradition, going all the way back to the Gallic Wars.

The Democrats’ profligate spending has created a historic situation in which lenders feel that it is safer to lend to Warren Buffet, P&G, J&J, and even others, than the U.S. Government:

Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks…

Moody’s predicts the federal government will lose its AAA bond rating very soon. And, this problem is not going to be fixed by saving $138 billion over 10 years.

Now, the annual budget deficit will hit $1.35 trillion dollars in 2010, down from $1.4 trillion in 2009. Out of that colossal total, Obama’s healthcare bill will cut a mere $138 billion over 10 years.

$138 billion over 10 years implies cutting the deficit by $13.8 billion per year. That’s like saving 1 cent for every dollar spent.

That will surely save the federal government from bankruptcy.

In a recent interview for the Dartmouth Alumni Magazine, Hank Paulson ‘68, the former Treasury Secretary, claims in reference to the Lehman Brothers collapse:

We tried very hard, but we didn’t have the authority to put capital into Lehman Brothers until we got TARP. Even if the Fed could have found a legal way to make a loan, it would have been foolhardy because it would have been lending into a run – Lehman Brothers had a big capital hole and a liquidity problem, and we didn’t have a buyer for them as we did with Bear Stearns…

[So there's nothing that could have been done?]

Yeah. We couldn’t find anything

That was for the weekend of September 13-14, 2008. The result? A complete freeze-up of the lending market and a massive tumble in U.S. and global stocks. Two days later on September 16, the U.S. government took over AIG with a $85 billion bailout.

Who Cares About Lehman?

Of course, there are many excuses to be made for allowing the Lehman collapse (free market!) and saving AIG (too big!), but how did the U.S. government suddenly acquire the authority to bailout an insurance company 2 days after it couldn’t save an important investment bank?

Arguably, the Lehman collapse was the spark that caused the fire. Once you save one company as insignificant as Bear Stearns, you can’t allow another as big as Lehman to collapse in the midst of a jittery economy.

Paulson and C0. are responsible for the horrible TARP program – not because it was put in place but because of the way it was implemented – and the initial Wall Street collapse. Paulson did try his best to prevent another Lehman, but it was too late already.

Tim Geither, along with other spendthrifts in Washington, think that Democrats can continue spending like there’s no tomorrow. In a recent interview, he claims:

Absolutely not … That will never happen to this country…

…referring to the possibility of a ratings downgrade given a projected deficit of 1.6 trillion dollars next year. This is in response to:

Moody’s Investors Service Inc. last week said the U.S. government’s bond rating will come under pressure in the future unless additional measures are taken to reduce budget deficits projected for the next decade.

The downgrade won’t happen because of any internal factor but as Stanley Fischer puts it:

I don’t know who else would be the gold standard at this stage

As soon as a replacement is found for the Treasuries, down go their ratings.

Happy

John Thain saved Merrill Lynch from collapse in 2008 through his adept maneuvers. He sold off the company to Bank of America in a Treasury-sponsored deal right before a run on its shares would have destroyed the firm.

He has now been appointed as the new CEO of CIT, the business lender that emerged from bankruptcy only recently. Thain might be the perfect choice to turn around the company.

I wonder where Bob Nardelli, Chrysler’s former boss, is going to end up.

Pandit: Happy To Be Out of Obama's Clutches

Eager to rid itself of the government’s onerous restrictions on compensation, management and risk taking, Citi has finally decided to repay some $20 billion in aid by replacing it with private investments.

Pandit said about the decision:

We owe the American taxpayers a debt of gratitude and recognize our obligation to support the economic recovery through lending and assistance to homeowners and other borrowers in need

Wells Fargo is also in the process of repaying its own loan. The company’s CEO pointed out the financial benefits of the arrangement for the government:

TARP stabilized our country’s financial system when confidence in financial markets around the world was being tested unlike any other period in our history…

Its success also generated financial returns for taxpayers, including 1.4 billion dollars in dividends paid to the US Treasury

So the government has making a decent buck from its investments in the banks – where has it all disappeared? Taxpayers should be given tax breaks, if nothing else.

Charles Lane writes in the WaPo today:

Reduce the federal minimum wage. In 2007, Congress enacted a three-step increase in the minimum wage, which was then $5.15 per hour. The final installment took effect in July, raising the rate to $7.25 per hour. In the meantime, unemployment climbed from 4.7 percent to 9.5 percent.

….It was unwise to keep raising the cost of hiring them in a recession.

The minimum wage is a socialist concept designed to reduce poverty in sweatshops. But, we don’t have such conditions in the US anymore. You couldn’t hire an illegal for $5/hour these days – you don’t need minimum wage to ensure a certain minimum pay.

What is preventing willing employers from being matched with willing employees is the anachronistic minimum wage legislation. If we get rid of minimum wage, perhaps, we could get back some of those jobs lost to countries with cheaper labor markets.

President Barack H. Obama’s latest brainwave is to conduct a “jobs summit” to discuss what needs to be done to lower the unemployment rate.

A couple of the ideas kicked around seem to be:

Give employers incentives to hire. A targeted tax credit, available to businesses that expand their payroll, is one possibility the White House and Congress may support. Ensuring that businesses can get tax credits for research and development is another.

…

Boost credit availability for small firms. “We’ve heard that loud and clear” as a top concern of business, White House economist Christina Romer said on CNBC. Large firms generally see credit markets working, Obama said in the meeting. The administration is already trying to provide new capital to small and mid-size banks, which support many small employers. Administration efforts to stabilize the housing market also tie in, because home equity is often the collateral for a small business loan.

The White House and Congress may support the most obvious method to stem job losses?

It’s already working in Germany and other parts of Europe…

In Germany … the sharp contraction in industrial output has led to – so far at least – a rise of only three-quarters of a point in the jobless rate.

…because of incentives and subsidies for businesses to cut the work-week, reduce costs and hold on to their employees. Even the IMF has grudgingly acknowledged that Germany has indeed done a good job of reducing job losses.

Another idea is that of India that is directly providing jobs to large swaths of the rural population. The good part about it is that unemployed people are getting paid to work, unlike the Unemployment Insurance system in the U.S. where folks are getting paid to sit at home. India hasn’t been hit as hard by the recession in part because of the continued increase in rural consumption.

Now, for the second point, does it take 8 months and 10.2% unemployment to realize that small businesses are starving for cash? Here in Bellevue, dozens of small businesses are shutting down every week (just drive around the Crossroads area to see all the empty stores) because they are not getting the loans that can get them through the economic crisis.

A real jobs summit would involve announcing such policies rather than another talk show.

I had posted in June that The End of Saab Cometh and it seems now that I might be right after all. Koenigsegg has backed out of buying the carmaker from GM and the only real option left is to shut it down.

Saab has been a loss making proposition ever since GM purchased it in 1989. Manufacturing cars in Sweden is expensive, and thus a bad idea, and making unreliable cars such as Saab is even worst.

Time indeed to shutter Saab.

Even if a company is a bail-out recipient, it still needs to retain talent and compete with other companies to hire the best workers. With onerous pay restrictions, no firm can be expected to hold its own with competition that is not functioning under the same conditions. Why would I want to work for 200k a year with Bank of America when I can get 400k with Goldman Sachs for the same job?

Fed and Treasury are coming around to this painful truth:

In recent weeks, officials from the New York Fed and the Treasury Department have urged Mr. Feinberg, to avoid making 2010 pay similarly restrictive for some top AIG executives and employees, according to people familiar with the discussions.

Fed and Treasury officials told Mr. Feinberg that tough restrictions could ultimately jeopardize the government’s ability to recoup its roughly $90 billion in loans because key employees would leave. Unlike other firms subject to Mr. Feinberg’s review, AIG isn’t expected to pay back the government’s investment for several years, making it subject to the pay czar’s rulings for the foreseeable future.

U.S. officials made a similar argument to Mr. Feinberg ahead of his 2009 decision, these people said.

But will Kenneth Feinberg and his White House overlords realize that socialism isn’t gonna help AIG and Bank of America return to profitability and independence?

Barack Obama shall now turn his hallowed attention to comprehensive immigration reform, according to Janet Napolitano. We’ve already heard the word on healthcare, Iraq, Afghanistan, energy, the environment, Portuguese water dogs, Gitmo, military tribunals, terrorism, and many more issues.

The only thing remaining was immigration and, lo and behold, it shall be dealt with. Don’t get me wrong, I do agree with the administration’s thinking on the issue, especially on the last point:

Laying out the administration’s bottom line, Ms. Napolitano said officials would argue for a “three-legged stool” that includes tougher enforcement laws against illegal immigrants and employers who hire them and a streamlined system for legal immigration, as well as a “tough and fair pathway to earned legal status.”

The problem that I have right now is that unemployment has crossed 10%, companies are shedding employees every single month, private spending is frozen just as it was a year ago, government waste is distorting the real state of the economy, and Obama is focusing on what are, really, peripheral issues.

What does an unemployed guy care more about? Health insurance, immigration, or saving his mortgage, his car, his whole life?

Furthermore, the Congress just passed an extension to UI, but what they should really be thinking about is giving the private sector incentives to hold on to their employees – for instance, targeted tax cuts – rather than extending the unemployment insurance tax to pay for a program which doesn’t save or create jobs.

Alan Mulally, erstwhile of Boeing, is doing a swell job for Ford. The company posted a profit of almost a billion dollars this part quarter, including:

The company’s earnings of $357 million in North America broke a streak of 17 consecutive quarterly losses there.

Mulally had earlier established a $10 billion credit line for the company, which allowed Ford to avoid bankruptcy and government intervention. In addition Mulally also successfully negotiated with the UAW earlier this year, with pay cuts for senior management.

Boeing, on the other hand, has posted $1.6 billion in losses. It seems that passing over Mulally for the CEO position in 2005 was quite possibly the worst decision that the company has made over the past few years, in addition to its more obvious issues with airplane production.

GM is expected to borrow an additional $2.5 billion (!) from the government to “help” Adelphi, its parts supplier.

Americans should boycott GM in favor of Ford and the Japs. Toyota, Honda and others have been building cars right here in the United States for decades and doing so profitably. Why can’t their American counterparts do the same?

Sept . 15, 2009 – Ben Bernanke: “From a technical perspective, the recession is very likely over at this point.”

Oct. 2, 2009 – Unemployment rises to 9.8% after 263,000 job cuts last month

The recession is over. 9.8% is still 0.2 less than 10! Yay!

This year’s deficit will be a mere 1.6 trillion, thrice as much as Bush’s 2008 deficit. Over the next 10 yrs, Obama wants to spend another 9 trillion dollars of money we don’t have.

Under Obama, we may be moving towards energy independence, but deeper into Chinese servitude.

Retail sales fell 0.6% in July, excluding cars and auto parts. We are speeding down the recovery highway.