France and Germany in a spat over Greek debt crisis

First the headlines and news and then my comments. From BLOOMBERG/COM. Sarkozy Opposes IMF Loan to Greece, Widens Rift With Germany. By Helene Fouquet

"March 19 (Bloomberg) -- President Nicolas Sarkozy opposes Germany’s call for an International Monetary Fund loan to Greece, a French government official said, pitting the euro area’s biggest members against one another over a rescue plan.

The official, who declined to be named under government ground rules, said Sarkozy favored a European solution to help Greece and said the monetary union must act to restore investor confidence and shrink Greek borrowing costs.

“I want to be very clear: if it were necessary, the states of the euro zone would fulfill their commitments,” Sarkozy said in Paris March 7 after a meeting with Greek Prime Minister George Papandreou. “There can be no doubt in this regard.”

My Comment:

Seems to me France is correct here. The Euro agreements stated that there were certain obligations to be met when a State with the Euro zone had any financial problems. By having the IMF bail out Greece, rather than EU members, the ground rules will have been violated and that has tremendous implications for the Euro. This conflict of positions between France and Germany over how to solve the Greek crisis, is very important as it pits the 2 largest EU members against eachother. It is no secret that France and Germany have always had a difficult relationship at best since WWII and even before that. This makes this a very serious problem and will give a clue as to where the power of the EU resides. Sparks can fly here quickly and the situation can get out of control without much difficulty. Stay tuned!

How can we turn the ship of this economic crisis? Some suggestions.

As a result of the election of Barack Obama, a new day of hope has been realized. Most Democrats, many Independents and some Republicans now are wishing the President-elect all the best and are wiling to get behind his leadership that will help us out of this Financial and economic meltdown. So we all look for leadership. But we must now start to look within, as the Consumer, that's you and me, can either help resolve these problems or contribute to magnifying them. This can happen when we are not aware of how our individual collective decisions or "herd" mentality is at play.

Right now, no matter where I go, I am asked how I am viewing the economy and financial crisis from my client interactions, business associates, neighbors, friends and family. What I see as a common thread is the fact that fear is present to different degrees by individual, but it is there and influencing daily and future decisions. Some are looking at household expenses and tightening their family's financial belt, Some have choices to make in there daily business decisions, which affects spending patterns now and plan changes in the future that all cut back and contribute to a tightening on a National level. This in turn affects a Global economy.

So how can we all help ourselves out of this mess and give the Obama Administration a better chance of success in getting this ship turned in the right direction? First, being aware of what decisions you are making and how they affect you and your family is the first step. Some do need to cut back as they are spending much more than they are earning. But some that have plenty are also cutting back unnecessarily as it is the herd mentality at work, affecting the economic environment additionally. If you make a good salary and have enough to carry you through some tough times, consider continuing with your current habits as if nothing is really wrong. You will be helping some businesses survive, as well as your community, State and Country. If everyone stops spending any money, the entire system will grind to a halt and it will get much worse.

So as we are approaching a dismal holiday for retailers in general, it is important that the Consumer consider the consequences of their actions and think broader about how they can affect things more positively. Those of us who make contributions to Charity at year end need to do it again, especially this year. The most needy among us will need our help. Research into the elimination of disease still needs our help by our donations. It can help reduce medical costs and health insurance. Public radio will still need your donations as will the Museums.

So as we approach our first holiday of Thanksgiving, there is much to be thankful for. A new President, the first African American to be President, and a change from the Bush Administration policy's is surely something to be thankful for. A family where love is present and learning abounds is a blessing. Having a roof over one's head where you don't have to worry about foreclosure, is a blessing. We can make a big difference with our collective actions but we all need to start being aware of how every decision we make or choose to defer has a consequence for the economy and the well being of our Nation. We can make this holiday season better than what most had expected and this would be a great gift to give the Obama Administration. A few gifts are in order this Christmas and if we all do some shopping rather than a total cutback, it will be a wonderful gift to our new President and the Country. Choose wisely!

A new and unique reaction to the Financial crisis of 2008: Class Warfare.

Past election issues, say from 1980-2004, have often been based upon ideological differences. The election of 2004 was based upon Security and who was going to make the Country safer, Bush or Kerry. In 2000, it was about proposed reforms of Social Security and Medicare and whether there was going to be a "lock box" for Social Security as Gore proposed or whether it was better to allow individuals invest their own retirement in the stock market, as Bush supported. (It's a good thing that idea never made it!) The other issue was, who was going to restore integrity and honor to the Presidency, after the Lewinsky matter and the impeachment of the President Clinton for lying turned the Country upside down and divided us into Red and Blue States. Another issue was weather we were going to use the U.S. Military fro "Nation Building". The Clinton Administration did send troops to the Balkans and this was supported by Gore. Bush wanted no Nation Building (in contrast to his desires the last 6 years in Iraq!). Gays in the Military were an issue and the Clinton Don't ask, Don't Tell policy was the policy of the Clinton Administration. Again, ideological issues around morality.

In the 1992 election between George Bush Sr. and a newcomer, Bill Clinton, Bush 1 had a very high approval rating of 89% after the first Gulf War. But that approval rating started dropping, as a mild recession encouraged Democrats there was a chance to win the election and take it away from Bush. Bush emphasized Clinton's lack of Military experience and ensured rumors of Clinton's infidelity took hold in the media. This campaign was as much about Clinton's character as anything else.

The 1988 election between Bush Sr and Dukakis had Bush casting Dukakis as a "proud liberal" that didn't have any Military experience, hence the famous photo of Dukakis in a tank with a helmut on and looking foolish according to the Bush attacks. There were a number of ideological differences between the 2 candidates. Dukakis tried to tie Bush to the scandals of the Reagan Administration, such as Iran Contra. During one of the Presidential debates Dukakis was asked by the Moderator if he supported the Death Penalty and gave Dukakis the situation for him to have as a context, which was that he was to pretend his wife was raped and murdered. Dukakis's answer discussed the statistical ineffectiveness of capital punishment. Rumors were spread that Dukakis's wife burned a Flag in protest of the Vietnam war.

In all of these examples the push for ideological differences is evident. For the first time in my memory, the fundamental difference in this election, is that it is about Class Warfare. There are no more Red States versus Blue States, Liberal versus Conservative. As a result of this unprecedented financial crisis, it's all about the Wealthy versus the Middle Class. Europe's elections have had this debate many times, but this is the first time in this country. Unions in France now have the power as they do in other European countries and in countries in South America as well. It is about empowering the Middle and Lower Class at the expense of the Wealthiest who have enjoyed an unprecedented run of about 30-50 years. Those who are wealthy are are split about this issue. Some believe the wealthiest are reaping the excesses of their failures to ensure all boats should have risen. They are willing to pay more in taxes and think it is fair and often wondered why the Republican Party under Bush 2 was pushing for so many tax breaks they really didn't need. It is a fact, that the gap between CEO's pay and average workers has increased many times fold over the past 20 years. This excess is giving rise to the highest voter participation rate in history. It has mobilized the youth of the country. With an election victory comes a more empowered electorate, just as the Founding Fathers had hoped would happen.

It has been a consequence of the actions and decisions of Presidents like Reagan, Bush 1, Bush 2 and all their supporters, including Corporate leaders who took abusive Salaries, Bonuses and company Stock Options. Those leaders got their Boards stacked with supporters who would approve these excesses and there was a quid pro quo for those serving on multiple Boards. You scratch my back and I'll scratch yours. It is only those Corporations that truly have independent Board members that have a chance to limit excesses.

Even Healthcare companies, who have gone from Non Profit to For Profit Corporations are guilty of these excesses and are responsible for contributing to the high cost of healthcare. Greed drove these leaders to excesses. It might be a way to help reduce healthcare costs if we can get a handle on these excesses, and possibly return them from For Profit to Non Profit once again.

Lou Dobbs made his fame over the issues about jobs being outsourced abroad, illegal immigration ruining Middle Class jobs. War and Peace are still issues in this election as they have been since Vietnam. But because Iraq wants us to leave with in an agreed upon timetable, it is less of an issue than it could have been this time.

The focus the next 4-8 years will be about restoring a Middle Class in America, reigning in excessive CEO compensation, a better safety net for the less fortunate, a focus on real improvement in the education of our youth, and a world that works together because it has to in order to survive. Collaboration and cooperation will be the tools used. Everyone will be asked to sacrifice something for the betterment of all. After this election, the times they are a changing!!! It's now up to you to vote and start this chain reaction for the better! Turn away from the failed policies of the past. Vote for real change this time. Vote your interests not your favorite personality. Vote with courage of the unknown, not the fear that binds us to the past.

McCain supported bailout and now calls Obama on "socialistic" policies? Give me a break!

Headline reads: McCain, Palin hint that Obama's policies are 'socialist'. According to a CNN report, "Sen. John McCain stepped up his rhetoric against his Democratic rival on taxes in his weekly radio address Saturday, comparing his plan to "socialist" programs.

Sen. John McCain held a rally Saturday in Cabarrus County, North Carolina. The remarks were part of a theme McCain has used since the final presidential debate, but his most recent comments were the first time he used the word to describe Sen. Barack Obama."

But isn't a vote for the bailout/rescue plan approved by John McCain "socialism". Be consistent Senator McCain. You can't have it both ways. Your Republican Party's mantra of "deregulate banking and Insurance" got us into this mess in the first place. It's not socialism to rescue the financial system from excesses, it's called saving the country. Remember "Country first!"

What was the first warning shot fired in the financial crisis?

The first warning shot in the financial crisis of 2008 happened actually in the late 1990's and while there was an initial reaction to the event, little if anything really changed on Wall Street. What was that precipitous event? It was the failure of the Hedge Fund, Long Term Capital Management (LTCM) which lead to a massive bailout by other major banks and investment houses.

LTCM was founded in 1994 by John Meriwether, the former vice-chairman and head of bond trading at Salomon Brothers. Board of directors members included Myron Scholes and Robert C. Merton, who shared the 1997 Nobel Memorial Prize in Economics. The company had developed complex mathematical models it used to make investment decisions. Initially enormously successful with annualized returns of over 40% in its first years, in 1998 it lost $4.6 billion in less than four months and became a prominent example of the risk potential in the hedge fund industry. The fund folded in early 2000.

But do you think Congress or Wall Street learned anything back then? Nope! That was when Congress was controlled by the Republican Party and occurred during the post Lewinsky investigation, by then rabid Special Prosecutor Ken Starr. So to say the impeachment attempt by the Republican led Congress was a distraction to events surrounding Long Term Capital Management, is an understatement. It was a casualty from a divided country where Congress was consumed over a sexual matter, where a President who was embarrassed by it, lied about it to the Public. I don't blame just Republicans, I also blame the Democrats and the American people including me, who did not press our elected officials to investigate this matter more fully at the time and even years later.

The cost to our Nation is just starting to be understood. Think what might have been prevented in the current Financial crisis had Congress and Wall Street done a complete investigation as to what caused the financial meltdown of Long Term Capital Management. We have only recently come to understand the interconnection to many of the worlds problems.

Are we at the bottom in the stock market?

According to my analysis, no, but we are close. Where is the bottom? After doing my own analysis it appears to me that the bottom is between 7200 and 7400 on the Dow. As of this writing, the Dow is at 8011 or down over 565 points as I type this. Looking at the chart below we have tested the 7200 level a number of years ago in 1999, 2002 and 2003. In the attached chart you can see from the lines I have drawn that I believe that will hold as well. So there is still some pain left. That is an 115 drop from here. To recover back up to 8100 the Dow would then have to gain 900 points or 900/7200 or 12.5%. That won't be difficult to do. So it seems the best strategy now, if you haven't sold already, is to hold on and let this play out. It's too late to sell, unless you don't have any cash at all.

We need to once again believe that as Americans we can and will pull together. However this time it will take a new President, as we have lost all faith in President Bush. But I do have one question to the Bush Administration. Where's Vice President Dick Cheney through all of this financial turmoil? Is he in the underground bunker working at contingency plans to institute Marshall Law? He doesn't even feel a need to support Bush by being at least next to him during these addresses to the public as he tries to calm fears. Shame on you Mr. Vice President.

They knew this Financial crisis was coming in 2004

This is a NY Times article and a must read as to how we got in this financial mess. Readers will be as surprised as I was. Here are a few excerpts and a link to the entire article:

"How could Mr. Cox (SEC Chairman) have been so wrong?

Many events in Washington, on Wall Street and elsewhere around the country have led to what has been called the most serious financial crisis since the 1930s. But decisions made at a brief meeting on April 28, 2004, explain why the problems could spin out of control. The agency’s failure to follow through on those decisions also explains why Washington regulators did not see what was coming.

On that bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks.

They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.

The five investment banks led the charge, including Goldman Sachs, which was headed by Henry M. Paulson Jr. Two years later, he left to become Treasury secretary."

To read the entire article click here.

McCain's self-importance view is so archaic

A few minutes ago John McCain said he was suspending his campaign to go work on the financial crisis in Washington and said he wanted to cancel the debate schedules for Friday night. This from the man who said he really wasn't up on economics. The American people deserve to have the debate held as scheduled on Foreign policy this Friday night. It isn't like McCain can really add anything to the debate.

My advice to John McCain: Let the debate go forward and learn to multitask. THIS IS ABOUT YOUR JUDGEMENT SENATOR!

Update on Financial crisis testimony by Treasury Secretary Paulson

As I listen to the testimony of Hank Paulson, Treasury Secretary for the Bush Administration, I am amazed that there is little definition as to the oversight structure that they want to put in place to monitor how the $700 Billion dollars requested from Congress. This money is to be used to deal with the financial crisis caused by the sub Prime Mortgage problems, Based upon everything I have heard so far, there is no real definition as to mechanisms, controls or oversight planned to monitor the distribution of funds. Paulson is basically saying "Trust me" and lawmakers are wary, as they should be.

We got into this mess because there was not oversight, regulations or transparency. I don't hear anything which outlines answers for those concerns. Is there another action which could be taken and what other actions have we considered? We won't know as they are scared that if they take too long, things could get worse very quickly.

One thing I would add is that I am so glad we have Hank Paulson as Treasury Secretary versus previous Treasury Secretary's in the Bush Administration. His experience at Goldman Sachs is invaluable in this crisis. He knows more than any Senator questioning him.

One thing I learned that was new was that the Credit Default Swap market now totals about $62 Trillion dollars. That size of investments in anything is scary indeed!