28 February 2008
Glenn Beck Boils Down Economic Woes
Posted by Joy Bischoff under: World Economy .
Here is the last half of an article from CNN by Glenn Beck. I like his point; we can’t be sure what is coming down the pike but it would be foolish to not be prepared.
by Glenn Beck
Professor Roubini recently laid out what he called the “12 steps to financial disaster.” Unfortunately, they were really complicated, and I have severe ADD, so I’ve boiled them down into five phases that even a rodeo clown like me can understand.
I think of these like our military’s “DEFCON” — or defense readiness condition — scale, except that this countdown could end in the meltdown of your bank account:
• DEFCONOMY FIVE
How you’ll know we’re here: The housing downturn turns into a free fall, making it the worst collapse in our country’s history. That not only triggers massive numbers of foreclosures and lost household wealth, but it also sets off another large wave of bank write-downs.
Odds we get here: Roubini told me that it’s “extremely likely, even unavoidable” that we hit this stage because “the excess supply of new homes in the market is like we’ve never seen before.” Prices, he believes, “need to fall another 10 to 20 percent before that clears.”
• DEFCONOMY FOUR
How you’ll know we’re here: Americans upside-down on their mortgages and unable to pay their home equity loans begin defaulting on other debt, like credit cards, car loans and student loans. In addition, bond insurance companies lose their perfect credit ratings, forcing already troubled banks to write down another $150 billion.
Odds we get here: High. Roubini says that 8 million households are already upside-down on their mortgages and he thinks we could see that number go to between 16 million and 24 million by the end of 2009. A lot of those people, he believes, will simply walk away from their homes and send their keys back to the bank.
• DEFCONOMY THREE
How you’ll know we’re here: Some banks begin to crack under the pressure of continuing write-downs and mounting defaults by consumers. A national or large regional bank finally collapses, triggering hedge fund failures and general chaos on Wall Street, potentially leading to a 1987-style market crash.
Odds we get here: Very good. Roubini says that we’ll likely socialize the losses, “effectively nationalizing the mortgages or the banks.” It would be, he told me, “like Northern Rock (the large bank in England that was recently taken over by the British government) times three.” He thinks the stock market will head south throughout the year as fears about a severe recession are confirmed.
• DEFCONOMY TWO
How you’ll know we’re here: Most forms of credit (both to consumers and businesses) become virtually nonexistent. That results in a “vicious circle” of additional write-downs, stock market losses, and bank collapses, which leads to even less credit being available.
Odds we get here: Good. Roubini says that credit conditions are becoming worse everyday across a variety of markets and won’t be getting better anytime soon. Without extra credit available, people might have to actually (gasp!) live within their means.
• DEFCONOMY ONE
How you’ll know we’re here: Welcome back to 1929. A full economic meltdown results in a complete failure of the underlying financial system. What will be known to future generations as “The Greater Depression” has arrived.
Odds we get here: Not likely. Roubini believes that this will be a “very painful and severe recession” that could last for 18 months or more, but it will be more like 1981 than 1929. Families may be eating soup again, but at least it’ll be in their own kitchens.
Now, do I think any of what you just read will happen?
I have no idea, and that’s exactly the problem. I’m not an economist or a stockbroker; I’m just a guy trying to make the best decisions I can, and picking the brains of real experts helps me do that.
But I do know one thing for sure: Depressions aren’t advertised in advance. Last time around we went from the Roaring ’20s to bread lines in a matter of just a few years.
Anyone who says that can’t happen again either doesn’t know history, doesn’t understand how interconnected the world’s economies have become, or is lying to you. While that doesn’t mean you should panic, it does mean you should prepare — something my grandfather would’ve done a long time ago.
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4 Comments so far...
Cavetrollhead Says:
28 February 2008 at 7:59 pm.
I have to admit some of this is over my head. Maybe if I understood what a write down is. . .
SGS Says:
29 February 2008 at 11:37 am.
Cave, I am glad you are blazing the trail here by asking a first question. I am sure you are not the only one. Please understand that I am not an economy expert. I may be wrong; it looks like Joy knows more about it, so hope she will correct me.
A company normally has many accounting ways to postpone the losses. However, when the company “writes down,” the company will absorb the loss. It often will lower their debt rating (like us with our FICO scores). However, their loans are not fixed over a long term. When their rating is lowered, their interests go up. Because they now are paying more in interests and they continue to “write down” loss quarter after quarter (which is inevident as long as our housing market is shaky), they will see less and less profits. This happen with a small number of companies all the time. The difference is that this time around, we may be seeing the above-average number of companies having to write down.
Joy Bischoff Says:
29 February 2008 at 11:49 am.
SGS, I’m glad you took that one. You explained it better than I would have. I’ve been meaning to get to this but forgot. I’m juggling too many projects at once right now so thanks.
NUTshell Says:
24 May 2009 at 10:20 pm.
Right Wing Extremist, Glenn Beck, Boils Obama’s Policies Down to a NUTshell
This weekend on Fox News, Glenn Beck, with both of his unregistered semi-automatics a’ blazin’, cut down Obama’s economic policy then boiled the carcass in a simmering cauldron of right-wing, president-bashing, extremist hate talk leaving nothing but a NUTshell. His epiphany: The president claims that we are in a serious economic crisis due to overspending – and the only way out is to spend more in order to keep our economy going.
A Fox News contributor and psychologist explained that the American public reacts euphorically to Obama by over-spending in the absence of an appropriate stimulus, “and I don’t mean Stimulus Package.” Supporting his assertion, the psychologist affirmed Beck’s analysis that there is no data to support the president’s conclusion and NUTshell policy to spend more in order to counteract overspending. The American populace, reacting to Obama’s economic policy (in the absence of supporting data) was compared to someone with bi-polar disorder in a manic phase. Treatment for the related euphoria and subsequent self-destructive behaviors would NOT be to affirm the delusions. Instead the individual would be given medication (perhaps rational, data supported policies?), “preferably in the form of suppositories, thereby preventing him or her from regurgitating the medication in order to preserve the delusional euphoria,” commented an off-air, self-proclaimed right-wing extremist psychologist. Beck’s guest psychologist further explained that the patient, having received appropriate medication, would be told that things would be fine now, and he or she will come out of the delusional thoughts and resulting behavior without harm.
“What are these right-wing extremists thinking?” asked an intellectual for the moderate viewpoint. He went on to comment:
1. Spending in order to counter overspending is effective and well-loved by the American people, particularly executives of AIG, for example, and a large, cultural cross-section of citizens who also receive government handouts and do not need to pay taxes.
2. This attack on the thoughts, perspectives and policies of the vast majority of progressive Americans is an attack on free speech and thus an attack on our very republic, itself.
3. There is no doubt in any of our nation’s brilliant universities that this type of hate-speech comes from none other than the “tea-banging rednecks who hate the fact that we have a black president.”
4. This is obviously nothing more than an attempt to push the right-wing anti-choice, woman-hating agenda, promulgated and fostered by surreptitious elements within the Catholic Church. The Catholic Church cleverly disguises its underhanded agenda of power-seeking by overtly claiming to protect fetuses as if they were human, when we all know that fetuses are nothing more than a burdensome extension of a woman’s body and are of no use other than scientific stem cell research. Just because all significant medical advances have thus far come exclusively from adult-stem cell research, while embryonic stem-cell research is exorbitantly expensive is no reason for the Catholic Church to oppose embryonic stem-cell research based upon purported moral and ethical grounds. They just don’t want to admit to ‘possibilities’ or the great good and psychological healing that women attain through abortion.
5. Of course the anti-American National Rifle Association is no doubt a part of this right-wing conspiracy as evinced by this group pushing their death-mongering agenda that holds the Constitution and the Bill of Rights as more important than well-meaning moderate activist groups like Acorn. Just because violent crime rates sky rocket in societies where gun ownership is severely restricted is no reason to keep up the killing.
6. Glenn Beck lacks any foresight or insight. And anyone that pals around with him, Bill O’Reilly or Sean Hannity needs a psychologist, and not the quack Beck had on his show this weekend.
7. This type of hate speech should not be tolerated. The ‘fairness doctrine’ should extend to the cable networks and anyone who publicly fosters this hate-mongering should be prosecuted with the support of the “full weight of the Obama administration’s press-corps.” Long prison terms should be implemented to silence these radicals and keep them from infecting our “Great Society.”
Although the debate rages on between right-wing extremists like returning military personnel, and peace-loving moderates like Bill Ayers, this exchange clearly demonstrates the intellectuals amongst the moderates have established the upper-hand.
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