Taking Stock Of Our Economic Woes

Experts Say The Nation's Financial Straits Will Get Worse, And There Is No Consensus On What To Do About It

(CBS)  We're taking stock of our country's economic woes this morning. Everyone knows we've been through some tough times of late. But does anyone really know how to turn things around? Our cover story is reported by Rita Braver:

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It was week of nerve-wracking economic news …

A run on a California bank … while the nation's two federally chartered mortgage giants turned up in need of a government rescue plan, a plan Treasury Secretary Henry Paulson described as being aimed at "supporting the stability of financial markets."

Stocks rallied, but only after weeks of losses. There was a new round of layoffs by General Motors. And even though oil prices fell a little, there was confirmation that inflation is on the rise. Consumer prices were up 1.1 % in June, while wages fell 2.4 percent over the past year.

Art Cashin, director of floor operations for UBS Financial Services, says it's been one of the most unstable periods he has seen in 45 years on the New York Stock Exchange.

"We're in what is called bear market territory," Cashin said. "We're down over 20 percent since October. We have very volatile moves where the stocks looked like they were going into absolute free fall. There were heart stopping moments here."

A new CBS News/New York Times poll finds that 80% of Americans believe the condition of the economy is bad.

The fallout continues. That once-booming housing market that we've all seen go bust …

Says Mark Weisbrot, co-director of the non-partisan Center for Economic and Policy Research, "That's the overwhelming cause of this recession. And that's because we built up an enormous bubble in home prices from 1996 to 2006. It was over eight trillion dollars of bubble wealth."

Weisbrot says that only about 40% of that bubble has deflated so far.

"So you're going to have a lot more foreclosures, a lot more writedowns in banks, possible bankruptcies."

By some estimates, banks may need to write off up to one trillion dollars in bad loans. One scary example: this past week's run on IndyMac, the California bank that went bust due to too many bad mortgage loans.

Marie Bonilla (left) is one of those who still hasn't been able to get her money out of the bank. She has three business accounts there, three personal accounts and a Roth. Her son has three accounts.

And she is angry: "At the Fed, at the greedy lenders, at the lying borrowers."

She says that she's had to cut hours for the employees of her small company that makes down and feather products. And because her name is on his account, her son Anthony, a Marine who has served in Iraq, can't withdraw the $6,000 he's been saving for a motorcycle.

"I can't get the money out, I can't touch it, and now my dreams are falling apart," he said.

Anthony and his mother still hope to get all their funds back. And no one is predicting the kind of bank failure fever that swept the country in the Great Depression.

But the turmoil of the week had President Bush trying to reassure Americans that the country is on solid economic ground.

"We can have confidence in the long term foundation of our economy, and I believe we will come through the challenge stronger than ever before," he said.

Not everyone was buying it.

In fact, the economy is still showing small signs of growth. But Matt Weisbrott says that with inflation up and wages down, that's little comfort:

"It's kind of like the guy who jumps out the window of a 60-story building, and he passes the 30th floor and he says, 'Everything's okay, so far.'"

Things are definitely not okay in places like Ravenna, Ohio, with businesses closing and workers laid off.

Dave Vaughan of the nonprofit Neighborhood Development Services says, "Home ownership counselors and our foreclosure specialists go through, day in and day out, hearing just terrible stories of people losing their houses, their dreams shattered."

Vaughan says that it's not just foreclosures.

"Most of the manufacturing jobs are simply disappearing," he said. "And the replacement jobs that are coming into play are much lower wage than they had been previous. As one of my colleagues said, the people who built the F-150 are now building Big Macs."

Last month, 37-year old Marianne Page, a single mother of two, lost her job as a production scheduler for a manufacturing company due to downsizing.

"It was hard, it was hard," she said. "The kids didn't really understand. Maybe a little bit, but they're young."

Now she scrimps on gas and groceries, and still can't find work.

"It just seems like everybody's swarming for the same jobs," she said. "It's just like one job and 100 people going for the same thing. It's just not a good thing."

And for many Americans the worst may be still to come.

Peter Schiff, president of Euro Pacific Capital which specializes in foreign investment, said, "We are going to have a lot more inflation. Unemployment is going to keep getting worse. Interest rates are going to go a lot higher. That is gong to make things worse. We are going to see a lot more bankruptcies, a lot more foreclosures, a lot of the big retailers cutting back and going out of business."

When Schiff first started predicting the bursting U.S. mortgage bubble, failure of financial firms and a steep rise in oil prices, he became known as "Dr. Doom."

"And people just dismissed, they almost laughed it off like it couldn't happen," he said.

He says that Washington and Wall Street have gotten it wrong for years:

"Our economy has been built on consumer credit, on borrowing and spending money," Schiff said. "The real foundation of an economy needs to be on savings, on under-consumption, and on production. We've got it backwards."

Now he forecasts that there will be a slowdown in consumption because, given the current economy, more of us are now unable to pay our credit card bills.

"And then it's going to be very difficult for Americans to get credit cards," he said. "Americans are going to see their limits dramatically reduced on the cards that they have, and so their ability to consume is going to be limited to the money in their checking account.

Though Schiff says lower consumption, whether it's of expensive homes or fancy consumer goods (especially on credit) would be good for the country, the view from Wall Street is different:

"What kind of impact does that have when consumers stop spending money?" Braver asked.

"That is the daily worry down here," Cashin said. "The American consumer is 70 percent of this economy, and if the consumer hits a brick wall and stops, then the economy all across the nation will be in serious trouble."

And almost everyone has a different view of how to get things back on track.

Some are calling for tighter regulations on financial institutions. Others say there are too many rules already.

Some economists and politicians want to let the market right itself. Others are calling for a government spending program to stimulate the economy

"Does anybody really have an answer for fixing the economy," Braver asked, "or is it all just a little bit of guess work? And maybe it'll take some luck?"

"It is probably much more the latter," Cashin said. "I'm afraid that it's Thanksgiving. They are all in the kitchen and there are no measuring cups. It's a little bit of this and little bit of that, so without the measuring cups, we're making it up as we go along."

[wardoglrs]

I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them. Thomas Jefferson

"Paper is poverty,... it is only the ghost of money, and not money itself." Thomas Jefferson to Edward Carrington, 1788


President FDR (on Fascist rule in a letter to corporate con man %u201CColonel%u201D Edward M. House, a founder of the Council on Foreign Relations and political fixer for the ruling class. House also handled President Wilson for the foisting of the privately rigged %u201CFederal Reserve%u201D Corp bank monopoly. 11/21/ 1933)

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." - Thomas Jefferson, Letter to Treasury Secretary Albert Gallatin (1802)

When all government, domestic and foreign, in little as in great things, shall be drawn to Washington as the center of all power, it will render powerless the checks provided of one government on another, and will become as venal and oppressive as the government from which we separated - Thomas

[xmanborg]

This change in the Ecomomy is basically all to blame on the Devaluation of the US Dollar and the Mis-Management of the Bush Administration and the IRAQ War the the Billions Wasted.

Good Ridance Bush.

[jmurrieta1]

And Alzheimer John''s top advisor (now resigned) thinks it''s all in our heads.

While that top advisor rakes in money from a corrupt Swiss bank that keeps Republican "patriots" from having to pay the taxes they owe.

It just shows how Repugs are traitors and liars. They send US troops into battle with substandard equipment while they channel billions in no-bid contracts to their rich pals.

And just so said rich pals don''t have to pay taxes, Fat Cat Repubs help offshore banks cheat the US government.

Nice work!

[babooph]

Lucky the report of most CEO s wanting Bush during the last 2 elections came out. It showed me I must get out of US companies-& the pay they gave those fools!!!My overseas stuff has done very well-Jim Rogers is a great help too.

[mandylou4u]

So you see, that while you are contributing to relieve one, you are drawing it from thousands who are even worse off than he. If you had the right to give anything, the amount was simply a matter of discretion with you, and you had as much right to give $20,000,000 as $20,000. If you have the right to give to one, you have the right to give to all; and, as the Constitution neither defines charity nor stipulates the amount, you are at liberty to give to any and everything which you may believe, or profess to believe, is a charity, and to any amount you may think proper. You will very easily perceive what a wide door this would open for fraud and corruption and favoritism, on the one hand, and for robbing the people on the other.
freerepublic.com

I only keep posting these because I cannot find the words myself and these words spell it out better than any other at this point. Looking to history sometimes helps us understand what has happened up to this point.

[mandylou4u]

Mr. Speaker, I have said we have the right to give as much of our own money as we please. I am the poorest man on this floor. I cannot vote for this bill, but I will give one week''s pay to the object, and if every member of Congress will do the same, it will amount to more than the bill asks."
Davy Crockett
freerepublic.com
Where did these days go. Your polititians could care less if a hard worker makes it through a day and they could care less about a rich person the same. Greed seems to be the only thing lasting the times lately.

[mandylou4u]

"Mr. Speaker %u2014 I have as much respect for the memory of the deceased, and as much sympathy for the sufferings of the living, if suffering there be, as any man in this House, but we must not permit our respect for the dead or our sympathy for a part of the living to lead us into an act of injustice to the balance of the living. I will not go into an argument to prove that Congress has no power to appropriate this money as an act of charity. Every member upon this floor knows it.

We have the right, as individuals, to give away as much of our own money as we please in charity; but as members of Congress we have no right so to appropriate a dollar of the public money. Some eloquent appeals have been made to us upon the ground that it is a debt due the deceased. Mr. Speaker, the deceased lived long after the close of the war; he was in office to the day of his death, and I have never heard that the government was in arrears to him. This government can owe no debts but for services rendered, and at a stipulated price. If it is a debt, how much is it? Has it been audited, and the amount due ascertained? If it is a debt, this is not the place to present it for payment, or to have its merits examined. If it is a debt, we owe more than we can ever hope to pay, for we owe the widow of every soldier who fought in the War of 1812 precisely the same amount.
Davy Crockett
freerepublic.com

[mcv57]

Paulson said banks are sound. IndyMAC is the 4th bank failure this year. I was wondering if Paulson is getting his drugs from McCain economic advisor. Must be a new mind-blowing drug for the rich.

[lochlan-2009]

The cause of our current malaise is unbridled consumerism, living on debt, and being the worst of the uneducated voters on the planet...we elected the government we deserve...and until we elect a better grade of politicians we will continued to be saddled with corruptions, incompetence, and ****-poor leadership...

Posted by ozilot

Speak for yourself. The only debt I have is a house and a car (wife''s car I payed in full). As for voting for these criminals, I was out of the country in 2004 and filed an absentee ballet just to make sure my vote counted against this guy and his organized crime ring.

[lochlan-2009]

"Consumer prices were up 1.1 % in June, while wages fell 2.4 percent over the past year."

That pretty much sums up all the b!tching about the Bush/Cheney agenda we''ve been doing the last seven years. Bootlickers are happier then a fly on *** with the destruction they''ve done to this country.

Notice, however, the number one concern for Americans is not the cause but the effect. Poll after poll shows Americans are upset with high gas prices, or food prices, or the finance markets, or the state of our economy, or the Iraq war. These are all effects.

The cause is corruption and unethical representation in D.C., and that issue isn''t even on the table.

[latrocinor-2009]

It''s the USA so what can you expect except for opportunistic immediate gratification.

Since the fables of Aesop and other behavioral guidance stories are now considered fascist right wing nonsense to be ignored and denigrated the consequences of doing so are inescapable.

[walt1944-2009]

Apparently CBS News has not heard the prognosis on the economy by the recently departed "Bagdad John McBush" McCain top economic advisor, "Doctor Phil" Gramm who says that this is all our imagination and that things are really "wonderful" (for rich old buzzards like him!).

Of course, "Doctor Phil''s" diagnosis on the economy and on those of us suffering thru it, got him fired from "Bagdad John''s" campaign, but we still have his son, Lindsey, to contend with who has demonstrated that he is just as big an idiot (if not bigger) than his father!

It is strange that in wealthy neocon based families, the heads of the families are dumb, and their sons are even dumber! It must be genetic, or maybe an "imaginery" virus!

SIG HEIL, BUSH!!!!
sig heil, ABSOLUTELY MORE OF THE SAME, McCain!!!!

[whitemale08]

This economy is in shambles.

There''s nothing to bring it back, no new tech bubble or housing bubble...nothing.

It has to be rebuilt from scratch.

Now we are all going to have to live in FEMA camps and tent cities like you already see in California and become a "rational peasant" by fleeing the suburbs to live closer to the factories to manufacture exports to Asia.

We are now replacing the Asians for manufacturing.

It takes 9 Federal Reserve Notes to buy 1 Yuan (Chinese) currency) soon it will be $15.00 to 1 Yuan. When that happens a typical Chinese worker who earns 3.5 Yuan a day will be the equivalent of $52.50 for 8 hours work that comes to $6.50 an hour or current minimum wage in this country.

It''s a race to the bottom folks, and congratulations to Republican Corporate Fascists. It''s you''ve always wanted.

[tootall10142]

HEY OZARKBARD YOU TOOK THE WORDS RIGHT OF MY MOUTH.CAN YOU BE HERE TOMORROW I WOULD LIKE TO READ MORE OF YOUR OPINIONS.I LIVE IN THE OUACHITA MOUNTAINS AND DIDNT THINK ANY ONE UP THIS HIGH HAD INTERNET . ILL BE WWATCHING AND WOULD LIKE TO MEET YOU ON LINE .

[pzabbie]

The United States is a fat, selfish society... and now they are so scared they are more then willing to trade their liberties for a false sense of security.
I hate to sound so negative, but American society DESERVES this economic abyss.

Posted by OzarkBard at 07:15 AM: Jul 21, 2008

Ozark,
I read these posts every day, and comment on just a few. But you are right on. The bottom line is, we Americans need to step back up to the plate and do what we did in the early 20th century. Remember the %u201CGreatest Generation?%u201D They are rolling over in their grave%u2019s watching our behavior now. It all starts with home and family. Selfishness, Greed and Avarice has always been the downfall of Democracy. Read your History, folks. It%u2019s not G.W.%u2019s, Obama%u2019s, Repub%u2019s or Dem%u2019s fault. It%u2019s the worker, the Entrepreneur. We have stopped working for the greater good. It%u2019s all about me, me, me. We have lost our way. And it WILL lead to the %u201CPOCKY-CLIPS%u201D. As for me, I%u2019m stocking up on whiskey and guns. That is what will control the masses at the end.

[babooph]

Just a small problem getting smaller -the rich are doing better than ever-big $ almost no taxes-the poor are still poor [a break even],& the middle class-only ones hurting- is getting smaller every day-soon no more problem.

[irliberal]

Oh,a thank YOU, republicons, for using the last eight years to destroy our military readiness by involving us in multiple front, pointless foreign wars, destroying the economy, and basically turning the USA into a world-wide laughingstock.

You morons aren''t patriots. You''re traitors. Time for you to go. Your time is over. You''re done.

Time for a change.

[ozarkbard]

I make $8/hour, and I''ve NEVER had a credit card, and I''m not in debt. Yet, I''ve always pay my rent and bills ON TIME.

How? Because I don''t live past my limits. I don''t have a bigscreen TV. I don''t have an Iphone. I don''t have a gas guzzler for a vehicle.

Yet, I have to pay more taxes to bail out everyone else that DID live past their limits.

The United States is a fat, selfish society... and now they are so scared they are more then willing to trade their liberties for a false sense of security.

I hate to sound so negative, but American society DESERVES this economic abyss.

[bucfish]

Clearly, Gen X is the source of all our troubles.

Boomers worked hard for years so the "greatest generation" could all retire at age 65 with high seniority and fat defined benefit pensions to drive their 6 mpg Winnebagos around and suck Medicare dry.

Now we''''re going to retire. Any politician who gets in our way better not plan on getting that fat Congressional pension, better find another line of work.

And the whiny Gen X, the children who bought into the Reagan "Greed is Good" philosophy, who voted in the current crop of Republicans thieves--they''''re to blame for the mess.

So Gen Xers, get out your shovel, get down in that ditch, and start digging overtime.

Because we''''re going to need your tax dollars.

Don''''t worry--someday you''''ll get 3 weeks vacation per year, someday you''''ll be able to retire.

At least that''''s the story they fed us.
by jmurrieta1

Do not blame GenXers it is those wonderful Politicians The Greatest Generation elected. They allowed Socialism to creep into America. You are not the Greatest Generation unless of course you would like to be the Fourth Reicht. That is a Media Label that you have accepted. But in reality The Greatest Generation was asleep and did not get involved enough in politics. Thereby putting us in a full blown debt. And having a Social Security system and Medicare System that is so UnAmerican! Thanks The so called Greatest Generation you have sold me into debt slavery!

[jmurrieta1]

Clearly, Gen X is the source of all our troubles.

Boomers worked hard for years so the "greatest generation" could all retire at age 65 with high seniority and fat defined benefit pensions to drive their 6 mpg Winnebagos around and suck Medicare dry.

Now we''re going to retire. Any politician who gets in our way better not plan on getting that fat Congressional pension, better find another line of work.

And the whiny Gen X, the children who bought into the Reagan "Greed is Good" philosophy, who voted in the current crop of Republicans thieves--they''re to blame for the mess.

So Gen Xers, get out your shovel, get down in that ditch, and start digging overtime.

Because we''re going to need your tax dollars.

Don''t worry--someday you''ll get 3 weeks vacation per year, someday you''ll be able to retire.

At least that''s the story they fed us.