September 15, 2008 was Black Monday. The New York Stock Exchange lost over 500 points that day, or 4.4% of its total value. Four-point-four percent doesn’t read like a lot, does it? Well, it only represents the loss of billions (that’s millions with a capital B) of dollars in value to shareholders. Oh, you may acknowledge that as a “paper” loss, but our currency, friends, is based upon—paper. Paper and the confidence we have in it. It’s not for nothing that business groups and the Federal Reserve conduct polls to measure consumer confidence. Without that confidence, things start spinning downward, faster and faster.

For those who have watched the events of recent days and hoped for some reassurance, from someone, here?s a quotable quote:

There is no cause to worry. The high tide of prosperity will continue.

You think that one of our current candidates for President said that, today? Close, but…not quite.

Crash & Credit

Our banking “system” reels from staggering losses; losses from investments made against incredibly insane mortgage loans made over the past few years. Lendors made those loans to finance the high-end proeprties, the so-called “McMansions” US home buyers apparently wanted, but could not afford. Unless, of course, they used extrememly risky loan “products,” such as interest-only or sub-prime mortgages. Lednors were only too happy to offer these products, and many of us were only too happy to accept them. After all, if there was something wrong with these loans, wouldn’t “somebody” warn us?

Now that many banks are literally teetering—CitiGroup, Wachovia, Bank of America, Lehman Brothers, and so forth, on and on—who will provide the credit needed to finance economic expansion? For that matter, what companies want to add debt to their debt? What, and how, do they want to expand? Are we buying more cars and trucks and homes than before?

No. Most of the credit applied for today is meant to be used to support the crumbling financial infrastructure of the banks that are wobbling on the brink. The most recent major player to go is the holding company for Lehman Brothers.

Leadership? Lack Thereof!

I believe that the Secretary of the Treasury and the Chairman of the Federal Reserve are doing what they can to mitigate this crisis. But…has the Congress been called back into extraordinary session to deal with this mess?

No.

Are those who aspire to lead our great nation doing anything constructive?

Yes.

They blame each other for a situation in which neither have played a role, despite their roles of US Senator. Let’s take a peak at their words today:

The challenges facing our financial system today are more evidence that too many folks in Washington and on Wall Street weren’t minding the store…Eight years of policies that have shredded consumer protections, loosened oversight and regulation, and encouraged outsized bonuses to C.E.O.’s while ignoring middle-class Americans have brought us to the most serious financial crisis since the Great Depression.—Senator Barak Obama (quoted from the New York Times)

Mr. Obama offered no solutions, but I suppose this involves more (unspecified) changes.

My opponents may disagree, but those fundamentals—the American worker, the innovation, the entrepreneurship, the small business—are the fundamentals of America and I think they are strong…But today, are being threatened today—those fundamentals are being threatened today because of the greed by some based in Wall Street and we have got to fix it.—Senator John McCain (ibid)

He’s right: we have to “fix it.” How do we fix it? Not a clue.

The Fix

No one will save us from ourselves. No one will prevent us from purchasing the Suburban Assault Vehicle that gets 5mpg or less “on the road” (as opposed to “in the city”). No one will protect us from buying a property we couldn’t afford at any time under any circumstances. No one will force us to spend (using our credit cards, while we stil have them) instead of saving.

Sadly, the banking crisis may kill savings. Why? Because we may not try to save, since we have less and less confidence in banks and their stewardship of our funds.

Jobs are going away at a truly alarming rate: Hewlett Packard just announced their intent to cut over 25,000 jobs in the near future, for instance. The latest labor statistics announced by the government showed a jobless rate of around 6.1%. Jobs dwindle, banks crumble, and credit dries up: does any of this sound somewhat familiar?

I think we need to look for people at all levels of government who are less concerned about their Party and more concerned with their constituents. Women and men who are committed to finding solutions rather than sound bites. I admit that this is as vague as Obama’s incessant calls for unidentified change, but I offer it as but part of a solution.

I think that a President, no matter who that might be, and the Congress, no matter who is in office, need to look toward:

• Basing our currency on something of value, other than mere confidence
• Working hard to place good people, and there are plenty of them, in positions of responsibility to manage federal and state programs and avoid the losses experienced recently by the Department of the Interior
• Realigning our system of tax credits for businesses so that it becomes more expensive to outsource jobs overseas than to keep them here (Don’t cry to me about “competitiveness;” if our goods and services were competitive today, would we have lost so many jobs?)
• Tightening regulations that allowed junk bonds and junk mortgages
• Controlling, through the tax system, the so-called “golden parachutes” used by so many so-called “managers” to be compensated at staggering rates for staggering incompetence (Okay, so this is my own bias; so what?)

Well, as you’ve no doubt realized, my training is not in finance. I am no threat to the Alan Greenspans of our world. I just know, or sense, that something is badly wrong in our land, and we need to do something, almost anything, about it. Perhaps we can start by putting the country on a war footing, since we’re at war. (The debt resulting from the Global War on Terror will have to be paid out, someday.)

• Perhaps those of us who are shareholders can start by demanding the corporations in which we’ve invested pay reasonable salaries to those who are appointed to the corporate boards or hired to be CEO or COO, or whatever.
• Perhaps we can gaze sadly into the eyes of our children and tell them that they have to go to the local community college because that’s what we—and they—can afford.
• Perhaps we can destroy most of our credit cards and decide to purchase what we can afford, when we can afford it, and when we need it.
• Perhaps we can move our money from banks that have ruthlessly squandered their resources—and ours—into more reliable, local Savings & Loans or credit unions.

But, perhaps I’ve moved back into The Land of Oz…