Update Mid-March 2009

If anyone was wondering, I haven't gone away!

I've been catching up on "business" and dealing with issues out there in the "real" world.

I also wanted to give the economy and our new congress and President some time to allow the "dust to settle". There has been more info available in the popular press than has been possible to digest.

The economy continues is decline, in fits and starts, toward a 10% national unemployment rate, and our government continues to throw the bulk of its financial support to the banks and financial institutions. The experts, who for the most part missed all of the signals leading to the current situation are now saying it may be late 2009 or 2010, or later for a recovery to begin, in earnest. Why should I believe them now?

Today the U.S. Labor Department reported that in January four states had unemployment rates above 10% and two other were close behind. Highest unemployment reported:
California 10.1%
Georgia 8.6%
Michigan 11.6%
North Carolina 9.7%
Oregon 9.9%
South Carolina 10.4%
Rhode Island 10.3%

Note: If you want a job, go to Wyoming. The jobless rate was reported as 3.7% for January, 2009, which is the lowest in the nation!

The stimulus promoted by the government, including the new Obama administration, includes what I would classify as a lot of "earmarks" which will not stimulate the economy and will burden our future with debt. Is it any wonder that many people are so morose?

My "personal" recession began in 2006 when my clients, all of whom are involved in heavy industry as it applies to construction, rapidly cancelled or postponed projects and contracts. MBA programs have been teaching the technique which Jack Welch of G.E. fame used during the period 1981-1985 and the related recession. Jack cut jobs deep and hard; it is my understanding that 100,000 jobs were eliminated by "Neutron Jack " as he was called, apparently in reference to his similarity to the Neutron Bomb, which destroys people but leaves factories intact. CEOs and managers emulated this technique in the 1990s and it worked very well, and I also think it contributed to the depth of that recession, as it is, now.

An associate made the statement to me on Monday "Don't I know what's going on out there?" Wake up, Virgil, as the saying goes, I have not been sleeping nor has my head been embedded in the sand! I suspect that associate hasn't been listening during our conversations, or simply rejected what I was saying at the time. He does have the opinion that I am off my rocker, most of the time.

So I'll be posting my updated perspective on the economy in the very near future. However, we are on track per my blog of October 21, 2008:

http://letmethinkaboutthis.blogspot.com/2008/10/how-bad-recession.html

Meanwhile, while our politicians debate, the government continues to send money to bail out banks, bankers and investment companies. Very little of this is apparently finding its way to the millions of distressed homeowners. In Obama's stimulus package, there is $75 billion earmarked for "distressed homeowners". I am not entering the debate about whom deserves or doesn't deserve government bailout money. It is apparent that a lot of people were greedy, a lot of people made mistakes or were simply stupid, and a lot of people perpetrated various frauds.

I am looking at this from the perspective of spending as little as possible to resolve the problem. We have about 7.3 million homeowners who have defaulted or are at risk of default. If these people were given a stipend by the government which was applied against their mortgages, this money would be passed to the banks who would be forced to lower the balance on their mortgages, it would find its way to those who hold the notes, etc. and should stabilize the system.
But how much money would it take? Or, how far could a trillion dollars, which is the amount routinely used as fodder for the pigs at the toughs, go? I'll round up the number of mortgages to 10 million. Well, one Trillion dollars = $1,000,000,000,000. If I were to divide that by 10 million distressed mortgages (10,000,000) I would have $100,000 per mortgage.

So which has been more effective? Throwing several trillion dollars at the banks and investment bankers, or throwing $50,000 at each homeowner? We could bail out 10 million homeowners and the entire banking system directly tied to these failed mortgages, using "only" one-half trillion dollars, which is $500 billion.

So now you know why am so cynical about our politicians. they could get the job done and they should know what I know. But they don't operate accordingly. So looking beyond all the rhetoric and the politicians and their media pundits, who is really being served? I'll let you draw your own conclusions.

Note: one trillion is a really big number. How big? Let's do a little arithmetic and answer the question "how many seconds is a trillion?" There are 365 days each year, 24 hours each day, 60 minutes each hour and 60 seconds each minute. So a year is 365 x 24 x 60 x 60 seconds = 31,536,000 seconds. If I divide 1 trillion by the number of seconds in a year, I'll know how many years contain 1 trillion seconds. The answer is 31,709 years.