Posts Tagged 'credit crisis'

February’s Auto Sales

Here are the auto companies U.S. sales for February. These are the year-over-year percent declines:

-48%   Ford
-44%   Chrysler
-53%   GM
-40%   Toyota
-21%   Honda
-37%   Nissan

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The Credit Crisis Visualized-Video

A visual video about our credit crisis. (Hat Tip, my wife)

California Budget Vote Tuesday

The Senate will vote Tuesday on California’s budget deadlock. Californians should prepare themselves for the biggest lobby effort ever. Nobody will like this budget and we will hear from everyone when the details emerge. The best hope is everyone cancels out each other and a budget is passed.

Buckle your seat belts – the ride is about to get wild in Sacramento, with state Senate President Pro Tem Darrell Steinberg planning to put a $42 billion budget deal up for a vote.

The deal – a combination of cuts and tax hikes – is expected to be unveiled Monday, then put up for a vote Tuesday.

Whether there are enough Republican votes to make it fly, however, is unknown.

“Darrell has made it clear that there was no handshake agreement, and there may not be the votes,” said one Democratic state senator who was briefed on the plan, but asked not to be named because of the sensitive nature of the talks.

“They are close, and hopefully it will pass,” added a member of the governor’s staff. “But there are still some major issues to be worked out.”

The biggest stumbling block for Republicans – whose support is required for the necessary two-thirds passage – is voting for any tax increase.

What is Good for You is Bad for Our Economy

From the AP:

WASHINGTON — Americans are hunkering down and saving more. For a recession-battered economy, it couldn’t be happening at a worse time.

Economists call it the “paradox of thrift.” What’s good for individuals – spending less, saving more – is bad for the economy when everyone does it.

On Friday, the government reported Americans’ savings rate, rose to 2.9 percent in the last three months of 2008. That’s up sharply from 1.2 percent in the third quarter and less than 1 percent a year ago.

It is good that Americans are saving more. Unfortunately, as we learn from above, it’s at the expense of the overall economy. When people save, it decreases the demand for products. When the demand for products goes down, companies adjust by producing less (this usually leads to layoffs). It will be a painful road for many this year but eventually President Obama and his economic team will help guide our economy back to normal levels.

What kind of economy do Americans want for the long term? It is back to our old way of spending with little savings (and lots of debt)? Or will this teach us a lesson about the importance of saving and not spending as much on “useless toys”. A colleague in the Political Science department believes Americans will go back to their normal spending ways after this crisis ends. He says history has shown that is the case with us. What do you think?

California Spiraling towards Bankruptcy: Downgraded yet again!

California’s bonds downgraded by S&P:

The latest blow came with the second downgrading in four weeks by Standard & Poor’s of the Golden State’s remaining $8.7 billion of economic recovery bonds, or ERBs. These bonds are backed by sales-tax revenue, which is taking a hit as consumers in California, like the rest of the country, rein in their spending.

California will not have the ability to borrow any more! Even if California is able to borrow, the interest rates will be so high we will have to cut more out of the budget or raise taxes.

The California government needs to pass a budget yesterday!

Real Estate Crash may be Ending

The National Association of Realtors said today that sales of existing homes rose 6.5 percent to an annual rate of 4.74 million in December. The number of unsold homes on the market in last month fell nearly 12 percent to 3.7 million. At the current sales pace, it would take 9.3 months to sell all the properties, down from 11.2 months in November.

The winter months are usually slow for real estate. People tend to not buy homes around the holidays and the weather can be a negative factor. This makes the latest real estate numbers impressive. With interest rates low and credit easier to obtain, people are starting to buy again. A friend of mine, who owns a mortgage lending business, says he is seeing a pickup in loan requests. “Thank God”, he said!

We are starting to see the rapid decline of real estate slow down. There may very well be a bottom in late spring or summer. Sales and prices should start to rise late this year. If that happens, it will be great news for the U.S. and world economies. The one spoiler for this is employment. If the unemployment rate continues to climb, the housing market will be negatively effected.

California is Almost Bankrupt

Because of the political gridlock and no California budget, the state will start delaying payments and issuing IOU’s next month. Here is California’s Department of Finance’s 161-page report which lists  5,300  public works projects which will be suspended or delayed indefinitely because of the state’s cash crunch.

California already has a higher than average unemployment rate, these delays will probably widen the unemployment gap.