Just Another Bit Of Good Housing News

...or not.

New U.S. housing starts and permits plunged to record lows in November, as long-standing problems in the housing market continued to weigh on the U.S. economy, a Commerce Department report showed on Tuesday.

Housing starts fell 18.9 percent to a seasonally adjusted annual rate of 625,000 units from 771,000 units in October.

That was much less than the 740,000 starts Wall Street analysts expected to see for November.

New building permits, which give a sense of future home construction, plummeted 15.6 percent to 616,000 units from 730,000 units in October.

That was also much below Wall Street analyst estimates of 700,000.

That's a massive drop in numbers even from just October. The bad part is if housing starts pick up faster than housing prices do...it will depress prices even further. I don't see how that could happen other than housing companies jumping the gun and building early 2009 in order to "get in on the ground floor of the new housing recovery".

It doesn't make any logical sense. Then again, the US economy has been operating on that whole "lack of logical sense" thing for the last several years, especially in housing. If people see these record low new housing starts and permits as the bottom of the market rather than a price-based bottom (which is still nowhere in sight), things could get even worse in the housing market.

American consumers aren't that dumb, are they?

A Simple Test

Which one of the three following financial news stories is the most outrageous?

1. The US auto industry is pleading for Bush to release $15 million from the TARP bailout, but odds are looking more and more like they will get nothing.
   
2. Investment guru Bernie Madoff may have defrauded investors out of as much as $50 billion.
3. Bloomberg News's lawsuit over which bank put up what as collateral for the over $2 trillion in loans and guarantees is denied on the basis of being "highly sensitive".

If you answered anything other than "three", you're frankly part of the problem.

Yes, they're all bad. But that last one should have Americans across the country out in the streets. We're not. And that's why number three there will almost certainly continue to happen even under Obama.

Red Light, Red State

The GOP attack on Detroit is being led by southern Senators from non-union, non-American automaker states: Alabama, Mississippi, Tennessee, Kentucky, etc. These states are deep red and the people there have been told time and time again that unions are destroying America.

On the other side of the line are blue states with UAW workers: Michigan, Ohio, Pennsylvania, and states with tons of auto dealerships like California and New York. Make no mistake that for the GOP, this is all about red vs. blue politics. They have an opportunity to punish blue states and the people who live and work there, the gain a measure of revenge against those crazy Yankees for rejecting the party of God and America.

If GM goes under and people buy more Toyotas made in Kentucky or Hondas made in Tennessee, that's good for the southern states. People will leave cities like Detroit, Cleveland, and Pittsburgh and move to Atlanta, Nashville and Birmingham, giving southern states more people and more power.

This isn't just about wrecking the UAW, although that's a big part of it. This is about wrecking the economies of blue states. Even though Asian automakers have said on a number of occasions that their sales are down sharply too and that a Big Three bankruptcy will hurt them as well, that doesn't matter to the GOP. They have a chance to hurt blue states. Period.

Because that's how the GOP operates. Democrats are the enemy, plain and simple. And the enemy must be crushed.

[UPDATE] Glad I'm not the only one who sees this (h/t LGM)

As today's news again reminds us, the GOP doesn't seem terribly concerned about much more problematic things like the disgusting, virtually no-strings-attached re-re bailouts of Citigroup and AIG. Rather, Republican senators want to drive down wages for American autoworkers and create competitive advantages for their right-to-work states so much that they're willing to inflict massive blows to the American economy to do so. (As Molly Ivors cracks, if there was some way of putting together a bailout that would pay executives and not workers, the bailout might have had a chance.)

And that's the bottom line. Screw the blue states, victory for red ones.

The lesson the GOP learned from the 2008 election is that they weren't assholes enough.

How Bad Would Auto Bankruptcies Be?

Just how bad would it get it GM and/or Chrysler declared bankruptcy as the GOP wants them to do? The estimates aren't pretty at all.

Industry experts and economists say the automakers would close plants, fire tens of thousands of workers and cut production. That would cause many of their suppliers to collapse, triggering more job losses, straining the cities and states where the car and parts companies operate, as well as federal safety-net programs.

It would also deliver another psychological blow to consumers and a major shock to Main Street following the crises on Wall Street.

“The auto industry is a key element in the economy,” said Bob Schnorbus, chief economist at J.D. Power & Associates in Troy, Michigan. “Anything that disrupts it is going to slow the economy down more than we have already seen.”

Economists say it’s difficult to estimate the full impact, given the large number of possible scenarios. The outcome hinges on which companies filed for bankruptcy and when, and whether they would be able to continue building cars and trucks while in reorganization -- assuming they don’t go into liquidation.

“It would be unprecedented,” says Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut. “So it’s hard to say exactly what would happen.”

In other words a bad situation would get significantly worse at minimum. How quickly would that happen after a filing?

Still, a GM or Chrysler bankruptcy “would be the start of a cascade of failures,” says Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan. “The economy will be in chaos within weeks.”

That quickly.

And it won't be just obvious auto jobs that are lost, but millions of non-auto jobs too, especially in communities where auto plants are a primary employer.

If there were just a 50 percent contraction in the auto industry, nearly 2.5 million jobs would be lost in the first year, resulting in $125 billion less in personal income before a partial rebound in later years, according to the Center for Automotive Research in Ann Arbor, Mich. State and federal coffers would lose $50 billion from lost tax dollars, the center said.

"We believe the economy is in such a weakened state right now that adding another possible loss of one million jobs is just something our economy cannot sustain at the moment," White House spokeswoman Dana Perino said Thursday.

Experts say it's not just the obvious — car companies, suppliers and dealers — who'll be affected. Failure of these companies could affect national security, television studios and even sports teams.

"If you knock out these suppliers who are also providing powertrains and axles to the military, what are you supposed to do then?" former Energy Secretary Spencer Abraham said Friday in a phone interview.

The economy is so weak right now that there's no slack to absorb the blow. The system is already stretched to breaking, especially in Big Three auto plant states like Michigan, Ohio, Indiana, and Pennsylvania.

GM is already in talks this weekend with the White House and the Treasury department to try to get something going, so we'll see what happens.

While You Were Waiting

...for Preznitman to magically do something, GM decided to idle 20 plants for the entire month of January.

General Motors Corp. said Friday it will temporarily close 20 factories across North America and make sweeping cuts to its vehicle production as it tries to adjust to dramatically weaker automobile demand.

GM said it will cut 250,000 vehicles from its production schedule for the first quarter of 2009, which includes a cut of 60,000 vehicles announced last week. Normal production would be around 750,000 cars and trucks for the quarter, spokesman Tony Sapienza said.

Many plants will be shut down for the whole month of January, he said, and all told, the factories will be closed for 30 percent of the quarter.

"We're adjusting pretty dramatically," spokesman Chris Lee said.

The move affects most of GM's plants in the U.S., Canada and Mexico. During the shutdowns, employees will be temporarily laid off and can apply to receive a portion of their normal pay from the company. They can also apply for state unemployment benefits, Lee said.

Clearly GM is still expecting to be around, but if something doesn't happen soon, I'm betting a lot of those GM plants simply aren't going to reopen. Ever.

Still no bottom for the US economy. Still millions of layoffs, billions in bailouts and trillions in total losses ahead.

The Greatest Fraud In History

Even if the financial crisis wasn't upon us, the fact of the matter is the news that hedge fund guru Bernie Madoff has been arrested for a $50 billion investment scam would still be the biggest news of 2008.

Beleaguered investors face a "complete loss" from a scheme at the center of a major U.S. fraud case, which is likely to highlight their tendency not to question the legitimacy of big gains and ultimately lead to tighter regulation if the alleged fraud is proved.

A number of prominent funds of hedge funds are believed to have invested money in portfolios established by Bernard Madoff, a securities trader and investment adviser who was arrested yesterday before appearing at a Manhattan court charged with securities fraud.

U.S. authorities claimed Mr. Madoff told employees at Madoff Investment Securities earlier this month that the investment advisory activities of his business had been "a giant Ponzi scheme."

Christopher Miller, chief executive of London hedge fund ratings agency Allenbridge Hedgeinfo, said: "Some very big investor names are involved in this. The scheme could only work if enough investors were subscribing for him to pay money out. Some of the world's biggest hedge funds have been hit by this. There will be a monumental impact for the hedge fund industry, it could be larger then Enron.

"Some investors in Madoff's funds face 100% write-downs on the money they invested, they will suddenly be nursing full write-downs in December. When people realize the magnitude of this it will be fizzing around the stratosphere."

One asset manager based in Switzerland, home to many high-net-worth individuals who invest in funds of hedge funds, said: "Everyone's talking about this in Geneva. Several wealthy investors could be facing big losses."

Funds of hedge funds are already facing losses of 19.1% from their investments this year, according to the non-investible performance index from data providers Hedge Fund Research. This combined with investor withdrawals have left them with 14% fewer assets than they started with this year, and $140 billion, or 17%, less than their peak level in the second half of this year.

People didn't question Madoff because he was making money. The entire scandal is a microcosm of the entire financial crisis. As long as the money came in, nobody cared if it was legit or not. Nobody. It was only because the markets bombed and the resulting credit crunch dried up new investment in Madoff's funds that he was caught at all.

Mr. Miller said: "This is about the credulousness of investors to give the benefit of the doubt to good performance. What has caused all this to come to the surface is really net redemptions from the industry, because Ponzi schemes need net inflows to work. Some investors have the tendency to turn a blind eye to other possibilities when they get good news. But the impact of what has happened will be absolutely huge."

Mr. Miller said tighter regulation of the $1.6 trillion industry could result if the alleged fraud is proven.

Commentators have said losses from the fraud Mr. Madoff is alleged to have conducted could run to $50 billion. This scale of loss would make it the largest in corporate history.

Stop and think about how this was allowed to happen: pure, unadulterated greed. Once again the little guy has to foot the bill for the billions lost. Imagine if a terrorist caused $50 billion in damage to the US. No lives lost as a direct result, but the damage would have crippled the economy and wrecked countless lives. Bin Laden himself could not have done a better job.

How do you punish a man for causing this much damage? How do you truly punish a crime this large? There's no way Madoff would have been able to perpetrate this without the existing financial system itself, and it's just as corrupt as Madoff apparently is, if not more so. Any system that allows one person to do this much damage is a fundamentally broken system, unrecoverable at its core.

It must be thrown out, jettisoned wholesale into the sun. How many other Madoffs are out there yet to be caught? The entire global financial system is built on lies. The entire system is now coming undone.

What will replace it, and who and what will survive to do so?

Zandar's Thought Of The Day

Cutting UAW workers' wages from $28 to $25 is vital to getting $14 billion to the auto industry, but too bad.

Meanwhile over in the financial sector, we have one dude making $50 billion pyramid schemes.

Yeah, life's fair.

The Merry Go Round Broke Down

As mentioned in StupidiNews for today, the auto bailout is officially dead, the final sticking point being GOP demands that the UAW cut union wages to the level of non-union workers.

Republicans, breaking sharply with President George W. Bush as his term draws to a close, refused to back federal aid for Detroit’s beleaguered Big Three without a guarantee that the United Auto Workers would agree by the end of next year to wage cuts to bring their pay into line with U.S. plants of Japanese carmakers. The UAW refused to do so before its current contract with the automakers expires in 2011.

The breakdown left the fate of the auto industry — and the 3 million jobs it touches — in limbo at a time of growing economic turmoil. General Motors Corp. and Chrysler LLC have said they could be weeks from collapse. Ford Motor Co. says it does not need federal help now, but its survival is far from certain.

Democratic leaders called on Bush to immediately tap the $700 billion Wall Street bailout fund for emergency aid to the auto industry.

The wage concession was basically meaningless for the continued survivability of the Big Three, designed to drive a stake in the heart of the UAW and kill it. Putting an end to the UAW was the real point of the GOP Senate resistance, and it its zeal to bust the last big union, the GOP is apparently deciding to take out the auto industry and a couple million jobs as well.

Nice guys.

So what's next? As the article mentions, the President can tap the TARP fund to save GM and Chrysler, but Bush could have done that at any point in this mess, and he's refused to so far. He may change his mind after all, a legacy-minded Bush doesn't want to be the President that killed the American auto industry. On the other hand, expecting Bush to be a logical actor in any capacity is foolish given the last eight years.

The most likely outcome is a weekend deal that puts GM and Chrysler in bankruptcy soon.

Still, GM also has said it will lack the minimum $11 billion needed to pay bills by the end of this month, raising the prospect of bankruptcy should it fail to win a cash infusion. GM reported having $16.2 billion as of Sept. 30.

An attempt to restructure GM in bankruptcy would end up as liquidation, because sales would plummet as buyers flock to solvent car companies, Wagoner has said.

Chrysler has said it will run out of money early next year. It ended the third quarter with $6.1 billion in cash and needs at least $3 billion on hand to operate, Chief Executive Officer Robert Nardelli told Congress on Nov. 18.

Pressure was mounting on GM and Chrysler this week before the congressional failure as both faced demands from a small number of partsmakers for payments in advance because of the bankruptcy concerns, people familiar with the matter said.

GM is “deeply disappointed that agreement could not be reached tonight in the Senate despite the best bipartisan efforts,” according to a statement. “We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis."

The industry is effectively done at this point, it's either collapse under Bush or nationalization under Obama. GM and Chrysler will not survive bankruptcy, and if both of them go under, Ford will follow.

The ripple effects will be catastrophic. Millions of jobs will be lost as dealerships, parts stores, suppliers and auto mechanics go under. The auto suppliers service several auto brands and manufacturers that share costs. With the Big Three gone, Toyota, Honda, Mazda, Volkswagen and other foreign car companies will have to pick up costs that will be passed to consumers. Those folks will be hurt big time as well.

Obama will have no choice but to fund a massive nationalization project to save the Big Three, and the GOP will blame him for every cent he spends.

Remember that in 2010 if you still have a job in November when you vote.

[UPDATE] Nope, Bush doesn't want to be the goat on this.

The Treasury threw a lifeline to the beleaguered US car industry, saying it is ready to prevent the failure of auto makers until Congress reconvenes next month."

Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry,'' Treasury spokeswoman Brookly McLaughlin said.

The announcement came shortly after the White House said it will consider using the $700 billion Wall Street bailout fund to rescue the auto industry after the Senate refused to pass a $14 billion bailout plan late Thursday night.

"The current weakened state of the economy is such that it could not withstand a body blow like a disorderly bankruptcy in the auto industry," White House press secretary Dana Perino said.

The Bush administration has repeatedly opposed using the bailout fund, saying it was designed specifically to restore stability to the financial sector. But the White House said Friday it must reconsider after the Senate failed to agree on rescue plan late Thursday.

Considering the Dow is down less than a percent this morning instead of the meltdown predicted this morning, clearly the market is expecting Bush to step in and float the industry until Obama can act.

We'll see.

Zandar's Thought Of The Day

$25 billion is not enough for the Big 3.

$36 billion is too much for the Big 3.

Therefore, the answer is $14 billion and one of those demeaning retractable child harness on a leash dealies, which magically is also too much and not enough at the same time, meaning it's going to die in the Senate and a couple million jobs along with it. But that's okay, because the job losses will come from the other 49 states the Senators voting against the plan are from.

Thursday Job Numbers

And they're not good folks. Weekly jobless claims hit a 26-year high with a staggering 573,000 unemployment claims last week.

It was the highest number of jobless claims since Nov. 27, 1982 when initial filings hit 612,000. Economists were expecting jobless claims increase to 525,000, according to a consensus compiled by Briefing.com.

The four-week moving average of jobless claims, which works to eliminate fluctuations in data was 540,500 last week, an increase of 14,250 from the previous week's revised average of 526,250.

One economist said the number of initial claims decreased in the previous report because the data from that report represented the week of Thanksgiving. Some of the surge in initial filings in this current report could be a bounce from that week.

However, "the underlying trend in the labor market is that it continues to weaken," said Jay Bryson, global economist with Wachovia Economics, and that is evident in the 4-week moving averages of initial claims.

The number of people continuing to collect unemployment rose to 4,429,000 in the week ended Nov. 29, the most recent week available, which was also a 26-year high. The measure was an increase of 338,000 from the preceding week's revised level of 4,091,000.

The last time continuing claims was at such an elevated level was Dec. 4, 1982, when continuing claims hit 4,509,000.

Folks in my generation and younger simply have not seen anything like this, period. We've been through a couple of hiccups like in 1991 and 2002, but nothing like a sustained, multi-year recession. How scared are Americans? For the first time ever, our household debt decreased.

According to the Federal Reserve's flow of funds report released Thursday, consumer debt fell an annualized $30 billion, or 0.8% in the third quarter to $13.91 trillion.

Americans holding less debt may sound like a positive, but it also means consumers are spending less, as debt has become more expensive and harder to come by.

As the credit crunch intensified in the third quarter - and exploded late in the period with the bankruptcy of Lehman Brothers - Americans were increasingly unable to finance big purchases like homes, cars and big-ticket goods.

"Consumers are going through a major change in their spending and savings habits," said Lyle Gramley, a former Fed Governor. "Throughout the housing bubble, consumers had a savings rate of zero, relying on the rising price of their homes. Now they're saving money for the future instead of spending it."

That's a worrisome sign for the economy, as consumer spending makes up 70% of overall U.S. gross domestic product. And the fourth-quarter numbers are likely to grow, as the peak of the credit crisis came in mid-October.

As I've said time and again this is a consumer-driven recession. Consumers buy less, more and more people lose their jobs as demand dies, and in turn they buy less, Deflationary Spiral 101.

The pain is just beginning.

The Big Zero

For the first time ever, four-week US Treasury bills sold at zero percent interest. Zero.

Investors fearful of deflation and riskier assets scrambled to hand over cash to the US Treasury in return for no interest at an auction Tuesday, while some T-bill rates fell below zero in the market.

Pressures on fund managers to stock up on the safest possible assets in advance of year-end book-balancing added to the bid for government securities, traders said.

The U.S. Treasury Department said it sold four-week bills at a high rate of 0.000 percent, a level never before seen, in a $30 billion auction.

When Treasury bill rates turn negative it shows that investors are so concerned about the safety of other assets that they are willing to effectively pay the U.S. government a fee to look after their money.

Rates for three-month bills in the market fell below zero, according to fixed-income trading platform Tradeweb.

"There is just a continuing flight to safety with money that needs to be invested," said Lou Brien, a market strategist with DRW Trading Group in Chicago. "Money funds want it to be invested rather than under the mattress, which is continuing to push rates lower."

The view that the Fed will use other methods in addition to cutting short-term interest rates to ease monetary conditions drove prices of long-dated Treasuries prices higher as well, sending yields on those maturities toward five-decade lows.

This is a classic liquidity trap scenario, where even with dirt cheap interest rates (and the Fed is expected to cut rates to 0.50% next week) and massive liquidity in the form of bailout billions has been pumped into the system, the economy is stalled out like a car with a flooded carburetor. Banks are hoarding cash rather than loaning it out because short term investments are way too volatile and dangerous. The practical upshot is that the economy grinds to a halt and deflation sets in.

We're headed down that road. The interest rate in this country will effectively be zero soon if not zero already. As such, the next step is deflation, and deflation means anybody in a lot of debt now will be only in worse debt later. That situation describes basically every company and most American families out there.

This is turning into a textbook disaster. Remember, it wasn't inflation that caused the Great Depression, but a catastrophic deflationary spiral. Prices dropped. Wages dropped as a result. People were laid off. Demand for goods dropped, causing prices to drop more...and the cycle continued for most of the 30's. It took us almost 20 years and World War II to recover from it.

We're heading into another situation like that now.

Out Of The Frying Pan...

...into the mortgage default. The newest report out this week from the Office of the Comptroller of the Currency shows that when the feds stepped in an intervened with mortgage payments to keep people in their houses, a large percentage ended up back behind in their mortgage payments again, sometimes within only a few months.

The OCC found that 58 percent of borrowers who received a modification in the first quarter have since missed at least one monthly payment. In the more recent group of borrowers who received modifications in the second quarter, 51 percent have missed a payment. The finding was based on data provided to the OCC and its sister regulator, the OTS, by 14 of the nation's largest banks, which account for about 60 percent of the mortgage market.

There's every reason to believe this is representative as a whole of the mortgage situation in the US. As the housing market continues to collapse these problems will continue until the housing market hits bottom, and there's no reason to believe that will happen anytime soon.

It's Bad Now And It Will Get Worse

Certainly Obama believes things are going to continue to get worse, but just how bad? One estimate from the UK has November's massive job losses as the good times...and 2009 could see job losses of twice that.

As many as a million American jobs could be lost every month by next spring as businesses struggle to raise capital in financial markets consumed by fear, according to a new analysis.

November was the worst month in the US labour market since the oil crisis of 1974, as more than 500,000 US workers were laid off, according to official figures released on Friday.

But Graham Turner, of consultancy GFC Economics, says the rising cost of corporate debt is now flashing a red warning signal that far worse is to come over the next few months and job losses are heading for levels last seen in the 1930s Great Depression.

Corporate bond yields have rocketed since the credit crisis began as investors flee risky assets in search of safe havens such as US Treasuries. That effectively means many firms are being forced to pay eye-watering interest rates to borrow funds.

Turner says when the gap between the yield on high-risk company bonds and US Treasuries widens sharply, unemployment tends to shoot up - and current credit conditions are pointing to a doubling in the pace of layoffs, to more than a million workers a month, by spring.

'The correlation is holding up all too well,' he said. 'It's very disconcerting.' He added that the pace of layoffs already happening in the US 'is indicative of panic'. During the 1970s oil crisis the panic was relatively short-lived, he says. 'But the worry now is that this will just roll on and on.'

Sustained job losses of that magnitude would indeed be catastrophic for America and the world. Consumer spending would drop like a stone, and retail level goods and services would evaporate, taking the economy with it. We're talking a deflationary dealth spiral scenario, one where millions of jobs would vanish and the US would face shortages, riots, and chaos. The effective unemployment rate is 12.5% now...it could end up twice that, with one in four working age Americans either out of work, under-employed, or no longer seeking a job because there will be none to have. The Happy Face economic press has so badly underestimated this crisis that the reality is more and more likely to be an "effective depression" where the entire global economy is restructured...and when it is, America will no longer be on top.

There is no visible bottom to this abyss. 2009 is going to be one of the worst years in American history, bar none.

Out Of Gas

The Kroog weighed in on the Big Three today, and the results were not pretty.

Nobel economics prize winner Paul Krugman said Sunday that the beleaguered U.S. auto industry will likely disappear.

"It will do so because of the geographical forces that me and my colleagues have discussed," the Princeton University professor and New York Times columnist told reporters in Stockholm. "It is no longer sustained by the current economy."

Krugman won the 10 million kronor (US$1.4 million) Nobel Memorial Prize in economics for his work on international trade patterns. Some of his research on economic geography seeks to explain why production resources are concentrated in certain locations.

Speaking to reporters three days ahead of the Nobel Prize ceremony, Krugman said plans by U.S. lawmakers to bail out the Big Three automakers were a short-term solution, resulting from a "lack of willingness to accept the failure of a large industry in the midst of an economic crisis."

And I happen to agree with him. As I've said, there's nothing that can really be done to solve the US auto industry's problem that doesn't involve the nationalization of the entire industry, which is just unacceptable given there's plenty of car companies out there. Even in the short term if the automakers survive, they simply will die long term as people won't buy cars from a bankrupt company. Obama will be forced to do it, as losing millions of auto jobs is even more unacceptable, and the price autoworkers will have to pay is to deunionize completely and take brunt of the concessions. The GOP will demand it and will get it. The only other option is to lock out foreign autos completely in a bout of nationalist protectionism.

It's not the auto industry that's going to vanish first, it's the unions...and with it the last of the blue-collar middle class in this country.

Obama's Jobs Plan

With Friday's hideous job numbers out signaling truly bad times ahead, Saturday was certainly the right time for Obama to announce his job creation plan.

President-elect Barack Obama on Saturday revealed five parts of his plan to save or create 2.5 million jobs by 2011, and said he will push for immediate action by Congress when he takes office in January.

Obama wants to make public buildings more energy-efficient; repair roads and bridges; modernize schools; increase broadband access; and ensure health care uses the latest technology.

"Our government now pays the highest energy bill in the world," he said in the weekly Democratic Radio Address.

"We need to upgrade our federal buildings by replacing old heating systems and installing efficient light bulbs. That won't just save you, the American taxpayer, billions of dollars each year. It will put people back to work."

In addition, he said, "It is unacceptable that the United States ranks 15th in the world in broadband adoption. Here, in the country that invented the Internet, every child should have the chance to get online."

"In addition to connecting our libraries and schools to the Internet, we must also ensure that our hospitals are connected to each other through the Internet."

"These are a few parts of the economic recovery plan that I will be rolling out in the coming weeks. When Congress reconvenes in January, I look forward to working with them to pass a plan immediately.

"We won't do it the old Washington way. We won't just throw money at the problem.

"We'll measure progress by the reforms we make and the results we achieve -- by the jobs we create, by the energy we save, by whether America is more competitive in the world," Obama added.

Indeed, the size and scope of Obama's national stimulus pacakage is growing by the day. And with state after state calling for long-needed Federal infrastructure investment and consumer consumption drying up quickly, it can't come soon enough.

I'm hoping this means that Republicans will be overwhelmed by the popularity of this and will have no choice but to concede, after all, politicians who vote against job creation for actual voters tend to get removed from office by those voters.

We'll see.

A Second Chance For The Big Three's Second Chance

I had pegged the bailout of the auto industry as all but dead, but it seems that today's dismal job numbers with over half a million jobs lost in November alone has spurred both the GOP and Democrats into action on the Big Three automakers.

Efforts to provide emergency loans to struggling U.S. automakers gained momentum on Friday after a grim U.S. jobs report spurred talks between congressional leaders and the White House.

U.S. House Speaker Nancy Pelosi has dropped her insistence that the money come from the $700 billion financial bailout fund that the Bush administration had refused to use on automakers, said a congressional aide familiar with the discussions.

Another congressional source said Pelosi was open to the idea of tapping the existing $25 billion advanced energy technology loan fund to help auto companies - an idea the White House has promoted.

Such a move would likely build bipartisan support in Congress for a bill that could be signed into law by President George W. Bush.

So far, this is being spun as a victory for the GOP, but the reality is just a bit further down the article...

Congress and the White House are anxious to prevent the threatened near-term collapse of one or more of the Detroit Three - which directly employ 250,000 people.

Somebody in the White House has apparently told Bush that if his final month in office leads to the death of the American Car, well history is really, really not going to look kindly upon him. Not that history had any other place for him but dead last of 44, but apparently that's too much for even Bush to handle.

The fact of the matter is the effective unemployment rate, the rate that includes all the folks who have stopped looking for work, or are scraping by on part-time work, has now reached 12.5%. That means one in eight American workers don't have a full-time job right now, and since December 2007, America has lost 2.7 million jobs.

Neither side wants to take credit for losing millions more should the auto industry fold. In a matter of about 8 hours today, both Obama and Congress have swung into action and the White House has done a complete 180.

By next week, an auto industry bailout could be on Bush's desk.

What a difference a day makes.

Zandar's Thought Of The Day

The same Village Idiot Happy Face economic experts who told us the Bush economy was the greatest story never told by the Evil Liberal Media are the same ones who have been saying the markets will hit bottom any time now and are the same ones saying after today's devastating job loss numbers that once again...the worst is over.

Do you believe the worst is over?

You willing to bet your job on that?

The Ten Percent Solution

To go along with the worst lob losses since the year before I was born, we now have news that one in ten Americans are at least one month behind on their mortgage payments.

A record one in 10 American homeowners with a mortgage were either at least a month behind on their payments or in foreclosure at the end of September as the source of housing market pressure shifted to the crumbling U.S. economy.

The Mortgage Bankers Association said Friday the percentage of loans at least a month overdue or in foreclosure was up from 9.2 percent in the April-June quarter, and up from 7.3 percent a year earlier.

Distress in the home loan market started about two years ago as increasing numbers of adjustable-rate loans reset to higher interest rates. But the latest wave of delinquencies is coming from the surge in unemployment.

And things are only going to get worse. Even if the housing market hits bottom...who is going to have the down payment and the creditworthiness to get a mortgage, a car loan, or any other major bank loan?

Banks are sitting on hundreds of billions, and they aren't loaning it out. The real problem isn't even the housing collapse anymore, but the collapse of the American middle class economy. With no middle class conusmers to consume, and no manufacturing base to rebuild a middle class, America's economic woes could very well last for a very, very long time.

Snow Job

Economists are predicting November was the worst job loss month in 26 years, an estimated 335,000 jobs went bye bye, the educated guess is unemployment at 6.8%. The real numbers will be out at 8:30.

I'm expecting them to be significantly worse.

[UPDATE] "Significantly worse" indeed. A staggering 533,000 jobs lost in November to a 6.7% unemployment rate, the worst single month since 1974. The newly revised numbers for September and October mean a heart-stopping one-and-a-quarter million jobs lost in the last three months alone.

Almost 2 million jobs now lost in 2008. December's numbers will certainly put us over that mark. The pain is just beginning, folks. No bottom is visible. 2009 could actually be worse.

The Big Three's Last Shot

Today the CEOs of the Big Three automakers go before the House to plead their case one last time, but the reality is Democrats don't have the votes in either chamber of Congress to pass anything.

With time fast running out, Congress and the Bush administration will wrestle again today over whether to lend $34 billion to Detroit automakers, even after senators heard grim warnings that their failure could cost 2.5 million jobs and the liquidation of three iconic U.S. companies: General Motors, Ford Motor Co. and Chrysler Corp.

Mark Zandi, chief economist at Moody's Economy.com, told the Senate Banking Committee on Thursday that even the $34 billion that the executives of the three companies pleaded for would hardly be enough. Detroit eventually would need $75 billion to $125 billion to avoid almost certain liquidation over the next two years.

Still, Zandi told senators that the automakers' failure would be "so damaging to the economy, you don't have the choice."

Bailout fatigue among the public and lawmakers is blocking the money in Congress. Lacking votes in both chambers, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid are preparing to blame the Bush administration for letting Detroit go under. Reid said Treasury Secretary Henry Paulson could "with the stroke of a pen" save the automakers by tapping the $700 billion financial rescue Congress passed in October.

Michigan Democratic Sen. Carl Levin saw in Thursday's testimony a new path to do just that.

Ford and GM executives pointed to an estimate by J.P. Morgan that the automakers' failure could trigger $1 trillion in losses to the banking system. Levin described that scary figure as key to persuading Paulson to allow automakers access to the $700 billion.

But President Bush said in an interview with NBC News, "No matter how important the autos are to our economy, we don't want to put good money after bad. In other words, we want to make sure that the plan they develop is one that ensures their long-term viability for the sake of the taxpayer."

It's pretty clear that the bailout is just not going to pass. It's even clearer that GOP lawmakers in states outside the Big Three's home of Michigan, Ohio Pennsylvania and Indiana have no interest in saving GM, Ford and Chrysler when their own states plan to benefit from foreign automakers having plants in those states outside the Rust Belt. And it's even more clear that the President will simply veto anything that comes down the pike.

The GOP is bound and determined to kill the Big Three in order to kill the UAW, plain and simple. Obama could step in at this point and promise something in January, but that may be too late.

We'll see.