Tag Archives: credit

Business/Economics, International

What Economic Recovery? Credit Crisis hits SAAB, can’t pay employees, shuts factory

A few days ago U.S. Federal Reserve boss Ben Bernanke said one of the factors in deciding the economy was worse then they thought, was continuing financing problems (credit crisis).  Swedish car maker SAAB, just announced they are the latest victims of the credit crisis.

SAAB can not get short term loans, which is what it uses to pay its employees.  Not only is this a bad sign of the economy, but a reminder that “Western” corporations run on debt, not revenues.

This inability to pay its employees comes after SAAB closed one of its factories in Trollhatten, due to lack of parts (thank Japan’s failed “just in time” supply system).

SAAB is trying to get loans from Chinese companies, they’re waiting for government approval.

Business/Economics, Opinion

Global Great Depression: Manufacturing down Demand for oil down Looks like the Main Stream Media Experts Got it Wrong

I remember many main stream oil “experts” saying that oil prices would go up, because while demand in the United States might be down, global demand would be up, because of increased global manufacturing.

Well, it ain’t happening.  The latest economic data show that manufacturing is not only down in the U.S., but is way down in Europe (in fact it’s been falling sharply ever since January 2011).  Even China has cut back on manufacturing.

Why?  Consumer demand is way down, all over the world.  Why?  Consumers (people) don’t have money!  Why?  Because corporations have been cutting back on wages, benefits and even jobs!  Why?  Because the big money lenders have cut way back on the amount of credit they’re willing to give those corporations!

Why would lack of credit hurt those corporations?  Because the reality is that big business runs on credit, not cash.  In fact, in the United States even little businesses need credit just to survive.  Basically the Western Capitalist economy has become a false economy that is run by credit limits rather than actual revenues.

Now, oil speculators guessed wrong and overbid oil and fuel commodities.  Some studies show that there is a great disparity between what the petroleum speculators thought about consumer demand, and the reality of consumer demand.  One graph I saw indicated that oil should be at $70.00 per barrel, based solely on consumer demand.

The speculators thought consumer demand, on a global level, would continue to go up.  The reality is that it’s going down.  It’s going down because of reduced manufacturing, and because enough drivers have indeed cut way back on fuel usage.

The more optimistic analysts will say we’re heading for a “double dip recession”.  This is going to be a depression.  The recession is caused by credit companies cutting businesses off, and individuals off, in many cases for no good reason.  This depression will be because speculators and investors will realize that the capitalist economy is a house of credit cards, and too many credit cards have  been pulled.  Why invest your money into products that people can’t buy?

The amazing thing is that many speculators are operating on credit.  As more and more fail to pay back their short term loans, because they lost money on the stock and commodity markets, they’ll be another credit crisis, this time affecting the big market ‘players’.

The investment markets will dry up, because they’ll be a big drop in the number of ‘players’.  The result will be that not only will corporations be short on credit, they’ll be short on investment money.  Which will lead to more cuts in benefits, wages and jobs, which will lead to even less consumer demand.  In ‘nother words; this is a downward spiral that’s just starting to pick up steam.

Many “experts” have been calling for increased government spending.  They say it’s because corporations obviously don’t have enough money to pull us out of the recession.  These “experts” don’t seem to realize that most governments are broke.  Don’t let those quarterly profit statements fool you, many economists say the books are still being cooked, the reality is that lenders are broke, corporations are broke, and governments are broke.   It’s going to be a long drop to the bottom.

International, U.S.

S & P’s reacts to Greece needing mo money, get ready for the stock markets to react

Standard & Poor’s cut Greece’s credit rating, downward 2 points, after Greek officials announced they needed more bailout money.

The S & P’s rating now puts Greece below investment grade.  S & P’s also says that Greece will need a waiver on repaying most of its current loans (that means they don’t think Greece can pay).

 

Business/Economics, International, U.S.

Credit Rating of United States trashed, kind of

Today, April 18, Standard & Poors downgraded the long term credit rating of the U.S., to a negative rating!

“More than two years after the beginning of the recent crisis, U.S. policymakers have still not agreed on how to reverse recent fiscal deterioration or address longer-term fiscal pressures.”-Nikola Swann, Standard & Poor’s

Standard & Poor’s is one of three major agencies that evaluate government and corporate debt.  The S & P analysts think the division between Democrat and Republican law makers is too far apart for them to make any real progress in dealing with the country’s public debt.

Investors with the Dow Jones reacted by dropping the industrial average by 200 points in the first half hour of trading.

The downgrade of the U.S. follows the downgrading of Ireland’s banks, as well as several other international financing issues.   Even though S & P dropped the U.S. credit rating to “negative”, they still maintain a AAA/A-1+ rating on U.S. sovereign debt.

Long term debt, money borrowed from financial institutions, is debt that will take more than ten years to be paid back.  Sovereign debt refers to government bonds.