Posted on 03/09/2009 7:57:41 AM PDT by SeekAndFind
Banking giant JPMorgan Chase announced Feb. 23 that it would be cutting its quarterly dividend by 87% to a nickel per share. At face level, this sounds bad, but the savings will speed the process by which it repays TARP funds in order to avoid problematic government oversight; plus, the extra capital cushion puts the firm in a better position to make acquisitions of flagging competitors, should difficulties in the banking sector drag on.
The JPMorgan (nyse: JPM - news - people ) example is important for reminding us that both individuals and companies frequently respond to economic difficulty in ways that ensure recessions are short-lived. To put it simply, when left alone, recessions tend to correct themselves.
Broken down to the individual, there's a fear factor that is part and parcel of downturns. First off, whether employed or unemployed, we save more and our savings very often flow, through bank lending, to capital-starved businesses eager to grow. There are no profits without saving first, and recessions induce us to save.
That, plus downturns make the individual work harder. This is essential because productivity itself creates purchasing power. When we work and produce more--perhaps out of fear of job loss--our productivity gives rise to demand that did not previously exist. In helping ourselves, we aid economic growth.
With regard to jobs more generally, over the last few months, Americans have been hit with all sorts of bad news on the employment front. If they've not been made redundant themselves, they've had to witness reports of record jobless claims and a persistently rising rate of unemployment, and they've had to read about how even corporate heavyweights like Goldman Sachs (nyse: GS - news - people ) and Microsoft (nasdaq: MSFT - news - people ) are shedding workers.
(Excerpt) Read more at forbes.com ...
Too late.
“the govt” does not WANT to stop this recession
until “after” it achieves socialized medicine, defunding the DoD, nationalizing energy consumption and banking, pension schemes, and other left wing agenda goals normal times would never allow them to achieve
I think you are right. Congress CREATED it after all.
Bush, Romeny, Gingrich, McCain, and the entire Congressinal GOP leadership sold us out with the bailout in October. It has been downhill since then.
.....and Bush and Obama.
This article and most others like it suffer from the same fallacy; that Obama actually wants to mend the troubles in our economy. He doesn’t. He wants it to fail. Only when capitalism has failed can he implement his socialist system. So long as there is a working economy under capitalist principles, even one that is struggling, he cannot succeed.
There's another fallacy at work here as well; one that is not recognized by many. An astute FR member stated that this is not a normal bear market caused by the usual "exuberance". A MASSIVE expansion of leveraged debt-fueled consumption has created a virtual financial Black Hole which no amount of fiat money can fill. Coupled with your observation that Obama has no intention of letting the situation correct itself leaves one to expect a massive deflation that may well change our lives for generations.
Actually, the Market corrects the conditions and/or bad behavior that created the recession. And it is perfectly obvious that the Market has successfully done this numerous times. The Market cannot do it this time because the government has gotten in the way. A Market-driven recovery was delayed—if not out right killed—beginning with the discussion about the Bush II socialist stimulus package.
Moreover, government’s response to poor policy is always to pour more money down the rat hole. It will no doubt repeat itself—again—and therefore keep this economy in the tank.
We need a new Reagan. It’s as simple as that.
The problem is the government and business are too interwoven now, that ship sailed years ago.
Folks, stop using the “R” word. It is NOT a recession that we’re in, it is a DEPRESSION.
Recessions are caused by overproduction, by and large, and sometimes by an external shock (like an oil embargo). However, depressions are caused by the popping of large/gigantic credit bubbles. Guess which applies to our situation?
Government won’t get out of the way until it is forced to do so - because such involves the reduction of its power.
Primarily Congress.
All this started with the CRA in 1977. Take a read of this, I connected the dots.
http://www.freerepublic.com/focus/f-news/2198595/posts
Its largely Congress, though FOR CERTAIN Bush had a role, he DID have a veto which he didn’t’ use, and Obama was part of creating it, he got the second most campaign contributions from Fannie, right behind Chris Dodd, and he did it in only 3 years while being a member of the Congressional Black Caucus, ACORN and Fannie Mae’s biggest staunchest, most vivacious supporters. And of course, Dodd killed legislation that would have regulated Fannie and Freddie, possibly averting the disaster we are in now.
I am MAD as HELL at congress.
Exactly. This is not a normal recession. It is far beyond that. We have been expanding since 1983. We had a 7 year commodities/stock market/real estate mania that ended in 2008 that was fueled by Alan Greenspoon's easy money policies. Wall Street took a derivatives wrecking ball to our financial system
We are in a deep hole
Climbing out of it will mean real work in a real economy
Not one goosed by flipping houses, by whipping out credit cards and buying retail stuff made in China
This is not a normal business cycle kind of recession.
Even Warren Buffet knows that and may or may not say it
The Great Depression was the first time the government intervened in the economy. Hoover raised taxes and signed the Smoot-Hawley (Protectionist) Tariff Act. Roosevelt took it from there.
But, had government done what it had done in the past --nothing -- the event would've been known as "The Panic of 1929"...soon followed by a recovery.
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