U.S. unemployment increases to 14-year high

Graph showing U.S. unemployment rate. From The New York Times.

There is just so much economic news to talk about this week. From The New York Times:

In a sign that American workers may face even more difficult times for many months to come, the nation’s unemployment rate last month jumped to the highest level in 14 years as job losses mounted.

Gloomy enough was word from the government on Friday that a fresh 240,000 American jobs disappeared in October, the 10th consecutive month of retrenchment. It brought the toll of lost jobs to 1.2 million for the year — more than half in the last three months alone — while the unemployment rate climbed to 6.5 percent. Worse was the sense that little could be done near term to alter this now-accelerating trajectory.

President-elect Barack Obama, speaking at his first news conference since winning Tuesday’s election, sounded resigned to inheriting a starkly troubled economy when he moves into the White House next year.

“It’s not going to be quick, and it’s not going to be easy to dig ourselves out of the hole that we’re in,” Mr. Obama said, calling for swift passage of spending measures aimed at stimulating the economy, including another extension of unemployment benefits.

But while experts said this could soften the damage, it was unlikely to change the fundamentals. They said the economy would probably lose several hundred thousand jobs a month well into next year, taking the unemployment rate to near 8 percent — a level last seen a quarter-century ago.

“The economy is slipping deeper into a recessionary sinkhole that is getting broader,” said Stuart G. Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. “The layoffs are getting larger, and coming faster.”

Economists are expecting the unemployment rate to rise to nearly 8 percent? I'd say the unemployment rate would be even higher. The unemployment rate measures those Americans collecting unemployment checks, and if you've exhausted your unemployment compensation, then you are dropped from the unemployment rolls. The unemployment rate also does not measure those Americans working part-time, or are underemployed in jobs that are below their skill set. According to the NY Times:

The number of unemployed Americans leapt in October to 10.1 million — the largest number since 1983. More than 22 percent of all unemployed people have been out of work for six months or longer — another level not reached in a quarter-century.

Only 32 percent of all unemployed people were drawing state benefit checks in October because of restrictions on eligibility. More than half of all unemployed people drew benefits in the 1950s, and about 45 percent received state checks during the last recession in 2001.

[....]

The jobs report reinforced how a potent assemblage of troubles — plunging housing prices, tight credit and shrinking paychecks — was combining to drag the economy down, depriving consumers of cash.

All through the year, companies have hired tepidly and begun to lay off workers as their sales sagged, while cutting working hours for those on the payroll. That trend continued in October: the so-called underemployment rate — which includes those who have lost jobs, people working part time for lack of full-time positions and those who have given up looking for work — rose to 11.8 percent from 8.4 percent a year earlier.

The pace of layoffs has accelerated in recent months. From January to August, the economy lost about 75,000 jobs a month. In September alone, 284,000 jobs vanished, the Labor Department now says, revising its initial estimate of 159,000.

“What you see now is this cascading of unemployment moving from hours cut to hiring freezes to layoffs,” said Jared Bernstein, senior economist at the labor-oriented Economic Policy Institute in Washington. “There’s almost no economic activity out there that’s going to generate jobs right now. This is the front edge of the deeper trough of the recession. It’s going to get worse before it gets better.”

Now according to this April, 2008 MSNBC story on underemployment, economists were expecting the unemployment rate to jump from 4.8 percent to 5 percent in February, 2008. However, Keith Hall, the commissioner of the Bureau of Labor Statistics, testified before Congress that the underemployment rate stood at 8.9 percent in February, up from 8.1 percent a year ago. The underemployment rate was about doubled the rate of unemployment.

I also found this interesting statistic on underemployment:



From 1994 to 2005, the underemployment rate is just about doubled to what the unemployment rate has been. According to the Economic Policy Institute:

Over the past 18 months, 3.3 million workers have been added to the jobless rolls, and there are currently 10.1 million unemployed workers in this country. The unemployment rate rose from 6.1% in September to 6.5% in October, its highest rate since March 1994. Underemployment, a more comprehensive measure of the extent of labor market weakness, rose to 11.8%, its highest level in over 14 years. Underemployment’s growth is primarily due to a surge in people working part-time but wanting full-time jobs—up 645,000 from September to October, and by 2.3 million over the past year.

If economists are predicting the U.S. unemployment rate to rise to almost 8 percent, then we could be expecting an underemployment rate of almost 16 percent! We are only getting half the story here on the jobless picture. It is going to get far worst, than people getting laid off of jobs. You still have the problem of people being underemployed, or dropping out of the job market all together. And these people are also consumers, who will certainly cut back on their spending--remember, consumer spending accounts for two-thirds of the U.S. economy.

The unemployment, and underemployment, picture is just another example of just how bad this U.S. economy is heading.

Update: It appears that the U.S. job market is getting worst for the working poor and the young. From The New York Times:

Labor experts say the hardships of the gathering recession are sweeping down to hurt the working poor and younger job seekers most of all.

From the fall of 2007 to this October, the share of 16-to 19-year-olds working fell by 8 percent, the largest decline of any age group, and the outlook for youths and low-skilled workers in coming months is bleak, economists say, with the industries most apt to employ them, like home-building and retail sales, taking steep dives. On Friday, the Bureau of Labor Statistics reported that 240,000 jobs disappeared in October alone, bringing the unemployment rate to 6.5 percent. But construction, for example, had the highest unemployment rate of any industry: 10.8 percent, compared with 6.1 percent a year ago, leaving entry-level applicants in the cold.

“Low-income people are the big losers when the economy turns down,” said Andrew M. Sum, director of the Center for Labor Market Studies at Northeastern University. With jobs scarce, many college graduates find themselves taking jobs that do not require a degree, and laid-off middle-income workers are taking lower-paying jobs in areas like retail sales. A kind of domino effect is beginning to squeeze out the least skilled or experienced workers — those already on the bottom of the ladder — who are settling for part-time employment and fewer hours if they can find work at all. Hardest hit of all are younger job-seekers, especially black males in their late teens or early 20s without more than a high school education.

Among those ages 16 to 19, access to part-time jobs, full-time jobs and summer jobs had already declined through this decade, and by last month only 31.4 percent had held some sort of employment. In the year ahead, Professor Sum predicted, “The teens will be thrown out of the labor market at record levels,” often causing hardship for poor families and causing youths to miss experience that, studies show, will gain them better jobs in the future.

[....]

The one age group whose employment rate climbed over the last year was people over 65, who are starting to take the part-time and retail jobs once dominated by students and younger high school graduates, Professor Sum said.

A recession takes its largest tolls not only on the young but also in cyclical industries like construction, manufacturing of durable goods, retail trade, hotels and temp agencies — traditional avenues into the workplace for the less skilled.

The crash in construction jobs is most acute in housing, which tends to use a greater share of inexperienced labor than commercial construction does, said Ken Simonson, chief economist for the Associated General Contractors of America. Looking at economic projections, Mr. Simonson said, “I’d expect even more of those low-skilled jobs will be lost.”

What is especially interesting to note here is that not only is the U.S. economy shedding the low-wage retail and construction jobs, but that the same jobs are being targeted by both college graduates and the over-65 people. The college grads probably cannot find the higher-skilled, middle-income jobs that are also being shed in the marketplace, while the over-65 crowd is going back to work to supplement their retirement income, or to possibly pay for rising costs--especially health insurance. So the working poor, and the young, are getting squeezed off the ladder altogether.

Retail sales "fell off a cliff" in October

Graph showing retail sales for October, 2008. From The New York Times.

I heard about this story on Friday in the New York Times. I'm not sure I have much to comment on this story:

Sales at the nation’s largest retailers fell off a cliff in October, casting fresh doubt on the survival of some chains and signaling that this will probably be the weakest Christmas shopping season in decades.

The remarkable slowdown hit luxury chains that sell $5,000 designer dresses as badly as stores that offer $18 packs of underwear, suggesting that consumers at all income levels are snapping their wallets shut.

Sales at Neiman Marcus, the luxury department store, dropped nearly 28 percent in October compared with the same month last year. Sales fell 20 percent at Abercrombie & Fitch, nearly 17 percent at Saks, 16 percent at Gap and nearly that much at Nordstrom.

Of the more than two dozen major retailers that reported on Thursday, most had sales declines at stores open at least a year, the majority of the decreases in double digits. Deep discounters like Wal-Mart and BJ’s Wholesale Club reported gains.

Consumer spending represents two-thirds of the nation’s economic activity, and analysts said the striking sales declines at retailers almost certainly portended an extended, severe recession. The reports highlighted once again the depth of the economic problems confronting President-elect Barack Obama.

Consumers are cutting their spending for many reasons, but high on the list is the weakening employment picture. Even people who still have jobs are pinching pennies as they hear of layoffs among friends and family. Unemployment has hit 6.1 percent, and a new jobs report due Friday is expected to show further deterioration.

“October was every bit as bad we feared,” said John D. Morris, a retailing analyst with Wachovia. “Maybe worse. October’s numbers were so disappointing, particularly in the final week, which had to leave retailers in a state of high anxiety going into the holiday season.”

This is just god-awful bad. Consumers cut back on spending, accounting for two-thirds of the U.S. economic growth. Retailers chop prices on goods, and cut back on stocking their shelves with inventory. This reduction of inventory goes back to the manufacturers, which then shut down their manufacturing in response to lower orders. The reduction of manufacturing of goods cuts down on the purchase of raw materials, forcing the companies producing the raw materials to also cut back on their output. Thus, we have a slowing in the supply as a result of decreased demand. And while all this is happening, the producers in retail stores, manufacturing, and the companies providing the raw materials, are also laying off workers, which is increasing the unemployment in the U.S., forcing these unemployed workers to also cut back on their spending. It is like an endless cycle. And what is worst, the retails sales have fallen off a cliff just before the Christmas shopping season:

Retailers usually make most of their profit during the Christmas shopping season. And while they always offer impressive sales, they plan to discount only about 25 percent of their merchandise, not half of it, Mr. Cohen said. Too much discounting erodes profits. And by cutting prices so early, retailers risk running out of stock, or color and size options, before the season’s home stretch.

A few retailers have strong balance sheets, but many do not, and with credit hard to find they can ill afford a disastrous Christmas season. Analysts said they expected a new wave of bankruptcies after the first of the year.

Bankrupt and ailing retailers are undercutting some of their healthy peers. Last week, for instance, Mervyn’s announced a 149-store liquidation sale just in time for the holidays. Other such sales are already under way at Steve & Barry’s and Linens ’n Things. Circuit City, the struggling electronics chain, began liquidation sales this week at 155 stores it is closing.

Mr. Cohen of NPD Group said wise retailers would not sacrifice profits just to shove goods out the door. But he acknowledged that in such a panicky climate, the race to discount merchandise had become nearly unstoppable.

“What’s happening is the retailer is almost saying, ‘Please just come in,’ ” he said. “ ‘We’ll pay you to shop.’ ”

The American consumer is completely tapped out. They have found themselves caught up in a debt trap of easy consumer lending, a housing bubble that brought Americans into even more debt as they purchased houses at speculatively high prices, before the crash, and now the threat of unemployment as the U.S. job losses hit a 14-year high. It is no wonder that the U.S. economy contracted in the third quarter of this year. And it will contract in the fourth quarter of this year, and possibly into next year. To make matters even worst, we've got Mervyn's, Circuit City, and Linen's and Things going out of business, throwing even more people out of work as they close their doors.

I don't know what the answer is.

Detroit Big Three sinking faster than Titanic, begging for government bailout

It appears that this week's news stories has been nothing but election news (including armchair political QBing), and even more bad economic news. I've been watching the news with this silent fascination, thinking can it get even worst--even as we've elected a brilliant, first, African-American president by the name of Barack Obama? I'm sorry to say, but Barack Obama will have to closet his pretty, gray suits, get some coveralls and a shovel, and discover just how dirty it is shoveling crap. Maybe Obama will need to bring in Mike Rowe, as an adviser, regarding the etiquette of getting dirty?

So let us start with the crap taking place in the auto industry. From MSNBC News:

For mighty General Motors, the news could hardly be worse. The nation's biggest automaker said it lost $2.5 billion in the latest quarter as it was slammed by a slowing economy, global credit crisis and the effect of high energy prices.

The company is now going through cash at a rate of $2 billion a month and says that without help it will run out of money in 2009.

“This is not necessarily the end of the road for General Motors, but they can certainly see the end of the road from where they are right now,” said Aaron Bragman, an automotive analyst at consultancy Global Insight.

Without a federal bailout, GM could be looking at bankruptcy, he added.

[....]

For GM, the situation is grimmer. The automaker announced a range of moves Friday to improve liquidity by $5 billion by the end of next year by cutting capital spending, reducing sales promotions and further cutting production in the first quarter. The automaker also said it will lay off about 3,600 workers.

But those cost savings are not enough to save GM.

What happened? General Motors is going bankrupt. For the past 10-15 years, Detroit's Big Three automakers have been lured into the short-term greed of building big, gas-guzzling, SUVs, which gave them big profits when gas prices were low, and Americans were happily buying up these battleships. Short-term greed was the prime motivation for the auto management, cheered on by the short-term greed of Wall Street analysts. The Detroit auto managers never thought about investing into smaller, fuel efficient cars, or even hybrid technology--even as the Japanese auto companies were plowing money into such fuel efficient research. So President Bush goes to war with Iraq, shooting oil prices up to almost $150 per barrel. Gas prices rose to almost $5.00 per gallon in September, 2008. What I'm saying here is that as oil and gas prices rose, Americans have shed their love for the Detroit gas-guzzling SUVs for the Toyota Prius, and other Japanese hybrid cars that were coming on the market in the mid-2000. In May, 2008, worldwide Toyota Prius sales topped 1 million cars. Toyota Prius sales even surpassed the top-selling Ford Explorer in January, 2008. The Explorer was the top-selling SUV, in the U.S., for more than a decade. The corporate management in Detroit's Big Three automakers screwed up royally for more than a decade, as they pushed for short-term profits in selling gas-guzzling junk to American consumers. And now that American consumers are turning to Japanese fuel-efficient, hybrid cars, the automakers are losing big money, while asking the federal government for their own bailout. It is pure madness.

Continuing with the GM story via MSNBC:

After the recent $700 billion bailout of the financial industry, there is some opposition to using taxpayer money to rescue yet another industry that has suffered from years of mismanagement.

But industry supports counter that the failure of GM or another automaker would have a severe ripple effect on the broader economy.

About 2.5 million American jobs would be lost in the first year if the industry shrinks by 50 percent, according to one dire report issued this week by the Center for Automotive Research in Ann Arbor, Mich. About 239,000 of those job losses would be at one of the Big Three companies, with the rest coming from parts suppliers and related industries.

“I can understand the sentiment — why reward failure? Why reward an industry that has suffered from 25 years of mismanagement?” said Bragman. “The answer is the consequences of a major failure in the automotive industry far outweigh the cost of keeping the major automotive companies going."

Bankruptcy is a poor option because buyers would be unlikely to buy a new car from an automaker that might be out of business within a few years. A bankruptcy also would also lead to more company failures and layoffs at companies that supply the automakers, and the foreign automakers like Toyota and Honda that those companies supply, Bragman said.

I can understand the auto industry's arguments for a federal bailout. It would certainly be very bad for the U.S. economy if GM or Ford were to go bankrupt. But at the same time, I don't want my taxpayer dollars to be spent on more management failures, and short-term corporate greed. If the federal government is going to bail out Detroit's Big Three automakers, they should do so with some serious strings attached. The big string is to demand higher fuel-efficient cars, with hybrid technology. The government should raise the CAFE standards on cars and trucks. And more importantly, the federal government will need to take the lead in developing an improved energy and transportation infrastructure to support new fuel efficient technologies.

And finally, let us look at the problems talking place in Ford Motor Company:

DEARBORN, Mich. - Ford Motor Co. said Friday it lost $129 million in the third quarter as the struggling automaker burned through $7.7 billion in cash.

The automaker also said it will cut about 2,260 more white-collar employees in North America as it tries to weather the worst economic downturn in decades.

Ford says it lost 6 cents per share for the quarter, compared with a loss of $380 million, or 19 cents per share, a year ago.

The company posted a pretax loss of $2.7 billion from continuing operations. But it was offset partly by a $2 billion gain as the company shifted retiree health care liabilities to a trust run by the United Auto Workers.

Ford’s global automotive operations had a pretax loss of $2.9 billion for the quarter, compared with a pretax loss of $362 million a year earlier.

Sales fell 22 percent to $32.1 billion from $41.1 billion due to lower volume and the sale of Jaguar and Land Rover.

Excluding special items, Ford lost $1.31 per share, worse than Wall Street expected. Analysts surveyed by Thomson Reuters predicted a loss of 94 cents per share on sales of $28 billion.

Dearborn-based Ford reported its worst three-month performance ever in the second quarter, when it lost nearly $8.7 billion.

So Ford lost $128 million in the third quarter, burning through more than $7 billion in cash, and cutting over 2,260 white-collar jobs. It is no wonder that Detroit's Big Three automakers are going to Congress, asking for a $25 billion bailout package:

WASHINGTON - Detroit’s automakers appealed to congressional leaders Thursday for $25 billion more in federal loans, low-interest emergency borrowing and a share of the Wall Street bailout to help rescue an ailing industry battered by the economic crisis.

The talks with House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., came as General Motors Corp. and Ford Motor Co. were poised to announce billions more in losses and further job cuts Friday, and as GM’s president for North America said the next 100 days would be critical for his company and the industry.

GM, Ford and Chrysler LLC pledged to work with the leaders “to ensure immediate and necessary funding to keep the auto industry viable and its transformation on track during this critical time,” according to a GM statement.

I sort of wonder what the next ailing U.S. industry will go to Congress, hat in hand? Will it be the construction industry? Retail? Big Energy?

A night of speeches

Here is John McCain's concession speech from last night:



It was a very gracious speech, given by McCain, to an especially shocked and dejected crowd at how the night went. The crowd cheered at McCain's mentioning of his running mate Sarah Palin, and even refused to accept that McCain admitted responsibility for failing to win presidency--to the point of shouting "USA! USA! USA!" The crowd booed at McCain's mentioning of Obama's name, of which even McCain admonished the crowd. It was a good speech, probably one of the best McCain has made in the past couple of years. McCain spoke from his heart in this speech. He congratulated Obama for his victory, and asked his supporters to come together in working with the Obama administration for rebuilding the country.

Here is Barack Obama's victory speech from last night:



Barack Obama's victory speech was huge. Huge crowds. Screaming cheers. Tears of joy. Obama thanked the American people, his supporters, for his victory. And his supporters gave him a joyful "Your welcome."

And yet, even as the crowd was ready to celebrate, Obama cautioned the crowd in saying that the real hard work has yet to start. He talked about the problems of Wall Street and an eroding Main Street economy. He warned that "those who would tear the world down," President Obama "would defeat" them, while "those who seek peace and security," Obama would "support" them. That is a powerful statement in showing that a President Obama is willing to use force--especially in hunting down al Qaeda terrorists, and Osama bin Laden (If he's still alive). And yet, President Obama is also willing to talk to nations and leaders for the benefit of peace. This is a strong speech, where Obama is willing to work in changing America to a peaceful, and prosperous nation. Can he do it? It will be an interesting four years.

And finally, here are some YouTube video celebrations of Obama's victory from around the world:

Obama victory celebration outside the White House;



Obama victory celebration Washington DC;







Obama victory celebration in Atlanta Georgia;



Obama victory celebration in New York City;







Obama victory celebration in San Francisco;







Obama victory celebration in London, England;



Obama victory celebration from the world;







This is an incredible phenomena that I have never seen. After eight years of the Bush administration's alienation from the world, and an almost three-quarters of the American public believing that the country is the wrong track, it is almost no wonder that the citizens of the U.S., and the world, are cheering the victory of this first, African-American, president-elect. It is just amazing.

And finally, here is President George W. Bush congratulating Barack Obama's victory this morning:



I'd say that President Bush is even happy to leave his successor the entire foreign policy and economic mess that this country is in.

Mr. President!

President-elect Sen. Barack Obama faces supporters during his election night victory rally in Chicago, November 4, 2008. (Jim Bourg/Reuters)

Talk about an historic election. From MSNBC News:

Barack Obama, a 47-year-old first-term senator from Illinois, shattered more than 200 years of history Tuesday night by winning election as the first African-American president of the United States.

A crowd of 125,000 people jammed Grant Park in Chicago, where Obama addressed the nation for the first time as its president-elect at midnight ET. Hundreds of thousands more — Mayor Richard Daley said he would not be surprised if a million Chicagoans jammed the streets — watched on a large television screen outside the park.

“If there is anyone out there who doubts that America is a place where anything is possible, who still wonders if the dream of our founders is alive in our time, who still questions the power of our democracy, tonight is your answer,” Obama declared.

“Young and old, rich and poor, Democrat and Republican, black, white, Hispanic, Asian, Native American, gay, straight, disabled and not disabled, Americans have sent a message to the world that we have never been just a collection of red states and blue states,” he said. “We have been and always will be the United States of America.

“It’s been a long time coming, but tonight, because of what we did on this day, in this election, at this defining moment, change has come to America,” he said to a long roar.

Here is the electoral map showing Obama's unprecedented win:

Map showing electoral vote for 2008 presidential election. From the New York Times.

Some quick comments. Obama won in the Northeast, the West Coast, a good chunk of the Rustbelt, and even the more reliable GOP states of Florida, New Mexico, Colorado, Iowa, and Nevada. The GOP, under John McCain was relegated to mainly the West, and the Deep South. I'm seriously wondering if the Republican Party is becoming a marginalized party, mainly the Deep South, considering the amount of hate and fear-mongering the GOP displayed during this election? It is an interesting thought.

The eight-year nightmare of this George W. Bush presidency is now over. Change has come with the first African-American president, and a stronger, Democratically-controlled Congress. Barack Obama showed an incredible brilliance in running such a flawless campaign, even in the face of such huge obstacles of becoming that first, credible, African-American candidate, developing a new fund raising system of small, consistent donations from average Americans, and bringing his message of change and hope against a withering fire of negative attacks and character assassinations from his opponents. I don't think I have ever seen a presidential campaign run the way the Obama campaign has run it, under all aspects of raising money, generating the campaign message, and countering attacks--and this even includes the Reagan, Bush Senior and Junior, and Clinton campaigns. If this man was as brilliant and smart in running his presidential campaign, then Barack Obama may do very well as our president.

Palin claims her First Amendment rights are threatened

I saw this story through Americablog, which linked back to the Huffington Post, which linked to this ABC News source story:

In a conservative radio interview that aired in Washington, D.C. Friday morning, Republican vice presidential nominee Gov. Sarah Palin said she fears her First Amendment rights may be threatened by "attacks" from reporters who suggest she is engaging in a negative campaign against Barack Obama.

Palin told WMAL-AM that her criticism of Obama's associations, like those with 1960s radical Bill Ayers and the Rev. Jeremiah Wright, should not be considered negative attacks. Rather, for reporters or columnists to suggest that it is going negative may constitute an attack that threatens a candidate's free speech rights under the Constitution, Palin said.

"If [the media] convince enough voters that that is negative campaigning, for me to call Barack Obama out on his associations," Palin told host Chris Plante, "then I don't know what the future of our country would be in terms of First Amendment rights and our ability to ask questions without fear of attacks by the mainstream media."

Excuse me Sarah Palin, but you have got it completely backwards. The First Amendment protects you from the government's infringement of your freedom of speech rights, not from "attacks" by reporters calling you out for your negative campaigning against Democratic presidential candidate Barack Obama. In addition, the First Amendment guarantees a freedom of a press to criticize their government and its officials on issues, and even the hypocrisy of these officials. Sarah Palin feels that she is the victim of media attacks, criticizing her going negative campaigning against Obama by bringing up the Ayers and Wright associations. And Sarah Palin’s First Amendment rights are being infringed upon by the media? She is completely wrong here.

Salon's Glen Greenwald perfectly explains the issue, even to the point of showing how Sarah Palin's views of First Amendment rights are so wrong:

The First Amendment is actually not that complicated. It can be read from start to finish in about 10 seconds. It bars the Government from abridging free speech rights. It doesn't have anything to do with whether you're free to say things without being criticized, or whether you can comment on blogs without being edited, or whether people can bar you from their private planes because they don't like what you've said.

If anything, Palin has this exactly backwards, since one thing that the First Amendment does actually guarantee is a free press. Thus, when the press criticizes a political candidate and a Governor such as Palin, that is a classic example of First Amendment rights being exercised, not abridged.

This isn't only about profound ignorance regarding our basic liberties, though it is obviously that. Palin here is also giving voice to the standard right-wing grievance instinct: that it's inherently unfair when they're criticized. And now, apparently, it's even unconstitutional.

According to Palin, what the Founders intended with the First Amendment was that political candidates for the most powerful offices in the country and Governors of states would be free to say whatever they want without being criticized in the newspapers. In the Palin worldview, the First Amendment was meant to ensure that powerful political officials such as herself would not be "attacked" in the papers. Is it even possible to imagine more breathtaking ignorance from someone holding high office and running for even higher office?

Two more days until the election.

Fear of deflation is coming!

This is from The New York Times:

As dozens of countries slip deeper into financial distress, a new threat may be gathering force within the American economy — the prospect that goods will pile up waiting for buyers and prices will fall, suffocating fresh investment and worsening joblessness for months or even years.

The word for this is deflation, or declining prices, a term that gives economists chills.

Deflation accompanied the Depression of the 1930s. Persistently falling prices also were at the heart of Japan’s so-called lost decade after the catastrophic collapse of its real estate bubble at the end of the 1980s — a period in which some experts now find parallels to the American predicament.

“That certainly is the snapshot of the risk I see,” said Robert J. Barbera, chief economist at the research and trading firm ITG. “It is the crisis we face.”

With economies around the globe weakening, demand for oil, copper, grains and other commodities has diminished, bringing down prices of these raw materials. But prices have yet to decline noticeably for most goods and services, with one conspicuous exception — houses. Still, reduced demand is beginning to soften prices for a few products, like furniture and bedding, which are down slightly since the beginning of 2007, according to government data. Prices are also falling for some appliances, tools and hardware.

Only a few months ago, American policy makers were worried about the reverse problem — rising prices, or inflation — as then-soaring costs for oil and food filtered through the economy. In July, average prices were 5.6 percent higher than a year earlier — the fastest pace of inflation since 1991. But by the end of September, annual inflation had dipped to 4.9 percent and was widely expected to go lower.

The new worry is that in the worst case, the end of inflation may be the beginning of something malevolent: a long, slow retrenchment in which consumers and businesses worldwide lose the wherewithal to buy, sending prices down for many goods. Though still considered unlikely, that would prompt businesses to slow production and accelerate layoffs, taking more paychecks out of the economy and further weakening demand.

The NY Times article continues with the relationship between interest rates and inflation. Policy makers can "choke off inflation by raising interest rates," but that could further send the U.S. economy into a deeper recession, and reduce demand for goods. The example of Japan is brought up, as "an economy may remain ensnared by deflation for many years, even when interest rates are dropped to zero: falling prices make companies reluctant to invest even when credit is free." According to the New York Times:

Through much of the 1990s, prices for property and many goods kept falling in Japan. As layoffs increased and purchasing power declined, prices fell lower still, in a downward spiral of diminishing fortunes. Some fear the American economy could be sinking toward a similar fate, if a recession is deep and prolonged, as consumers lose spending power just as much of Europe, Asia and Latin America succumb to a slowdown.

“That’s a meaningful risk at this point,” said Nouriel Roubini, an economist at New York University’s Stern School of Business, who forecast the financial crisis well in advance and has been warning of deflation for months. “We could get into a vicious circle of deepening malaise.”

I'll admit that at first, I've been worried about an opposite effect of stagflation, which is rising inflation, coupled with slowing economic growth, or an economic recession. My reasoning for this has been the combination of the slowing U.S. economy and the rising energy and gas prices--with the rising energy prices sending prices on every other U.S. good to also go up in price. But with the Wall Street financial market meltdown, and the meltdown in the world financial markets, there is now a fear that the world economy may be going into a recession, and that demand for commodities--oil, gas, copper, steel, grains, and such, may be reduced, sending prices spiralling even lower. So far, the Federal Reserve has been pumping billions of dollars into the U.S. economy--through both the half-point cut in the interest rate and the $750 billion bailout package for Wall Street. Kenneth S. Rogoff, a former chief economist at the International Monetary Fund and now a professor at Harvard, states that “If you print enough money, you can create inflation,” thus countering the effects of deflation. At this point, I can't say whether the U.S. economy is heading into a deflationary period, and inflationary period, or stagflation. All I can say is that the U.S. economy is in serious trouble.

Fed adds another $21 billion in loans to AIG

This is just becoming an endless American taxpayer bailout for AIG. From the New York Times:

The American International Group said Thursday that it had been given access to the Federal Reserve’s new commercial paper program, allowing it to reduce its reliance on a costlier emergency loan from the Fed.

The company said it would be able to borrow up to $20.9 billion under the new program, raising its maximum available credit from the Fed to $144 billion under three different programs. The credit includes an earlier emergency loan of $85 billion from the Fed that carries a much higher interest rate.

A.I.G.’s big borrowings underscore the company’s bewilderingly rapid decline. When it suddenly faced a cash crisis in mid-September, the original estimate of the amount it needed was just $20 billion. A few days later, the Fed stepped forward with its $85 billion credit line. And now, the stunning size of that original bailout has grown by almost 70 percent.

A.I.G.’s cash needs could grow even further. Much of the cash it needs is being used to meet collateral calls from its derivatives counterparties, and the precise collateral triggers and amounts are not public information. In general, the derivative contracts cost A.I.G. more as the real estate markets decline. The company’s financial products division did a lot of business in that type of derivative, called credit-default swaps.

By the same token, if real estate prices rebounded, A.I.G. has said, it could call some of the collateral back.

In addition to the $85 billion credit line and the $20.9 billion commercial paper program, A.I.G. has a $38 billion facility from the Fed that provides liquidity for the company’s securities-lending business. A.I.G. said on Thursday that it was currently using about $18 billion of this facility.

By tapping the newest source of money from the Fed, A.I.G. was able to reduce the amount it had borrowed under the original $85 billion line of credit, said a spokesman, Joe Norton. He said the company had currently drawn down $65.5 billion from that loan, compared with about $72 billion a week ago.

The Fed extended the original $85 billion line of credit at a steep price. On the part of the loan that A.I.G. draws down, it must pay an interest rate of 8.5 percentage points over the three-month Libor, an index rate for inter-bank lending. On the unused portion, A.I.G. must pay a fixed rate of 8.5 percent. In addition, the Fed added a 2 percent commitment fee to the total balance when it started the loan.

Mr. Norton said A.I.G. had incurred interest and fees of about $331 million so far. The Fed also took a majority stake in A.I.G. in exchange for the bailout, angering shareholders, who were almost completely wiped out.

I am trying to think of an analytical comment for this story, but all I can think of is that the U.S. government has just purchased a bank. AIG made some very bad bets in the derivatives market, and now the company doesn't have the money to pay off these contracts. The AIG shareholders have been completely wiped out. AIG probably doesn't have the assets to pay off the liabilities, and so enters the U.S. Treasury. The American taxpayer has purchased American International Group for the price of $144 billion. I wonder how many other Wall Street investment banks that the American taxpayer will be purchasing in the future?

Some weekly economic headliners

This week, I've been housesitting at my parent's place down in Hollister. In terms of high speed Internet, Hollister is still in the dark ages, with some really poor utility services. The problem for Hollister is that they've expanded too quickly in the construction of homes during the housing bubble, however the city refused to expand their utility services to keep up with the demand for housing--Hollister is about 35 miles south of San Jose, right in the middle of farmland. About six years ago, Hollister placed a moratorium on new home construction because the city couldn't keep up with the water and sewer demand. Now Hollister is charging higher utility prices just so they can improve their water and sewer plants.

So what does this have to do with high speed Internet? Well, there is no competition for high speed Internet in Hollister. In San Jose, I have a choice between AT&T high speed Internet, or even Comcast Cable internet. My parents are currently on a dialup service through a company called Hollinet, which charges $19.95 per month for 56k modem connections. Charter Cable, Hollister's cable service, offers cable internet service from $54.99 for 5 megabytes per second cable internet, to $79.99 for 50 megabytes per second cable internet service. I did find a DSL service through Garlic.com, however they are closed on Saturdays, so I can't determine their prices for their DSL services. Why am I bringing this up? Because outside of the San Jose Bay Area, there is not much competition between the Internet service providers to bring high speed Internet into a smaller city like Hollister, at a decent price. It is disappointing because I know my parents would use, and enjoy, the high-speed Internet connection at an affordable price. But, I guess it is too expensive for these big Internet providers to bring their services into a small town like Hollister.

And as the web becomes more embedded with images, video, and flash animation, surfing the web via a dialup service provider becomes even slower, and more frustrating.

The sad thing here is that the Internet has a great potential for providing resources, information, and commerce to just about every American citizen here. This is a tool that can be used to gather information, conduct research, communicate via email or instant messenger, and even purchase products from businesses around the world. E-commerce can certainly play a major role in generating consumer spending in this slowing U.S. economy. However, you really can't utilize the power of the Internet, and the benefits it can provide to consumers, via a slow dial-up connection. The bigger Internet service providers will certainly refuse to provide affordable Internet services at an affordable price to those areas that they feel are not cost-efficient for them, which are basically the rural areas (And Hollister is surrounded by nothing but farmland). So my parents are stuck within this dead rut.

Anyways, I've been watching the economic news over the past week, and none of it is really good. The big news story for the week has been the decline in U.S. GDP growth for the third quarter. So let us get into a weekly economic headliners.

U.S. economy shrank in the third quarter: We are now in a recession. I know I've been saying this for the past year--I think even two years. But I've certainly noticed how resilient the U.S. economy has been, over the past couple of years, in maintaining even the slowest growth rate in the face of all the bad economic news--consumer spending slows, debt increases, more jobs lost, increasing inflation, increasing energy and food prices, the sub prime mortgage mess, increased foreclosures on homes, falling home prices, and yet the U.S. economy still has grown by 0.00001 percent. Maybe it was the gimmick of the economic stimulus checks that has kept the U.S. economy out of a recession under the Bush administration's term. Either way you call it, this is still a Bush administration recession. From MSNBC News;

WASHINGTON - The government reported Thursday the economy shrank in the summer, the strongest signal yet that a recession may have already begun, a day after the Federal Reserve slashed a key interest rate to battle an economic downturn.

The Commerce Department reported that the gross domestic product, the broadest measure of economic health, fell at an annual rate of 0.3 percent in the July-September period, a significant slowdown after growth of 2.8 percent in the prior quarter.

The spring activity had been boosted by the $168 billion economic stimulus program, but the economy ran into a wall in the summer as the mass mailings of stimulus checks ended and consumer confidence was shaken by the upheavals on global markets. Consumer spending, which accounts for two-thirds of the economy, dropped by the largest amount in 28 years in the third quarter.

The U.S. economy has officially shrunk by 0.3 percent of its gross domestic product. The $168 billion economic stimulus package has petered out at the end of summer as consumers have spent their checks. With the financial markets going into a meltdown, and the U.S. government now spending another $750 billion "economic stimulus program" for bailing out Wall Street, American consumers have slammed the breaks on their spending. As a result, the U.S. economy has contracted.

This contraction will continue into the fourth quarter of 2008, and perhaps even into the first couple of quarters of 2009. There is still a lot of fear within Wall Street, as we have seen with the stock market's wild ride during October. I believe the stock market will continue to wildly gyrate through the end of this year. And because of these wild mood swings in the stock market, we're going to see another contraction during the fourth quarter, as American consumers cut back on their holiday shopping. I think retail sales for the fourth quarter will be the worst seen in years, with retailers slashing their prices even further just to get the inventory off the shelves. And if the U.S. economy contracts in the fourth quarter of 2008, then it will be a classical definition of a recession being two consecutive quarters of negative GDP growth. Although this recession will feel like it has been with us a lot longer because of the sluggishly slow, almost stalling U.S. economic growth over the past year or so.

Consumer sentiment takes a swan dive: I didn't realize consumer sentiment had taken this deep of a dive. From MSNBC News;

NEW YORK - Consumer confidence suffered its steepest monthly drop on record in October, a survey showed on Friday, as the worst financial crisis in generations continued to take its toll.

The Reuters/University of Michigan Surveys of Consumers said its final reading of its index of confidence plunged to 57.6 in October from 70.3 in September.

That was just slightly below economists' expectations for a reading of 57.8, according to the median of their forecasts in a Reuters poll. It was up marginally from 57.5 recorded in the Surveys' of Consumers preliminary report released on October 17.

"Consumers reported the most dismal assessments of their current financial situation ever recorded," the report said.

The index was its lowest since a reading of 56.4 in June of this year.

The report said there have previously only been four surveys that posted double-digit declines, "and all resulted from severe economic dislocations, with the losses accelerated by fear and panic."

The University of Michigan confidence index dates back to 1952. Its record low was 51.7, which it hit in May 1980.

I find it especially interesting that the report stated that double-digit declines "all resulted from severe economic dislocations, with the losses accelerated by fear and panic." We had such fear and panic take place between the end of September and the beginning of October, as Wall Street banks started failing, the global stock markets plunging, and the U.S. government quickly pushing through a $750 billion bailout package for Wall Street. It has been nothing but fear and panic with this U.S. economy slowing during a presidential election. Is it no wonder that the U.S. economy contracted 0.3 percent for the third quarter? And as Americans start to open their 401K statements, are they going to be in a holiday mood to go Christmas shopping this December?

Personal spending posts biggest decline since 2004: This is also through MSNBC News;

WASHINGTON - Consumer spending in the United States dropped in September by the largest amount in four years, while incomes suffered because of Hurricane Ike.

The Commerce Department reported Friday that personal spending fell by 0.3 percent last month, the biggest decline since June of 2004. That followed flat readings in both July and August, contributing to the worst quarterly performance in 28 years.

Incomes showed a 0.2 percent rise in September, just half of the August increase, a slowdown that partly reflected the adverse effects of Hurricane Ike along the Gulf Coast. The storm cut into rental payments and earnings from businesses affected by the rough weather and its aftermath.

The September spending decline was slightly worse than economists expected and confirmed that the economy hit a wall in the third quarter because of the weakness in consumer spending, which accounts for two-thirds of total economic activity.

Here the decline in personal spending was not the result of the Wall Street meltdown, or the global decline in the world stock markets, but rather because of "the adverse effects of Hurricane Ike along the Gulf Coast," as the rental payments and earnings from businesses were affected by Ike. This was another external factor that has slammed the U.S. economy, perhaps affecting the contraction. It will be interesting to see the results for personal spending in the fourth quarter, as consumers factor in the financial market meltdown, the contracting U.S. economy, and the gyrating U.S. stock market.

Fed cuts interest rate by half point: This is from The New York Times;

WASHINGTON — The Federal Reserve lowered its benchmark interest rate by half a percentage point on Wednesday, its second big rate cut this month, as policy makers tried to fend off what could be the worst economic downturn in decades.

The move brought the target rate for federal funds — the interest rate at which banks lend to each other overnight — to 1 percent, down to the near-record lows reached in 2003 and 2004, when the Fed was trying to encourage an economic recovery after the bursting of the Internet bubble. The central bank left open the possibility of going still lower, warning “downside risks to growth remain.”

Graph showing Federal Reserves benchmark rate for past eight years. From the New York Times;


As the crisis that began in the mortgage market spreads through the economy, policy makers are redoubling their efforts to contain the damage. Even as the Fed reduced rates on Wednesday, the Bush administration was weighing a plan to slow the foreclosure epidemic in the nation’s housing market. Details of the initiative were in flux, but the plan could involve the government guaranteeing the mortgages of as many as three million at-risk homeowners, a step that could cost taxpayers tens of billions of dollars, people briefed on the plan said.

But neither the Fed’s move nor word of the possible mortgage rescue were enough to allay concern in the financial markets that the economy was in deep trouble. The stock market, which had rallied briefly after the rate cut was announced shortly after 2 p.m., tumbled in the final minutes of trading.

In a statement, the Fed acknowledged that the economy had lost steam on almost every front — consumer spending, business investment, financial markets and even exports, which had been the one bright spot recently. For the time being, infla-tion is of little concern.

I find it rather ironic how the Fed is now suddenly concerned about the slowing U.S. economy, and is now ignoring its age-old enemy of inflation. However, I think that the Federal Reserve has got it backwards. The Fed may be hoping that a half-point rate cut will entice the banks to loosen credit standards, and start making personal and business loans as a means to stimulate the economy. The problem is that the banks are refusing to make loans, unless you have a triple-platinum-coated credit rating, with gobs of assets to show how little you really need the money. According to this WJZ-TV 13 story: the White House is demanding that banks stop hoarding the bailout money;

WASHINGTON (CBS News) ― An impatient White House prodded banks and other financial companies Tuesday to quit hoarding billions of dollars flowing into their vaults from Washington and start making more loans. Wall Street soared nearly 900 points on bargain-hunting and hopes of a hefty interest rate cut by the Federal Reserve.

[....]

Hoping to thaw the credit freeze that has chilled the economy, the Bush administration sent banks an unmistakable message to put aside fears and open up loan windows for cash-starved businesses and consumers who have pulled back on spending.

"What we're trying to do is get banks to do what they are supposed to do, which is support the system that we have in America. And banks exist to lend money," White House press secretary Dana Perino said. While there are limits to Washington's power to affect banks' behavior, the White House decided it was time to use its bully pulpit.

"They (regulators) will be watching very closely, and they're working with the banks," Perino said.

There is plenty of liquidity, and stimulus, in this U.S. economy, with the $750 billion Wall Street bailout package and the Fed Reserves half-point rate cut. The U.S. Treasury is even buying shares in banks, as a means of pumping even more liquidity into the market. Banks are not handing out loans. The banks have been saddled with so much losses due to the sub prime mortgage meltdown, that they are refusing to write even more loans on the fear that such loans will go bad on their balance sheets. So the credit market is being restricted. Business cannot get short-terms loans in the credit markets to cover payrolls, and other expenses, causing their own financial problems. Businesses then have to cut back, perhaps even with job layoffs. Unemployed Americans can't pay for their mortgage payments, thus causing foreclosures on their homes. Banks get saddled with even more bad debt, further restricting their loans. Fear starts to prevail in the marketplace, as economic problems steamroll onto even more economic problems. This is not a problem of liquidity or stimulus, but of fear and a lack of confidence. Going back to the New York Times article of the Fed's interest rate cut;

The government has taken a series of extraordinary steps in recent weeks to get credit flowing again, but while the strains in the credit markets have eased somewhat in response, confidence remains fragile. The central bank left room for itself to drive short-term rates even lower, saying that it would “act as needed” to promote both sustainable growth and stable prices.

But analysts said lower interest rates were not likely to accomplish much at this point, because the economy’s biggest problem is the fear among banks and financial institutions about lending money.

“The difference between 1.5 percent and 1 percent is really pretty insignificant, particularly when the banking system is as weak as it is,” said Ethan Harris, a senior economist at Barclay’s Capital. “You have a big uncertainty shock. It’s not just that the markets have declined. People are uncertain about where the world is going.”

There is still too much fear in the marketplace. Banks are afraid of loaning out money due to the loans going bad. Businesses are afraid of the marketplace uncertainty, and may end up cutting back on employment. American consumers are afraid of losing their jobs, their homes, and their retirement savings, thus are cutting back on their spending, or pulling out of the stock market. The problem for the Federal Reserve, and for the next incoming president, will be to find some way to reduce the fear in the economic marketplace, and to instill some type of confidence into allowing the U.S. economy to go forward. That is a tall, tall, order.

Banks using bailout money to buy up other banks: This story sort of dovetails into the WJZ-TV 13 story of banks hoarding bailout money, but it does show just how banks are using the bailout money to do everything, except making loans to customers. From the Washington Post;

Several major U.S. banks are leaning toward spending a portion of their federal rescue money on acquiring other financial firms rather than for issuing new loans, the primary purpose of the government's $250 billion initiative to invest in banks.

J.P. Morgan Chase, BB&T, and Zions Bancorporation have all said in recent days that they are considering using some of their federal money to buy other banks.

About 10 financial institutions belonging to the Financial Services Roundtable, which represents 100 of the nation's largest financial services firms, are also considering making acquisitions with the money, said Scott Talbott, the group's senior vice president.

Treasury Secretary Henry M. Paulson Jr. confirmed yesterday that some banks may use the capital they receive through the Treasury program to buy weaker banks and that this could benefit the financial system.

In an appearance on "Charlie Rose," Paulson said acquisitions were "not the driver behind this program. The driver is to have our . . . healthy banks be well-capitalized so they can play the role they need to play for our country right now." He added, "There will be some situations where it's best for the economy and for the banking system for there to be a consolidation."

[....]

The interest among banks in tapping the funds to finance acquisitions raises the possibility that the financial services industry could undergo a wave of mergers even more intense than what many analysts had predicted.

According to some analysts, an excess of mergers and acquisitions in the financial sector over the past decade created too many institutions deemed "too big too fail," meaning that the government would be obliged to rescue them if they faltered. Now, some worry the government's program will continue to drive that trend.

"I think it's a very serious problem, and I think it's part of a general failure to enforce antitrust laws in the last few years," Nobel Prize-winning economist Joseph Stiglitz said at a hearing of the House Financial Services Committee yesterday. "So one of the things I think is part of your exit strategy is that we have to think about breaking up some of the big banks," added Stiglitz, a Columbia University professor.

So, I guess the federal government is now encouraging banks to purchase even more banks with this bailout money, creating even bigger banks and less competition within the marketplace. And if the banks get too big, from purchasing smaller banks with taxpayer money, does that mean that the federal government will be using even more taxpayer money to break these big banks up? Talk about an economic madness here!

A Rate of Zero Percent From the Fed? Could be coming: In the wake of the Federal Reserves' half-point interest rate cut, the New York Times is now speculating on the prospect that the Federal Reserve may just lower interest rates to zero percent;

WASHINGTON — Zero percent interest rates! It sounds like free money, or maybe a promotional deal from General Motors to get people to buy Hummers. Are zero rates coming to the Federal Reserve?

As it happens, the Fed is surprisingly close to that point already. On Wednesday, the central bank lowered its target for the federal funds rate — the rate that banks charge each other on overnight loans — to 1 percent from 1.5 percent.

But in practice, the actual federal funds rate fluctuates slightly around its target as the Fed carries out its open-market operations in the money markets. And because banks and financial institutions have been so frightened about lending in the last month, the actual Fed funds rate has been below 1 percent for the last two weeks. On Tuesday, it averaged only 0.67 percent.

A growing number of analysts now predict that the economy is so weak that the Fed will have to reduce its official target to zero if it wants to jumpstart the stalled economy.

Japan’s central bank reduced its benchmark interest rate to zero for five years, from 2001 to 2006. It did so mainly to combat a particularly persistent case of deflation, a broad-based decline in consumer prices, and to revive economic growth.

Some analysts see signs that the United States faces a similar threat. Like Japan’s, American banks have become so decimated by losses in real estate that they are either unable or unwilling to resume normal lending. And as prices for oil and many other commodities have crashed during the past two weeks, some analysts now warn that deflation might be a threat here as well.

With the Fed funds rate already down to 1 percent, and below one percent on many days, the central bank is fast approaching what economists call the “zero bound.”

If the Fed funds rate did drop to zero, it would not mean free money for consumers or businesses. The zero rate would only apply to the reserves that banks are required to maintain and that they lend to one another. Customers would still have to pay some interest, but the rates could be extremely low for some business borrowers.

According to Wikipedia, Japan's economy collapsed due to rampant speculation in an over-priced real estate market during their own bubble in the 1980s. Banks were granting risky loans on the extreme value of these real estate holdings. The Japanese economy collapsed, and banks were stuck with this bad debt that they refused declare as losses. The Tokyo stock market and real estate market collapsed, forcing investors to pull their money out of Japan, creating a deflationary spiral. Interest rates dropped so low that Japanese savers refused to place money into savings accounts. Japanese consumption was also extremely low. The Japanese government continued to subsidize failing banks and businesses, creating "zombie businesses." The Japanese economy continued to stagnate throughout the 1990s. In 2001, the Japanese government reduced interest rates to zero as an attempt to stop the deflation in the Japanese economy. The zero-percent interest rate lasted in Japan until 2006, when it was eliminated. The Japanese economy is still limping along, even today. You really have to wonder just how similar the U.S. economy is now, with the Japanese economy in the late 80s, early 90s. Both economies suffered a collapse in the real estate market after rampant speculation. Both nations’ banking system was saddled with bad loans that they refused to write off. And the savings rates have dropped with both countries--Japanese savings rates dropped as deflation hit the country and banks dropped the interest rates to savings accounts to practically zero, while U.S. savings rates have always been fairly low. So there may be some lessons to look at with Japan's economic stagnation for U.S. policymakers to consider, as they attempt to pull the U.S. out of its own economic problems.

Exxon Mobile breaks another profit record: There is not much more I can say about this MSNBC story;

HOUSTON - Exxon Mobil Corp., the world’s largest publicly traded oil company, reported income Thursday that shattered its own record for the biggest profit from operations by a U.S. corporation, earning $14.83 billion in the third quarter.

Yet numbers contained within the company’s most recent financial report revealed production numbers that continue to sag, and shares slipped 3 percent in midday trading.

The Irving, Texas-based company has reported unprecedented back-to-back quarters, the end of the most recent coinciding with a rapid plunge in crude prices. Benchmark oil prices fell another $2.91 to $64.59 Thursday on the New York Mercantile Exchange, about 56 percent off record highs in July.

Exxon said net income jumped nearly 58 percent to $2.86 a share in the July-September period. That compares with $9.41 billion, or $1.70 a share, a year ago.

The previous record for U.S. corporate profit was set in the last quarter, when Exxon Mobil earned $11.68 billion.

Revenue rose 35 percent to $137.7 billion.

Chevron also reported "the largest quarterly profit in its 129-year corporate history," earning "$7.89 billion in the third quarter, more than double the $3.72 billion profit of a year earlier. Revenue shot up 43 percent to $78.87 billion from $55.2 billion." I should point out that Exxon and Chevron are making these huge profits, even as gas prices have tumbled 53 cents per gallon in the past two weeks, with gas selling for less than $2.00 per gallon in some parts of the U.S.

There are still so many more economic stories to look at. As the economic situation gets even worst for the U.S., American voters will have to seriously consider which presidential candidate will be able to guide this country out of the morass. The next decade will probably be a very trying period for this country, perhaps as trying as the 1930s were.

Saturday Night Live--George W. Bush gives his endorsement to John McCain and Sarah Palin

Let us have some fun with this Saturday Night Live sketch of Will Ferrell's President George W. Bush giving an endorsement to Tina Fey's Sarah Palin.



I am still amazed at how Tina Fey has got the look, and the act, down for Governor Sarah Palin.

Palin, alone on the bus and snubbed by McCain

I found some even more interesting details of the bickering taking place between the McCain / Palin camps. GQ correspondent Robert Draper will be blogging on the campaign trail with this GQ Blog, with this fascinating post on just how bad the bickering has gotten between the McCain / Palin camps. From GQ Blog:

Almost from the very beginning, the Palin pick created tension.

An armada of handlers descended on McCain’s running mate like the flying monkeys in The Wizard Of Oz. The day after the ticket made its debut, it was August 30 and the campaign staged a rally outside of Pittsburgh, on the field of a minor league baseball team called the Washington Wild Things. I remember seeing Tucker Eskew—an old Bush hand out of South Carolina who had never spent a day in McCain World until Nicolle Wallace recruited him to be Palin’s counselor—wandering around the premises, looking somewhat lost. He and Wallace took charge of schooling the Alaska governor on message discipline. Two days later at the GOP convention, an adviser watched them coach Palin on how to answer routine press questions and warned Steve Schmidt that she was being overly managed. Three weeks later, Wallace arranged for the interview with her former CBS colleague Katie Couric, which proved to be a disaster. Meanwhile, Palin’s debate prep was going miserably, to the point where Schmidt had to peel off from McCain (who was having his own challenges responding to the financial crisis) and join Nicolle’s husband Mark Wallace in simplifying Palin’s prep so as to avert catastrophe. The latter efforts resulted in what one senior adviser would describe to me with palpable relief as “a campaign-saving performance.”

I’m sympathetic to Eskew and Wallace, and not just because they’re decent people. They’ve held their tongue from leaking what a couple of McCain higher-ups have told me—namely, that Palin simply knew nothing about national and international issues. Which meant, as one such adviser said to me: “Letting Sarah be Sarah may not be such a good thing.” It’s a grim binary choice, but apparently it came down to whether to make Palin look like a scripted robot or an unscripted ignoramus. I was told that Palin chafed at being defined by her discomfiting performances in the Couric, Charlie Gibson, and Sean Hannity interviews. She wanted to get back out there and do more. Well, if you’re Eskew and Wallace, what do you say to that? Your responsibility isn’t the care and feeding of Sarah Palin’s ego; it’s the furtherance of John McCain’s quest for the presidency.

On the other hand, it had to be hard for Sarah Palin—who has achieved all she’s achieved with a highly personal touch—to take all this ridicule under an enforced gag order. After being introduced to the world as one of the “Team of Mavericks,” she’s admonished not to be one. She’s being called out by some McCainites for not cleaving to all of the senator’s positions. The Republicans who fawned over her superstar looks are now shocked—shocked!—to learn that her much-admired wardrobe has been purchased with RNC funds. I’ve heard from one well-placed source that McCain has snubbed her on one long bus ride aboard the Straight Talk Express, to the embarrassment of those sitting nearby. It has surely been implied to the governor that she should be eternally grateful to have been plucked from obscurity. And yet the high water mark of John McCain’s campaign for the presidency unquestionably began on September 3, when Palin gave her nomination speech—and ended precisely twelve days later, when McCain went off-script—I have that on the authority of the person who participated in the writing of said script—and told an audience that he still believed the fundamentals of the economy were strong.

Even John McCain snubbed Sarah Palin on the Straight Talk Express! There is a fascinating love/hate relationship taking place between the McCain and Palin camps, and possibly even between John McCain and Sarah Palin. John McCain chose Sarah Palin as an obscure Alaska governor, for who the McCain campaign could mold into their own "Maverickess." The problem for the McCain campaign is that they never realized just how ambitious Sarah Palin really was--they never took the time to properly vet Sarah Palin. And as the McCain campaign attempted to over-manage Sarah Palin, Palin started fighting back. Hence, we're seeing the stories that are coming out of Sarah Palin "going rogue," talking off-script, and campaigning her own way. Of course, there was still the big problem in that Sarah Palin was completely out of her league in understanding what the vice president actually does, or even understanding the complex domestic, economic, and foreign policy issues that is the basic qualifications for the office. As it became quickly known at how unqualified Sarah Palin was for the office, especially in the aftermath of her disastrous interviews with both Gibson and Couric, Palin still demanded that she should have the right to go out in more interviews, even as the McCain campaign realizes what a disaster Palin was on these interviews. Do you feed Sarah Palin's ego, or do you limit her exposure for the good of John McCain's electoral chances?

The real kicker in this posting was how John McCain snubbed Sarah Palin on the Straight Talk Express. It is like these two met in Las Vegas, got married at the Elvis Presley Drive-Thru Wedding Chapel, and then woke up the next morning with both a hangover, and a sharp disliking of each other--warts, no make-up, and all. They really were not a "right" match for this race--both John McCain and Sarah Palin are extremely ambitious in their quest for political power. Both have shown the American public the serious character flaws they have. For John McCain, there is the question of his judgment in choosing Palin for his vice presidential nominee. If he made the first bad choice in his presidential career by selecting such and unqualified vice presidential pick, then how can we continue to trust McCain's judgment if he is into the White House? For Sarah Palin, it is the simple fact that she was so unqualified for the vice president's office, was shown to be so unqualified before the American people for the vice president's office, and yet her own ego demanded that the McCain campaign should let "Sarah be Sarah." They have become the two most mismatched presidential and vice presidential candidates that I've certainly seen--The Odd Couple for the Oval Office? It is a wonder that both John McCain and Sarah Palin have survived this long, even as the entire McCain/Palin campaign self-destructs before them.

Ooooooh, barracuda!

ABC New's Jack Tapper has got some juicy details on the McCain / Palin bickering over Sarah Palin's $150,000 wardrobe:

Allies of Alaska Gov. Sarah Palin are now trying to throw McCain aide Nicolle Wallace under the proverbial bus, and as they do so those in McCain’s circle are wary of the impact on Sen. John McCain, R-Ariz., himself.

Since becoming McCain's running mate, there have been a host of issues where Palin publicly challenged decisions made by McCain – withdrawing from competition in Michigan, for instance, or for not attacking Sen. Barack Obama, D-Ill., for his longtime relationship with the controversial Rev. Jeremiah Wright. (See "McCannibals," from earlier this week.)

But nothing has seemed so resonant as $150,000 in clothes purchased for Palin and her family by the Republican National Committee.

Palin has taken to blaming the entire incident – as well as her introduction to the nation – on her “handlers,” presumably meaning Wallace, who was a key part of the team that handled Palin's successful announcement speech, her successful convention speech, and her interviews with Charlie Gibson, Sean Hannity and Katie Couric.

McCain allies say that Palin allies talked to Fox News commentator Fred Barnes to further throw Wallace under the bus. Barnes yesterday said, “the person who went and bought the clothes and, as I understand it put the clothes on her credit card, went to Saks and Neiman Marcus...the staffer who did that has been a coward” for not coming forward and accepting the blame for the $150,000 shopping spree. Barnes clarified that he was talking about Wallace.

But Wallace didn’t buy the clothes, put the clothes on her credit card, or go to Saks and Neiman Marcus, sources on the McCain campaign say.

And plenty of people on the McCain campaign are mystified as to how the $150,000 charges were racked up.

Read the entire piece. What is especially interesting is that this is just one in a long Tapper list of examples of how Sarah Palin "has a reputation for making friends who can help her and then screwing them over." The list includes:

* Former Wasilla Mayor John Stein says he mentored Palin during her 1994 run for City Council. Then she decided to challenge him and run for Mayor. “Things got very ugly,’ Naomi Tigner, a friend of the Steins, told Salon.com. “Sarah became very mean-spirited.” Palin allies suggested she would he “Wasilla's first Christian mayor,” even though Stein is Protestant. Palin allies also whispered that Stein and his wife – who hadn’t taken his name - were not legally wed. “We actually had to produce our marriage certificate,’ Stein said. His wife died in 2005 without ever reconciling with Palin. “I had a hand in creating Sarah, but in the end she blew me out of the water,” Stein told Salon. “Sarah's on a mission, she's an opportunist.”

* Former City Councilman Nick Carney also helped mentor Palin in her first city council run. They later had a falling out when Palin accused him of corruptly advocating that the city use his trash hauling business. “The episode might serve as a compelling, if small-bore, example of Palin's reformer instincts,” the New Republic reported. :Except that, according to those who were present, Carney wasn't quite the crooked trash magnate Palin makes him out to be. For one thing, Carney couldn't have proposed the ordinance because he'd recused himself from the matter. The council, in fact, had asked him to appear as a kind of expert witness on the relevant rules and regulations.” Carney endorsed Stein in the 1996 mayoral race against Palin, and news reports say she subsequently as mayor refused to call on him. Carney told Salon that Palin – without council authorization -- spent more than $50,000 in city funds to redecorate her office. “I braced her about it,” he said. “I told her it was against the law to make such a large expenditure without the council taking a vote. She said, 'I'm the mayor, I can do whatever I want until the courts tell me I can't.”

* State Senate President Lyda Green from Wasilla, is a fellow conservative and was an ally of Palin’s throughout the 1990s. “If you had looked at our résumés, as far as being pro-life, pro-N.R.A., pro-family, pro-parental control, saving taxpayer dollars, keeping government out of our lives, we would have been identical,” Green told the New Yorker. “She traces the chill in their relationship to her decision not to endorse Palin in her 2006 gubernatorial primary. (She stayed neutral.)…

“The animosity became public last January, when Palin turned up on an Anchorage shock-jock radio program, ‘The Bob and Mark Show.’ Bob Lester said that he knew Palin believed Green was ‘a bitch’ and ‘a cancer.’ Palin laughed at the comments. ‘Sarah can be heard in the background tittering, hee-heeing,’ Green said, ‘never saying, ‘That’s not appropriate, let’s not talk like that, let’s change the subject,’ or anything.’ Green was devastated. ‘I worked through it,’ she said. ‘The difficult thing about it was when my children read about it online. They were dumbfounded, because they had known Sarah. I had breast cancer in ’97 and had a radical mastectomy. Sarah certainly knew I had breast cancer, because she sent me flowers when I was ill.’”

* Former Gov. Frank Murkowski made Palin the chair of a state commission overseeing oil and gas drilling. Four years later she challenged him – and beat him – for governor.

* Prominent Alaska conservative talk radio host Dan Fagan was a longtime friend. But he found himself on the outs after he criticized her for raising taxes on oil companies. “He found himself branded a ‘hater,’” the New York Times reported. “It is part of a pattern, Mr. Fagan said, in which Ms. Palin characterizes critics as ‘bad people who are anti-Alaska.’”

You have to wonder just how far Sarah Palin will go in throwing John McCain under the bus for her own crass, presidential ambition. I find it rather ironic in how McCain selected such an extremely crass, grifter, considering his own extreme presidential ambitions. If Sarah Palin is successful in throwing John McCain under the Straight Talk Express bus, there is a chance that she could be in a position where she could become a Republican front-runner for the 2012 presidential election.

The problem for Sarah Palin is that this information is coming out on how she will use people for her own personal ambitions, before throwing them away. If this Tapper list is accurate, then we can speculate that Sarah Palin will have made a number of enemies during her time on the McCain campaign--enemies that will not forgive her for "going rogue" in these waning days of the McCain campaign. And we're only getting some of the details coming out before the election. We have yet to hear from the McCain staffers that are holding their tongues until after the election, and the post-election analysis will then begin. Will Sarah Palin be able to survive a potentially devastating McCain loss, and the blame that will be heaped on her for this loss?

We've got seven days left before the election.