The economy in microcosm

[SuperScout]

The U.S. government created this country's ethanol industry. First it subsidized it. Then it protected it with tariffs. Finally, after these measures failed to spark a demand for ethanol, the government mandated its use as an additive in gasoline. The mandate did the trick. Once people were actually required to by ethanol, distilleries started popping up all over the Midwest. Then the financial crisis hit. Gasoline consumption declined as the economy slowed, meaning less demand for ethanol. Plants started going out of business every week, putting thousands of people out of work. Now the industry is asking for a $ 1 billion bailout to get it through these difficult times. The joke is on the American public, wo representatives set aside $20 billion for renewable-energy subsidies in the stimulus bill. Think of the ethanol industry, and remember that subsidies are just the beginning.

The above story is just one example of what goes wrong when the government starts tinkering with the free-market economy. If ethanol had been such a high-demand commodity, the free-market system would have responded with the requisite infrastructure. As a results of this government interference, food prices on a variety of products have increased tremendously, since corn syrup for example, is a major ingredient in a whole shelf of goods in your grocery store. So the permanent subsidies to the ethanol industry will be just one more entitlement program that is bankrupting our country.

[phuloi]

Obama Policies Feed Market Panic

Thursday, March 5, 2009 4:40 PM

By: Greg Brown Article Font Size




All week, negative headlines have competed with the slumping market ticker, including early news Thursday that General Motors might well go bankrupt despite billions in taxpayer loans. (Newsmax graphic)

Since Barack Obama was sworn in as president on Jan. 20, stocks have tumbled to record lows — with investors losing an estimated $2.5 trillion in market value.

The trend continued Thursday, with the Dow closing down 281 points, a 4.1 percent drop for the day. Since Inauguration Day, the Dow has fallen 20.4 percent.

All week, negative headlines have competed with the slumping market ticker, including early news Thursday that General Motors might well go bankrupt despite billions in taxpayer loans.

As selling sped up, Citigroup traded at one point under $1 a share, General Electric dipped under $7, and international financial names like Barclays saw declines of nearly 30 percent on the day.

"Everybody is so bearish right now that you would expect to be in the midst of a counter-trend rally," Steven Goldman, market strategist at Weeden & Co, told CNNMoney.

"But the implosion in the banking and insurance sectors is just overwhelming."

Obama has moved aggressively on economic and fiscal policies. But investors — if the market is any indication — are giving his initiatives a chilly response.

On Feb. 17, Obama signed a stimulus bill worth $787 billion — the largest spending bill in history. But the Congressional Budget Office indicates only 20 percent of the funds will be spent this year, and the nonpartisan group suggests that the package could do more economic harm than good.

Obama also gave the green light to an omnibus $431 billion House Democratic spending bill laden with close to 9,000 pork-barrel spending items.

Plus, Obama revealed that he plans increase marginal tax rates on those earning more than $250,000.

The new taxes will yield more than $1 trillion in government revenues, but some economists believe the news of increased taxation will suck the wind out of any economic recovery.

In the middle of the market meltdown Thursday, Obama spent the day talking about a massive increase in healthcare spending, including a proposal in his budget that sets aside $634 billion in a 10-year reserve fund to pay for expanded care.

The drumbeat of bad news was too much for stocks, including:

• U.S. bankruptcy filings surging 31 percent in 2008.

• More than 600,000 Americans filing claims for jobless benefits for a fifth straight week, the worst performance since 1982.

• U.S. factory orders falling for a sixth straight month in January, official data showed.

• One in every eight U.S. households with mortgages ended 2008 behind on payments or in foreclosure, reported the Mortgage Bankers Association.

"The auto industry is effectively being wiped out or nationalized, however you want to think about it," Rick Campagna, portfolio manager at Provident Investment Council in Pasadena, Calif., told Reuters.

"Now you're talking about a good portion, if not all, of the banking sector being wiped out. It's just getting relatively dire."








© 2009 Newsmax.

[Stick]

America was a rural nation before Ransom Olds and Henry Ford who developed a replacement for the horse. America grew after that to the industrial envy of the world and sent it's industrialist around the world to show them how it's done. America PRODUCED and the world bought from America.
Chrysler Corp. hasn't sold one share of it's stock since August 8, 2008 and when it was sold it was selling for 1/2 of what it was selling for just two years before that. I once upon a time paid over $100 for a share of Ford stock which, thankfully I sold in 1996 for $43 a share. Yesterday Ford stock closed at $1.70 a share. General Motors stock sold yesterday for $1.45 a share, stock which just 7 years ago was over $100 a share. Every company in America that depends on supplies depends on trucks and the buyers for those companies drive their car to work every day. Heck even the Amish get a good part of their needs from the a store which depends on the truck to deliver its stock. Virtually every job in America depends on the car companies and in probably less than a decade there won't be one vehicle made in America unless it’s by a foreign company.
The same scenario can be written for American financial institutions where every American has their money. You bought your house by borrowing from one of those financial institutions and they got their money either from investments of your deposits into Wall Street stock or from the government printing presses. Those banks took YOUR money and without one thought let that money depreciate to a fraction of what it was worth to you and today the banks are going belly up and your money's going with them.
Uncle Sam has the answer. He's going to bail out the car companies and the banks with your money but that's OK 'cause all Uncle Sam has to do is to tell you to give him more. Uncle Sam owes the bank big bucks too. If you don't pay more taxes he'll roll the presses and the value of the dollar, our dollar will go down, down, down. Then Uncle Sam will go to Saudi Arabia, China, Russia, and countries that use the Euro and not the dollar and we'll borrow from them or buy more of the garbage they sell us and someday they're going to call in their markers for value not dollars. They’ll own our “Gross National Product.”
Sooner or later we're going to have to pull our head out of our butt and open up our eyes before we sell America or before the Elected Representatives sell us.
What the heck happened to "By the people, for the people and to the people."
Once upon a time "Made in Japan" meant it was junk and there wasn't hardly anything that said "Made in China" Today we go and buy our car or pick-em-up over at the local “Not made in America” store. Who wants to spend that kind of money (from the bank) at a dealership that's going to be closed next week or worse yet, from a car company that supplies the dealership that goes belly up and the new car you buy today can't have it's rear window defroster repaired next week. Your extended warrantee is worthless. Something’s extended, turn around and bend over so you can take that extension right up you’re pakiyah. Your car just depreciated 70% in one week but you owe the bank for twice what that car's worth.
When’s “Made in the America” going to mean something to our elected officials or does it have to be written also in another language too to make it politically correct?

[Arrow]

Great post Stick, couldn't agree more. Sis