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In case you haven't already seen this video from Funny or Die that reunites all past Saturday Night Live cast members impersonating presidents, here it is.
Lost in last week's news amid a bevy of horrid economic reports, heightened tension in the health care debate, and Congressional hearings on Toyota's acceleration problems, one overlooked story seems worthy of note this weekend - the demise of the Hummer.
With GM's sale of the Hummer line of gargantuan SUVs to China’s Sichuan Tengzhong Heavy Industrial Machinery now scuttled, what served as a cultural icon during the middle of the last decade will now be relegated to history's scrapheap. It is the final footnote to an era a half-decade ago when the U.S. housing bubble was at its maximum point of inflation and, not only would banks let you borrow money for virtually anything, but the government provided incentives for small businesses to purchase these monstrous vehicles.
It comes at a time of profound change for this country and there is more than a little irony in the Hummer being cast adrift in the same year that California governor Arnold Schwarzenegger will meet the same fate, eight years after both were embraced back in 2002 as noted in this report in today's Washington Post.
The little-known history of the street-legal H3 is detailed in this fine story, then the phoenix like rise of both the Gubernator and the H2 are chronicled.General Motors' decision last week to shut down its Hummer brand is not merely one more sour note in a car-industry chorus of bailouts and bad brakes. It also appears to be the final chapter of a star-crossed love story, an American marriage of one man and one machine that couldn't endure because of a hard truth: Even the biggest things don't stay big forever.
The man, Arnold Schwarzenegger, was responsible for bringing the machine, Hummer, to prominence.
In the beginning, the marriage of Hummer and Schwarzenegger was based on love, with mutual benefits. The star's fandom helped the big new vehicle gain attention, and the vehicle's popularity demonstrated the value of Schwarzenegger's judgment. Schwarzenegger and Hummer extended their brands together.Of course, there is some Hummer history around this blog also as an oversupply of these SUVs was the most popular item ever to spring forth from my keyboard in the now four-and-a-half year old epic - Hummer Overfloweth.
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Schwarzenegger won the California governorship and Hummer sales grew rapidly, from about 20,000 in 2002 to more than 71,000 globally in 2006. But the pressures of political life strained the marriage.
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With gas prices soaring, global sales for all Hummer models slumped to 66,261 in 2007 and 37,573 in 2008. GM tried last year to sell the brand to a Chinese company. After the deal fell through, GM announced last week that it was killing the brand, barring an outside bid to buy it. Schwarzenegger, for his part, said through a spokesman last week that he "believes the Hummer is a great vehicle that needs to be reintroduced with a more green engine like electric or bio-diesel."
Schwarzenegger may need his own makeover. Just as Hummer lost its identity as its makers sought mainstream appeal, the governor became more political moderate than muscular star, a man of compromise in a time of partisan war. However responsible such a stance may be, there is a cost to giving up your horsepower. No one knows exactly what you stand for.
In polls in recent months, majorities of Californians see Schwarzenegger as weak and ineffective. It's unclear what, if any, political future he may have.
He will be forced from office by term limits at the end of this year, just as the last Hummers are being sold.
Lost in the shuffle of last week's Thanksgiving holiday festivities was another in a series of fine documentaries from the folks at PBS Frontline - The Card Game - in which it is learned, among many other things, that U.S. consumers use plastic for 100,000 transactions a minute.
After having spent the better part of the last week in California where credit cards seem to be used for nearly every purchase - from grande lattes at Starbucks to candy bars and giant sodas at the AM/PM - it comes as a surprise to me to hear that a growing number of shoppers are paying cash for their holiday purchases as reported by Reuters.
Also on our trip south, while on the I-5 just north of Sacramento - one of the many housing bubble hotspots in recent years - we spotted a sign that probably characterizes today's housing market better than anything I've seen recently:Cash was king for consumers who shopped over the Thanksgiving weekend, according to survey results released on Sunday, and that factor could have cost retailers additional sales.
Only 26 percent of people who shopped over the weekend said they used credit cards for their purchases, according to a poll conducted for Reuters by America's Research Group.
"That's an amazing shift in consumers' habits," said Britt Beemer, founder of America's Research Group.
A total of 39 percent said they used cash, while the remaining shoppers used debit cards, the survey showed.
Consumers shunning credit cards is a bad sign for retailers, since people who buy gifts with a credit card tend to spend anywhere from 20 to 40 percent more on the gift, Beemer said.
More evidence that there's not too much difference between drugs, alcohol, and shopping at the local mall when the credit card balances only go in one direction - up - comes in this story by Megan McArdle in the Atlantic.
Lead Us Not Into DebtHey, if submitting to a higher power works for alcoholics, why not "shopaholics"?
Finance guru Dave Ramsey wins followers with a simple message: find God and lose your credit cards.Dave Ramsey looks nothing like a televangelist. He’s a little on the short side, neither fat nor thin, and he wears jeans and a sports jacket, not a shiny suit and an oily smile. With his goatee and what’s left of his graying hair trimmed close to his head, he looks mostly like what he is—a well-groomed, middle- to upper-middle-class American professional. But when he runs out onstage and starts dispensing financial advice, you realize that he could have been a great preacher.
On a fine summer day at the end of August, I paid $220 for front-row seats on the floor of a minor-league hockey rink in Detroit, just to hear Ramsey talk for five hours. The ostensible topic: getting your financial life in order. Afterward, my fiancé, who grew up in the Bible Belt, called me to ask what I’d thought.
“I think I just attended my first prayer meeting,” I told him.
There was, of course, a great deal of talk about money, and what to do with it. But the format was more tent revival than accounting seminar, with the first 90 minutes or so mostly devoted to Ramsey’s personal story of ruin and redemption. We heard how, during the second half of the 1980s, a young Ramsey built up a multimillion-dollar real-estate empire—then lost it all as the bank got nervous and called his loans, ultimately forcing him and his wife into bankruptcy. How, searching for help in his hour of need, he turned to the Bible and discovered Proverbs 22:7: “The rich rule over the poor, and the borrower is slave of the lender.” At that moment, he told an audience so hushed that we could hear the ice squeak, Ramsey decided to never borrow another dollar again.
The banking industry is further endearing themselves to the American public by instituting a new policy - a pilot program beginning next year - to levy fees on credit card holders who pay their bills on time or don't spend enough. This USA Today story has the details:
Starting next year, Bank of America will charge a small number of customers an annual fee, ranging from $29 to $99. The bank has characterized the fee as experimental. But card holders who have never carried a balance or paid late fees could be among those affected.Like many of you, perhaps, I continue to doubt the conventional wisdom that, "Until the banking industry recovers, the U.S. economy won't recover".Citigroup, meanwhile, has started charging annual fees to card holders who don't put more than a specific amount on their cards, typically $2,400 a year. Other banks are charging inactivity fees if customers don't use their credit cards during a specific period of time. You heard that right: You could be spanked for staying out of debt.
These fees are the credit card industry's response to credit card legislation that will, among other things, restrict credit card issuers' ability to raise interest rates on existing balances. Credit card issuers are looking for ways to raise income before the new rules take effect in February.
Spotted over at the Daily Bail a short time ago, these guys seem to understand how the world works better than most people and have a sense of humor to boot.
First cars, now guns... Maybe this guy is onto something in suggesting that the housing market needs a "Cash for Clunkers" program to help it get moving again.
After hearing a lot of talk in recent days about hopeful signs for the U.S. economy and how it is vital that consumers regain their confidence in order for a recovery to truly take hold, it struck me once again that the U.S. economy, more so than most other economies around the world, is really just a "confidence game".
As in ... a hustle.
As in ... Paul Newman.
As in ... not a good long-term plan (unless, of course, you're the one running the swindle) because, at its foundation, the game is fraudulent.
From Merriam-Webster:
confidence gameNow, this is not some short-term hustle where some guy standing on a street corner signals his partner with a tap on his nose - this is a multi-generational scam that has as much to do with flawed concepts about how economies should operate as it does with fading empires and their tendency to transition from manufacturing powerhouses to centers of finance and money shuffling where, over time, the masses are duped into borrowing and spending their way to oblivion and the government does much the same simply because it thinks it has no other choice.
noun
a scheme in which the victim is cheated out of his money after first gaining his trust
It's now rising like a phoenix and, while that may be a good (and very necessary) thing for one's personal finances, it is definitely not a good thing for the economy in the short-term.
Stateside, the government's finances - dominated as they are by entitlements such as Medicare and Social Security - appear to be much more of a Ponzi scheme than a confidence game, though, there are surely some characteristics of both.Ponzi SchemeLet's face it, when you and your employer each have 6.2 percent of your wages sent directly to Uncle Sam and deposited into the social security "trust fund", you are "investing" this money in the biggest Ponzi ever perpetrated because your money goes directly back out to recipients and, to make things even worse, what's left over is spent by the government.
noun
an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks
In fact, that peak you see above in 2007 may represent a generational high in asset prices since so much of this increase was fueled by a massive expansion of credit enabled by lax lending practices that have now unraveled over just the last couple years.Oh Dear! This could really be the end of life as we've known it in the good 'ol USA - part of the "new normal" that they keep talking about - as people like Dave Bruno are apparently succeeding in convincing other people that they don't need so much stuff.
According to Bruno, who writes a blog called guynameddave (don't worry, I couldn't figure it out for a couple of seconds either), you only need about a hundred possessions, and he set out to prove it last year in his 100 thing challenge, shown below with about a dozen of his things (that's a book "collection", apparently, not about a hundred books behind him).
A few excerpts:"Perhaps the silver lining (of the recession) is that people are coming to realize they can live with less and their lives are richer for it," says Michael Maniates, professor of political and environmental science at Allegheny College in Meadville, Pa.
Making the transition from homeowner to renter about five years ago had more than the obvious implications for our finances. In all that time, we still haven't gotten rid of all the crap that we bought when we owned our own house, the idea of having "one more thing to move" being a recurring reason not to buy stuff.
A third, 32%, say they have been spending less and intend to make that their "new, normal" pattern; 27% say they are saving more and plan to continue, according to a Gallup Poll in April.
Nearly half of consumers, 47%, say they already have what they need, up from 34% in November 2006, according to the 2009 MetLife Study of the American Dream.
"People are feeling forced and inspired to get back to what is core to them," says Julie Morgenstern, author of Shed Your Stuff, Change Your Life. She says they're valuing objects less and experiences and people more.
Eric Dykstra, pastor of Crossing Church in Elk River, Minn., read Morgenstern's book, then ran across a blog by Dave Bruno of San Diego. Bruno launched a "100 Thing Challenge" in November and says he pared his own possessions to fewer than that.
The housing boom and bust has seen an untold number of houses emptied of all sorts of "things" that people really didn't need, making any economic recovery to the mid-decade heydays virtually impossible.
It was a clever plan while it lasted - create a housing boom with cheap money that creates even more cheap money that people can go out and use to buy things that they don't need to fill up all the houses that were being bought.
It worked great until home prices stopped going up.
There's a fascinating story in the New York Times about the government of Norway and their novel approach to managing public money - robust savings and investment accompanied by a complete aversion to debt - that can only be described as "other-worldly".
Nonetheless, the government sets a remarkable example for others.The global financial crisis has brought low the economies of just about every country on earth. But not Norway.
Once again, it would be a completely different story without the oil revenue (and the demographics), but they do stand in sharp contrast to other Western nations whose governments routinely rack up massive new debt that their grandchildren have no realistic chance of ever paying off.
With a quirky contrariness as deeply etched in the national character as the fjords carved into its rugged landscape, Norway has thrived by going its own way. When others splurged, it saved. When others sought to limit the role of government, Norway strengthened its cradle-to-grave welfare state.
And in the midst of the worst global downturn since the Depression, Norway’s economy grew last year by just under 3 percent. The government enjoys a budget surplus of 11 percent and its ledger is entirely free of debt.
By comparison, the United States is expected to chalk up a fiscal deficit this year equal to 12.9 percent of its gross domestic product and push its total debt to $11 trillion, or 65 percent of the size of its economy.
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Norway’s relative frugality stands in stark contrast to Britain, which spent most of its North Sea oil revenue — and more — during the boom years. Government spending rose to 47 percent of G.D.P., from 42 percent in 2003. By comparison, public spending in Norway fell to 40 percent from 48 percent of G.D.P.
“The U.S. and the U.K. have no sense of guilt,” said Anders Aslund, an expert on Scandinavia at the Peterson Institute for International Economics in Washington. “But in Norway, there is instead a sense of virtue. If you are given a lot, you have a responsibility.”
Eirik Wekre, an economist who writes thrillers in his spare time, describes Norwegians’ feelings about debt this way: “We cannot spend this money now; it would be stealing from future generations.”
Among the many other sad, interesting, and inspiring developments over the last week or so, the car that we purchased with the help of that initial wave of home equity money back in 2002 was sold in preparation for our move to Oregon.
It was cause for reflection as so much has changed in those seven years.
Recall that, back in early-2002, the nation was still trying to recover from the effects of the September 11th attacks and short-term interest rates were just below two percent on their way to one and a housing bubble was in its gestation phase, the seeds being sown for the mess that is all around us today.
Home prices were rising, but they had been rising for years.
In the Los Angeles area, starting in about 1998, real estate prices began climbing at a rate of about 10 percent a year which, given the severe downturn earlier in the decade - an overall decline of more than 25 percent from 1991 to 1996 - seemed like a normal sort of rebound.
Having (mostly) unwittingly purchased a house near the bottom in 1995, by the time 2002 rolled around we had oodles of home equity and when the banks started pestering us to refinance or "tap" some of our gains, we went along, hesitantly.
We needed a new car and, between the $15,000 that was just sitting around in a savings account earning a measly two percent and an equal amount that could be quickly "extracted" from our house, it was kind of a "no-brainer".
According to recent sales in the neighborhood at the time, there would be plenty of home equity left over after that withdrawal and, for the first time ever, we began to think of our house as if it was a savings account.
I'm just glad that we never became dependent on that method of financing purchases in the years ahead as so many others did.
After making another equity withdrawal or two to buy some "dumb 'ol gold coins" we soon began thinking about our long term plans and, after refinancing when rates hit rock bottom in 2003, we sold our place and became renters not long thereafter.
I hasten to think what our lives would be like now if we did what so many others did at the time and opted to upgrade our lifestyle by simply repeating this process over and over until the bubble burst.
When we finally did sell our house, we actually felt bad about our loan amount being higher than where it began in 1995 by a few thousand dollars, but knowing that some of that debt was converted into real money at less than $400 an ounce made this a bit easier to take.
It's funny to think about how much the world has changed since 2002.
The seven year old Nissan Maxima shown below was in perfect working order and the only reason we got rid of it is that we need an all-wheel drive vehicle since, wherever we finally end up calling home, we are sure to be driving around in snow during the winter.
Selling it now, before we move, makes that whole process a bit easier and, lest anyone forget, there's no sales tax in Oregon. Coming from a state where you can add 10 percent to the final negotiated price of a new car will make our next purchase, where a simple $200 charge gets tacked on for four years of registration fees, feel like we won the lottery.
That era has now come to an inglorious end for most people.
If not for the logistics (i.e., hotel room table, awkward laptop keyboard, no slippers, and, most importantly, American Idol coming on in about 15 minutes), after having arrived in Bend, Oregon, there just might be a Jim Kunstler type riff on the end of suburbia.
Apparently, foreclosures accounted for almost 70 percent of all existing home sales during the month of December - we just might move here.
The phrase "too big to fail" has taken on an entirely new meaning on the East Coast over the last year or so and that new meaning is not likely to work in favor of the Donald Trump empire, a small portion of which went belly-up the other day for the third time in four years.
Fortunately, Celebrity Apprentice kicks off in about ten days or so and if there's one good thing about a high unemployment rate, it's that there are lots more people with lots more idle time on their hands and, as never before, we Americans just love being distracted from an increasingly complicated world out there.
The Donald's Prime Time show enters its eighth season after being nixed by NBC a couple years ago only to return as a celebrity-train-wreck sort of format, an idea that is apparently being built on this year with an even more volatile cast of characters including Dennis Rodman, Andrew Dice Clay, Tom Green, Joan and Melissa Rivers.
If ever there were a metaphor for the American Empire, it is the Trump Empire and the eighth season of The Apprentice.
Here's the report from Reuters on the casino:Trump Entertainment files for bankruptcy
He seems to have learned a thing or two since the early 1990s.
Trump Entertainment Resorts Inc, the casino operator named for Donald Trump, filed for bankruptcy protection on Tuesday as recession and declining gambling revenues battered the company and its rivals.
The Chapter 11 filing marks the third plunge into bankruptcy for the company, which was created out of a restructuring in 2005. It also underscores the struggles facing the casino business as recession squeezes casino gambling.
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Trump, a very public and flamboyant figure in an industry filled with colorful, headstrong executives, said the company represents less than 1 percent of his net worth, and that "my investment in it is worthless to me now."
No stranger to bankruptcy, Trump Entertainment Resort Holdings went into Chapter 11 in 2004, from which it emerged a year later with Trump having relinquished the position of CEO.
According to Wikipedia, his business went bankrupt in 1991 after the last real estate bust and he barely escaped filing for personal bankruptcy at the time.
It will be interesting to see how he does this time around.ooo
The image below (via The Oil Drum) is from Nate Hagens' letter #2 to President Obama regarding the country's energy future. The question of the day, it seems, is whether America's new found energy conservation is just a passing fancy or a long-term trend.
It doesn't sound as though a permanent transition will be easy:Our species in general and Americans in particular have the wiring and drive to be consumptive machines. No matter how many goods we acquire over time, our pecuniary desires seem to increase faster than our acquisitions. Combine this with our mirror neurons, between-and-within-nation aspiration gaps (based on biologic underpinnings of relative fitness), an evolutionary penchant for waste, a built in drive to outcompete, a culture that fosters keeping up with the Joneses with a high % of Veblen goods, and you get a frenetic feedback loop that has a vast plurality of Americans now Jonesing, many nearly broke, obese, and a fair number realizing, without knowing the details, that something is amiss.
Over the last few decades, the world has gotten used to over-consuming Americans. Given where things stand today, it's not clear whether we can live with that, or without it.
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Demand Side Summary===> We are hard-wired to compete, and our brains are easily hijacked and confused by modern stimuli. Both these aspects lead to incredible wastes of energy and resources. It is the most politically difficult area, but also the one with lots of low hanging fruit.
The Commerce Department reported U.S. retail sales fell for the fifth month in a row during November, down 1.8 percent from October and a full 7.4 percent below year-ago levels.
Since these figures are not adjusted for inflation, this represents a major contraction in spending in real terms as year-over-year inflation was last reported at 3.7 percent.
As has been the case in recent months, the downturn was led by a 2.8 percent decline in auto sales, following drops of 5.8 percent and 5.5 percent in the previous two months, the annual decline in sales at motor vehicle and parts dealers now at a whopping 25.2 percent.
Part of the reason that the headline numbers have been as bad as they have been in recent months is the precipitous decline in gasoline prices. After declining 13 percent in October, gasoline station sales fell 15 percent in November.
Earlier in the year, when the price at the pump was rising toward $4 a gallon and beyond, gasoline station sales contributed positively to overall retail sales, now the contribution is negative.
Excluding autos, gasoline, and building materials, sales posted their biggest gain in six months, rising 0.5 percent in November after falling 0.7 percent the month before.
There's a nice article about former Fed chairman Paul Volcker in today's LA Times with a good deal of background information that helps to explain why he is the way he is.
Volcker grew up during the Depression, raised by a father who taught him one lesson above everything else: Integrity is a person's greatest asset, said Volcker's sister, Virginia Streitfeld. She calls Volcker, who stands 6-foot-7, her "little brother."He'll have his hands full in helping to get the U.S. economy back onto a more solid footing - there's a lot that needs to be "undone" since he passed the Fed chief baton to Alan Greenspan back in 1987. Read more...He is known for practicing what he preaches about the nation living within its means. He travels with one business suit and lives in the same Manhattan apartment that he bought decades ago.
When he was Fed chief, he lived in a modest Maryland apartment and did his laundry on Saturdays at his daughter's house nearby, recalled Marina v.N.Whitman, a University of Michigan economist who has known Volcker for decades.
"Paul is one of the most frugal guys on Earth," Whitman said. "The advice he gives and the way he views the world are entirely consistent with his personal ethics and lifestyle."
He is outraged by executive compensation packages, seeing them as part of a larger breakdown on Wall Street.
"Paul can't imagine anybody wanting or needing that much compensation for consumption purposes," said Whitman, a member of the Group of Thirty. "It probably offends his sense of right and proper."
Julie Alexandria of Wallstrip encourages Americans to due their civic duty in support of the U.S. economy, while demonstrating what is surely an unhealthy fascination with squirrels.
The LA Times reports California Governor Arnold Schwarzeneggar wrote a letter to Treasury Secretary Hank Paulson yesterday commending him on his efforts to bail out the global economy but warning that the nation's largest state might need a bailout too if the credit crisis goes on much longer.
The governor is in the middle of a painful learning process about how it's much, much easier to govern when you have a housing bubble, rather than a housing bust. Here's the letter(.pdf) with a nice, bold signature at the end.California Gov. Arnold Schwarzenegger, alarmed by the ongoing national financial crisis, warned Treasury Secretary Henry M. Paulson on Thursday that the state might need an emergency loan of as much as $7 billion from the federal government within weeks.
Note that the picture above did not appear in the original LA Times story.
The warning comes as California is close to running out of cash to fund day-to-day government operations and is unable to access routine short-term loans that it typically relies on to remain solvent.
The state of California is the biggest of several governments nationwide that are being locked out of the bond market by the global credit crunch. If the state is unable to access the cash, administration officials say, payments to schools and other government entities could quickly be suspended and state employees could be laid off.
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California finance experts say they know of no time in recent history when the state has sought an emergency loan of this magnitude from the federal government. The only other such rescue was in 1975, they said, when the federal government lent New York City money to avoid bankruptcy.
So, we're going to "bluntly assess the economy" a couple weeks from now down in Long Beach - the folks at Reuters/AdvicePoint were kind enough to create the graphic that will appear in the right sidebar for the next week or so.
This will be my first return to Southern California since our move northward almost exactly one year ago - I think our remote control for the entrance to the gated community in Ventura County where we used to rent should still work, so maybe we'll grab the latest foreclosure listings and have a look around the old neighborhood.
It always cracked me up to see people doing crazy things with borrowed money like tearing out perfectly good, brand new driveways to replace them with equally functional ones that better matched the landscaping theme they so desired.
It's much easier to "bluntly assess" the 2005-2006 economy than the current one, but I'll give it my best effort.
On a related note, apparently, things went well enough in New York that the folks at the Hard Assets Investment Conference have already asked me to speak at the next gathering in Las Vegas this September.
I understand it's lovely that time of year in Sin City.
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