There's no gold in them hills

In times of economic mayhem there has almost always been a safe haven for individuals: gold and silver. But this particular stock market meltdown has caused the value of gold to depreciate. How is this happening?

It's simple. The "Hedge funds and high-net-worth investors are liquidating highly leveraged precious metals derivatives contracts, options, and gold index notes to raise the capital to meet margin calls on their tanking stock and bond investments," says Roberta C. Yafie of Portfolio magazine. Basically the financial crisis has forced these investors to eliminate gold and silver investments in order to balance the money lost in the volatile stock market. Prices for gold and silver are down, however, the investor demand for gold is high.

The big money is in gold, which is why investors are so fond of it now. "An Exchange-trade fund buys exposure to gold, and the price is right," says metal consultant at the CPM group, Jefferey Christian. "People three to four years ago bought them at $300, $400 an ounce and made a lot of money." Gold today is trading for more than $750 an ounce, according to Yafie. "Investors who bought a year ago, when the price was $780, are a little underwater," Christian adds. "Those who bought two years ago are in pig heaven."

As Comex Gold Trust and GLD E.T.F have increased gold holdings worth $17 billon and $2 billion, respectively, investors continue to sell and the price of gold is estimated to drop another $100. But experts say, according to Yafie, that after the short selling of gold ends, gold could shoot up to $1000 an ounce. Although the credit crunch has halted supply of gold, people are lining up to the buy gold the second the selling stops. When that happens, the price of gold will skyrocket because of the extremely high physical demand.

So what do you think America? Is gold a worthwhile wait and investment? Or is the risk too high?

Who am I now?

Wow. From the beginning of this blog I really had no idea what the stock market really was and how it is a vital part to the complex global economic system. Honestly, I thought the stock market was a room filled with sweating suited brokers who screamed at billboards posted with constant changing numbers and wild graphs, and all they did was yell buy or sell. But my growth as a thinker on this issue has grown exponentially, especially since the dawn of economic peril in October 2008.

For those who were like me, let me clarify a little of what I have inferred about the basic function of the stock market and its tie with the economy. Stock is basically a part of the company. When you buy stock you buy part of the company and the price determines how well the company is doing. Each company is made up a shares, Microsoft has about 112 million shares. So, for example, if you buy 200 shares of Microsoft at $20 a share and the next day the price of each share has dropped to $18, not only did you lose $400, but the company may have had something going on whether it be a strike, poor advertisement, court cases, or any other factors. The price represents the worth and success of the company. So, again for example, if comparatively the price of Apple stock is $100 a share, then Apple is having higher success in the company through better sales of their products.

All these companies of products are under an umbrella of markets, aka stock markets. The most popular and focused American markets consist of the NASDAQ (national and capital markets), the New York Stock Exchange (NYSE), and the AMEX. Who buys the products of these companies? Consumers. It is a consumer driven market. Each market reflects an overall percentage gain or drop aggregated from each company's individual success within the market. If all the markets are being affected with a simultaneous plummet of percent, or points, then the underlying problems are sourced to the consumer. Anything that devastatingly affects the consumer is reflected in the stock market which then is reflected in the economy as large companies make up most of the economy. So since the mortgage crisis caused so many people to lose their homes and banks to be hollowed out, the consumer is driven into panic and halts buying of products; thus driving down the stock market and the economy.

So there you have it in a nutshell. Now the federal government is stepping in just like in past crashes and the Great Depression. The government issued a $700 billion bailout which has proved to be ineffective for short term success. What America needs is a long term solution; a solution to the source of the problem, the mortgage crisis.

It's all in the mortgage crisis. This problem which has spanned from a decade of debt, speculation, and deregulation is showing right now in this market. Target this problem. These quick injections of money into the economy are only serving as hopes for a quick fix, but as Meritt argues, "We are a society of quick fixes. With a bleach pen, a travel sewing kit, anti-itch relief cream we don’t have to worry about anything. With the economy, a system that entails all of our families’ and friends’ financial successes in life, a quick fix is nowhere near possible."

Before this blog research project I had no idea about the complexity of the economic market or any response to the stock market's volatility. My dad discussed with me the global market before this project. I would nod my head pretending to understand but I had no clue what was going on. He teaches in the college of business. I never had anything to talk to him about his work. He was too brilliant for me on that subject. But now I can have casual arguments over the primary cause of the stock market and propose passionate theories to fixing the economic chaos.

Now I am passionate to argue about the economy. I feel like I am spreading my education to the world not just through my blog, but through my thoughts. I will update friends on the current status of the stock market. "Hey did you see that the Dow dropped 782 points on October 6th?" "No I didn't" "Stay updated. This is our future!" I could argue with analysts or even presidential candidates about fixing the stock market and economy.

The world is now opened to me. I am now aware that I should be aware. I make sure I am aware of all the issues that will affect my future: college loans, the economic crisis, the presidential election, taxes, social security, oil, and alternative energy.

The History of the Dow

So everyone's been talking about this famous company in the stock market: the Dow Jones Industrial. Maybe you've heard of it? Well this company, along with Standard and Poor's 500, serves as a major reflection of the United States' stock market's status. Speculation has risen since the beginning of October for a market bottom, but analysts say that prices may even still drop. The Dow company has had a roller coaster of a ride the past 6 months, and the past 10 years, and even the past 78 years, but can this history predict a market bottom, or a bottomless market?

According to Adam Shell of USA Today, the Dow Jones has dropped 41% since its 13,000 point peak in April. But even after a devastating plumett of 700 points on October 10, 2008, the Dow managed to recover 128 points before closing. "Since then, many signs that have signaled market bottoms in the past have surfaced: record levels of fear; a surge in investor pessimism; and the fact that the Dow and Standard & Poor's 500 index have stayed above their intra-day Oct. 10 panic lows," Shell writes. But when a definite bottom will occur is the question.

Todd Salamone, an analyst at Schaeffer's Investment Research, says the Dow bottomed in October 2002 at 7200 points and March 2003 at 7500 points. "It's not inconceivable that we go back and test the lows we saw in 2002 and 2003," says Salamone to Shell. Even after the implosion of hedge fund Long Term Capital Management in September 1998, the Dow bottomed out between 7400-7500 points. And of course the epic low of the Dow in 1932 spurs a mixed emotions of hope and dread.

So what do you think America? Is there any immediate signs of the markets bottoming out? Or is the worst still to come?

Update on the Stock Market

Business Weekly writes today that the stocks have fallen to the lowest levels in five years. "The S&P 500 hit its lowest level in more than five years Wednesday amid weak earnings reports and growing worries about the U.S. and world economies." The Dow Jones Industrial Average plummeted 514.45 points, or 5.69%, to end at 8,519.21. The S&P 500 lost58.27 points, or 6.1%, to 896.78 and the giant Nasdaq fell 80.93 points, or 4.77%, to end at 1,615.75.

Oil continues to drop. On the NYMEX, crude oil dropped $4.80, and is at $67.38. International markets continue to plummet as the Indian stock, Sensex, closes at 9879 after losing 300 points according to the economic times.

What do you think America? Are we destined for a serious recession or is there any hope for a quick recovery? As the international markets fall and the stock market drops, lets hope the presidential candidates can stimulate some hope and confidence.

Can you handle the Fear?

So this is pretty interesting my fellow blogging blogspot blog readers of blogs. According to the New York Times, as people watch the stocks drop towards rock bottom, they are watching an "obscure index known as the VIX," writes Michael M. Grynbaum. "The VIX (officially the Chicago Board Options Exchange Volatility Index) measures volatility, the technical term for those wrenching market swings. A rising VIX is usually regarded as a sign that fear, rather than greed, is ruling the market. The higher the VIX goes, the more unhinged the market looks." So fear seems to be running the market instead of greed nowadays.

The VIX rose 70.33 points on Friday, the highest it has ever been since the VIX birth in 1993. But having this great index does not seem to help us according to Ryan Larson, head equity trader at Voyageur Asset Management. Grynbaum interviews him as he says, "The VIX is a self-fullfilling prophecy. It's almost adding to the problems." The VIX promotes panic among the stock holders as when the media picks up the record high fear points, every freaks out and thinks they have to sell their stocks.

But it's meant to endorse a new revenue stream and primarily. “The first purpose was the one that is being served right now — find a barometer of market anxiety or investor fear,” Professor Whaley, who now teaches at the Owen Graduate School of Management, Grynbaum writes. Apparently it has had a good record according to Grynbaum. "It spiked in 1998 when a big hedge fund, Long-Term Capital Management, collapsed, and after the 9/11 terrorist attacks." Bottomline the VIX is supposed to offer guidance for marketors and stock companies.

Now America, what do you think about this VIX? Is it a good index and a reliable source for stockholders? Don't discredit it right away because it has a negative impact. Do the benefits outweigh the risks? You decide. And by the way, vote early!

So what do you do if you don't want to do it?

Let's say hypothetically that no one addresses this issue of the economic crisis and global stock market meltdown. What do you think might happen? Maybe just a tiny decrease in confidence and income and jobs; maybe just a tiny increase in mayhem and chaos. By tiny I mean astronomical.

The global economy is already in a state of chaos due to the United States' mortgage failure which generated a wave of economic distress to the rest of the world as international banks began losing money and assets. Then the stock market began to plummet, throwing the entire country in long state of panic. But what if all this was ignored and things continued to decline? Put simply, it could be hell. Banks would shut down and close completely. Jobs would be suddenly wiped off the nation. But saying to not focus on the economy would mean not focusing on oil, heath care, the iraq war, taxes and pretty much everything because everything is wired in with the economy. And economic status is drawn from international revenue as well, so the whole world would have to ignore the problem. That would be bad. (Just understating a little.)

Things would go into another great depression. Money would be rationed even more than it is now. Children in college might have to go home and work to help pay for family bills. Everything would just slow down. It's unimaginable what would happen if this issue, the economy, the stock market, essentially everything, were to be ignored.

I thought of an interesting question though. Would this issue be a lesser or a greater concern if the election process was not during this economic crisis?

A message to my fans

To all my loyal fans who view my blog, check out these blogs as well. They provide a deep insight on vital topics that affect everyone's lives.

Renewable energy: The New Oil?
Tommy's blog shows an in depth analysis of the possible alternative sources of energy. He updates his blog on new energy sources that I have never even heard of before such as Ocean Thermal Energy Conversion (OTEC) which is a "water-based way for harvesting energy." He compares these new methods of attaining energy to the detrimental and now diminishing fossil fuels. The OTEC offers an incredible amount of energy, as Tommy writes, and "only 0.1% of this energy could provide 20 times the energy consumed in the United States." But the only problem with it is...you will have to go and see his blog to learn more.

Middle East Politics in 2008
Kia writes a blog that, well, is just what it sounds like. It is an incredibly interesting blog that focuses on the struggles within the Middle East and the effects the U.S. has on that region of the world. I never knew anything about the Kurdish struggle and how they were oppressed from Saddam Hussein and the Turkish government, forced to become refugees and create a terrorist party in order to attain a homeland. But the PKK terrorist group is attacked by the Turkish forces, thus suppressing the terrorism but not promoting any peace. Kia displays the facts in a way that makes the reader analyze the argument. The Kurds are in desperation and deserve an independent nation through negotiation rather than terrorism. Read more and decide for yourself.

Global Warming
Don't you love the heat? No! Student provides a look at global warming an its cause and effects. Apparently it is not just the carbon dioxide that is the sole contributor to global warming, but it is a natural process. According to student, "about 450 million years ago the carbon dioxide levels were ten times what they are now." How many questions can you ask now about global warming? Will it continue to heat? Do the human have any effect at all on global warming? Ask student these questions as you read his blog.

Theory of Marketivity

Ahem! Class! Today I will explain the Theory of Marketivity. The solution to the global economic situation lies within the housing and mortgage crisis and strict regulation of banks.

According to CQ researcher, the mortgage crisis in the U.S. not only affected large national banks and insurance industries such as AIG and WaMu, but also the largest wealth management company in the world: the Swiss Union Bank. "The flood of subprime mortgage defaults roiling the U.S. housing market is also feeding a worldwide credit crisis," says Kenneth Jost. "Along with other big banks in Europe and the United States, UBS had experienced a financial meltdown — and in UBS's case a shareholder revolt — after it lost nearly $38 billion, more than any other lender, since the start of the subprime crisis in July 2007." What are people going to do when they see the global economy suffering dramatically? Panic.

The U.S. Stock Market is driven by consumer spending. What drives consumer spending is the confidence each individual has in making a purchase or buy stock through their own financial situation. Just as Kara Baskin describes in the Boston Phoenix, Wall Street tycoons had overseen the hollowed loans as assets for the banks because they said so. "They overplayed their hand and believed their own hype. There comes a tipping point when ego and greed replace empirical data and logical confidence. The problem is, for better or worse, Wall Street sets the confidence level for the rest of the country. They rally, we rally. They panic, we eat Ramen noodles," Baskin writes.

The risky speculation, deception from banks, and deregulation of large brokerage companies have led to significant consequences as the Stock Market suffered an epic loss in this month of October. What America needs to do is target these sources of this economic meltdown. Once regulation is in place with the banking business, it will alleviate the mortgage crisis which will in turn raise the global economic status. All this will require time; years and possibly decades may pass before the Stock Market and universal economy completely recovers.

Did you say nationalizing of banks?

The NY Times writes of the nationalizing of banks. The government proposed to support all types of banks, small and large. Henry Paulson said the injection of $250 billion was necessary to restore confidence. This plan is similar to Europe's and it is used to thaw credit. The federal government wants banks to start lending money and sending capital. The intent of this is mainly to drive confidence up and take over stakes of the banks. Although the Dow closed after gaining 936 points Monday, today was different. The U.S. dollar fell against the Euro after the Federal government announced its involvement in the market according to CNN. The Federal Reserve said its all in. It will supply unlimited amounts of money for the global banking system. This has to be a drive towards boosting confidence. All I have to say is: money, money, money!!!

Meanwhile, Daniel Larison writes that bankers are the ones who have lost confidence and the government contributed to this loss. The bailout was false fear. People thought the market was going to crash. Consumers panicked and started short-selling. This caused only more chaos according to Larison. The nationalizing of banks gives too much control to the federal government. It is only one more step towards socialism. This eliminates the free market principles. What's next?

Free food!!!

Aha! I got your attention didn't I?

Again, I was reading an online article in the San Francisco Chronicle which was about the chairman of the Federal Reserve Ben Bernanke. He is apparently a scholar of the Great Depression and, as Carolyn Said writes, "observers say Bernanke's vigorous responses spring directly from his knowledge of the ultimate economic catastrophe." Bernanke is applying the same tactics that Roosevelt executed during the Great Depression; "unorthodox approaches, some with trial and error." Some of his actions included rescuing the insurance giant AIG "in exchange for an ownership stake," and brokering Bear Stearns. Bernanke even began working with the Treasury Department.

I have to say, I am pretty confident in this man. Although he is pursuing some points with trial and error, at least he is doing something, and he is using his knowledge of the Great Depression to credit his actions. According to Said, "Bernanke is taking the opposite approach from what the Federal Reserve did before and during the Great Depression. He is giving gas to the economy by increasing liquidity." Bernanke is flooding the economy with cash and although he is nicknamed "Helicopter Ben" for showering the country with money, economists trust his judgment due to his large knowledge. David Moss, an economic history professor at Harvard Business School, praises Bernanke's aggressive approaches and meticulous study of the Great Depression. "He has an appreciation for the complexities and reality of what was going on then, as much or more than any other scholar," Moss states in Said's interview. Wow, I mean come on, it's a Harvard professor of Business!!!! It doesn't get much better than that...unless you are the Federal government.

Just last Friday, the Stock Market was officially nationalized. The Federal government will now buy financial shares and bank stocks. Last Wednesday the SEC ended its ban on short-selling after the attempt to stop the dramatic declining of the Market had failed. The American Banking Association demanded the ban be returned if their stocks started to plummet again. But according to Robert Folsom of the Elliotwave International, "instead of reinstating the short-selling ban, the Treasury will now proceed to buy bank shares. Needless to say, all the stock market news now proclaims that today's 936-point, 'biggest one-day point gain ever' in the Dow Industrials was because 'governments and central banks took aggressive steps to unlock the flow of credit."'

Hope seems to stay alive as today the Dow rose 936 points making it the biggest single day percentage gain in 75 years, according to Michael M. Grynbaum of the New York Times. Bernanke and his extreme solutions with the Treasury Department seem to have output some positive effects; or this could be the omen of another Black Tuesday, the calm before the storm, history repeating another Great Depression.

While the "nationalizing" seems to be a movement towards socialism, the Federal government continues to step in to the U.S. economy. Money is being poured into the Market, but it seems the government is overstepping their boundaries by saving large corporate tycoons with taxpayers' money. What do you think America? Are we giving the government too much control with our economy? Do you think this positive gain is evidence for condoning the government's actions? Is Ben Bernanke our savior from a economic meltdown? Or is this just the last bit of hope squeezed out of the Market before disaster? I want to know what you think America.

Stock Market debate, who wins?

Ok.

That's about my best summary to the "town hall" second presidential debate in Belmont University in Nashville, Tennessee; a little better of an opening compared to the responses the candidates pulled on the global economic crisis. According to U.S. News and World Report, last night's debate began on the day where the Stock Market dropped 508 more points and the emotional concern with this issue in the debate failed to match the drama of the plummeting economy. Kenneth T. Walsh writes in his article on the debate, "Neither scored a decisive victory nor made a major mistake as the two quarreled over who has the best prescription to lift the nation out of its financial mess...And while each man avoided the extreme negativity that has dipped the overall campaign into the mud recently, the debate offered only a brief respite from the cycle of attack and counterattack. Immediately afterward, each side resumed the name-calling."

Both candidates agreed on the passing of the $700 billion bailout, oh excuse me, "rescue plan." Let me just say this: is it not interesting that the rhetoric has changed from "bailout" to "rescue" in order to serve as a catalyst for hope and stimulate some growth for the Stock Market and U.S. economy? John McCain explicitly said that, “The first thing I'd do is say, let's not call it a bailout, let's call it a rescue because it is a rescue. It's a rescue of Main Street America,” according to Andy Barr's quote of McCain on a CNN interview. "Rescue" is just want it sounds like, the U.S. government is not "bailing out" the economy and buying out debt as people, CEO's, and fraudulent large companies which have blatantly (excuse my advanced syntax and vocabulary) screwed us over, they are simply rescuing everyone; the government, my hero.

But in the debate (sorry for digressing like both candidates), McCain told the audience and the media that he would spend $300 billion additionally on a federal program to help "buy out bad mortgages" from consumers, according to GMA News in Washington. So the obvious question lingers, after McCain approved spending $700 billion on a "rescue" bailout plan and then offering to spend $300 billion more, totaling $1 trillion, where is he going to get this money? And whose shoulders' is this financial deficit going to fall on? Barack Obama presented flaws in McCain's proposals for the economy, but he did not offer any specific solutions either. Walsh writes that "Obama said he favored a tax cut for the middle class, higher taxes on the rich and big corporations, healthcare reform, and taking more steps toward energy independence," but nothing direct with the Stock Market. However, each program and issue is wired together with the economy.

To answer the rhetorical questions: it's quite interesting where McCain would get this money, as Walsh reports, as he is against raising taxes. No taxes = no money. And the financial crisis is going to fall on, sadly, us; the youth, the college students, the future doctors, lawyers, bankers, the high schoolers, my kids' kids. So as these 4 weeks approach towards election time, understand each candidate and their positions that will benefit the future.

Why we are where we are

The Stock Market is on the verge of catastrophic failure as major stocks such as the Dow drops 777 points in a day, closing lower each day than it has in 4 years. The complexity of the economy is so vast that professors with doctorates in economics can barely comprehend and know all the factors that cause will economy and Stock Market to fluctuate. Predicting the outcome of the Stock Market relies upon analysis of history, and this year, history is in the making as the Global Market approaches a systematic meltdown; a crash back into the history of 1987 and the Great Depression. This immediate plunging of the Stock Market and U.S. and Global economy comes from a 10 year process of extremely risky speculation on mortgages and the housing industry, fraudulent companies, and the deregulation of banks in the United States. New proposals from the presidential candidates need to be associated with these problems that have now avalanched onto the economy so that hope for the world's market exists.

The 1987 Stock Market crash proved to be a fearful day known as "Black Monday" where, according to Jennifer Itskevich of the History News Network, "the Dow Jones Industrial Average plummeted 508 points, losing 22.6% of its total value. The S&P 500 dropped 20.4%, falling from 282.7 to 225.06. This was the greatest loss Wall Street had ever suffered on a single day." Just last Monday the Dow dropped 800 points and the S&P plunged 3%. The data is getting closer to the times it was in prior to 1987. Itskevich accounts for the 1987 crash through, "computer trading and derivative securities, illiquidity, trade and budget deficits, and overvaluation," as she follows with detailed economist quotations. But today's financial crisis expands into a global predicament as the U.S. mortgage and low housing costs have damaged the Market.

According to CQ Researcher online, Kenneth Jost writes that the giant Swiss bank USB, the "world's largest wealth management company," lost $38 billion because of risky speculation in the U.S. mortgage industry. On Wall Street, Jost writes, the investment house Bear Stearns was near bankruptcy as they only had "mortgage-based" security. JP Morgan gave an emergency loan after the Federal Reserve stepped in to give JP Morgan $29 billion of credit. "Much, but not all, of the blame for the financial dislocations at Bear and other institutions lay with the explosion of subprime mortgages: expensive, frequently high-interest loans hawked aggressively by mortgage brokers, often to speculators or home buyers with poor credit, and then packaged into mortgage securities for sale to banks or other financial institutions. Far removed from the borrowers, the financial institutions either could not or did not carefully evaluate the quality of the underlying loans." This led to hollowed out banks as they included the unpaid loans from poor credited borrowers as overseen assets. The source of the current Stock Market sprouted from the dangerous speculation of the housing market and then the crookedness of banks.

Fraudulent companies such as Enron had a significant affects on the Stock Market. After the company had crashed due to fraudulent activity, large investment companies had kept Enron's bonds which falsely raised the speculative rating of the Stock Market so that when the bonds were liquidated and worthless, the Stock Market suddenly, overall, dropped.

Deregulation for banks continued in the 1990's as lobbyists of the Republican party pressured Congress. According to CQ researcher, in 1994 the Interstate Banking Act lifts restrictions on interstate banking. Banking would become easier with other banks from other regions of the country, and so would investment banking and reaching out nationally to advertise consumers to purchase loans. The mortgage purchasing exponentially increased as banks and companies made billions of dollars of quick profits, but the consequences seen today are extreme because of the deregulation.

As banks turned into investment banks, it squeezed itself as a role in the global economy and Stock Market. These banks would pressure consumers to purchase loans way out of their paying capabilities which would generate quick cash for the banks; billions of dollars at a time. Stocks would rise and the risky speculation commenced. People would buy expensive houses with a loan in order to receive 200% profit on the house when they sold it if the housing market went up. But the housing market did not go up but in fact went down, and these often poor people could not pay the loan back; therefore walking away from it. The banks failed to recognize this lack of money and recorded it as assets to be recirculated through the banks and into consumer hands. The problem was that there wasn't any money there. Banks became hollowed out therefore Stocks declined, people panicked, and Markets fell.

What both fail to address in the regulation of banks which in turn would reverberate back to the mortgage crisis as loans will not be released so easily and instead would be based on good credit ratings. Both Barack Obama and John McCain agreed on the $700 billion bailout for consumer debt because of the naive and extremely risky speculation of the housing market and over use of loans and bankruptcy. Obama's policy on the mortgage crisis stands as urgent, and he proposes to "create a 10 percent universal mortgage credit to provide homeowners who do not itemize tax relief. This credit will provide an average of $500 to 10 million homeowners, the majority of whom earn less than $50,000 per year," as found on Obama's website. McCain only suggests to keep housing for people instead of addressing the failure of paying loans and the mortgage issue in general. "McCain is calling for aggressive federal action to help keep 200,000 to 400,000 families from losing their homes."

The election has focused on the mortgage crisis initially but then shifted to the declining Stock Market and now global economic crisis. The mortgage and banking issues are what need to be addressed in order to help stimulate the economy and Stock Market again as they are those are where the crisis began. Kenneth Rogoff, a renown Harvard economics professor, says in the British online newspaper The Guardian that the banks' have been running on taxpayers' credit, and the run is over. He theorizes that banks need regulation. "the financial industry now needs to undergo a period of consolidation and pruning. Weak banks must be allowed to fail or merge, so that strong banks can emerge with renewed vigour," Rogoff states. Jost writes in CQ Researcher that, "Subprime mortgage crisis leads to global credit crunch."

Mortgage, mortgage, mortgage. That's all I can say. The mortgage crisis is the epicenter of the entire wave of global economic meltdown. The mortgage crisis and consumer debt led to hollowed out banks, which led to a global credit crunch, with led to the declining of the Stock market, which leads to obliteration of pension plans, and the whole world is affected through the Swiss Union Bank and European Markets. Obama's economic plan is the best overall as he addresses the mortgage crisis more in depth than McCain. Obama states he, "will work to eliminate the provision that prevents bankruptcy courts from modifying an individual's mortgage payments. They believe that the subprime mortgage industry, which has engaged in dangerous and sometimes unscrupulous business practices, should not be shielded by outdated federal law." This comes as close as it will get to regulation of banks. If the mortgage issue can be fully addressed and focused, then the global economy has a significant chance of rebounding.

Scary Business

I was reading an online article from the San Francisco Chronicle today about the House and Senate passing the $700 billion bailout plan, and I saw in the article, the first words of the article, that the Dow dropped 777 points after the House initially failed to pass the bailout bill. Let me just say this: holy crap!!! 777 points in one afternoon!

ABC news reported the Dow dropping 800 points by mid-afternoon today and closing below the 10000 mark. Wow, thats even better. This has not happened since October 24, 2004 according to Alice Gomstyn and Scott Mayerowitz of the ABC News Business Unit. The Nasdaq went down 4.3% and the S&P went down 3% today. That's just in one day! "The Dow hit its lowest point of the day at 2:46 p.m., when it was down 800.06 points. What a difference a year makes. Almost a year ago, on Oct. 9, 2007, the Dow reached its all-time high closing of 14,164.53.The Dow ended today 4,209.03 points, or 29.7 percent, below that high," Gomstyn and Mayerowitz write.

But it's not just the United States proposing bailouts. As the ABC Business unit reports, Germany passed a $68 billion bailout for commercial-property lender Hypo Real Estate Holding AG and France's BNP Paribas bought 75% of Fortis' Belgium Bank after its government failed to rescue it. "Despite those efforts, overseas markets still saw significant declines," the Unit writes. Japan's Nikkei went down 4.25 percent today, Hong Kong's Hang Seng index lost 5 percent, the German DAX fell 7.1 percent, Great Britain's FTSE 100 fell 5.8 percent and France's main stock index plummeted 9 percent. This crisis, you must know, is a global crisis, not just a U.S. issue.

this is a chart of Britain's FTSE from Jan 2008 to today from the FTSE website

Going back to the Chronicle, the bailout will not help the economy at all. Even though, as they write in the article, "...the only thing worse than having a bailout would be having no bailout at all...We can't avoid a recession, but a bailout might keep the economy from falling off a cliff." But a complicated question is proposed: if we do not bailout these "wall street tycoons" what would like be like with no credit? Everyone would be affected, not just the bankers. Even state government's funds would be affected as last week, the Chronicle writes, "Governor Arnold Schwarzenegger went pleading for a $7 billion loan." And what does the bailout need to fix you ask? Why the mortgage crisis, where the entire problem began. With Secretary of Treasury Henry Paulson in control of $700 billion dollars, let's hope he knows what he is doing.

The Stock Market on the Guillotine

The U.S. Stock Market is in peril...again. The fear is real and the consequences are scary. We now know exactly how people felt prior to the Great Depression or the Crash of 1988. In the middle of the Great Depression, Congress blamed the risky speculation of commercial banks with using depositor's funds . Congress then passed the Glass-Steagall Act to regulate banks but with pressuring lobbyists, the regulation was repealed in 1999. As banks began owning brokerage firms and providing investment opportunities for depositors after the repeal of the Glass-Steagall Act, the speculation evolved into using funding illegally, creating fraud, or persisting in extremely risky speculation (CQ researcher 10-01-08 Financial Crisis "Did the lax regulationcause a credit meltdown?" by Kenneth Jost).

Mortgage firms flourished from this deregulation, and mortgage companies such as JP Morgan, AIG, and WaMu pressured people into taking the risky speculation on buying homes way out of their paying capabilites and selling with the intent to gain profit if the housing market went up. Due to the large number of people buying mortgages this way, the Stock of the company skyrocketed and more people began pouring money in to the Stock Market; investing uncontrollably in each company. But the housing market didn't shoot up as CEO's and everyone wanted who invested billions of dollars into the companies and the Stock Market. The housing market went down; slowly at first but the results impacted everyone like a meteor. For example, if the market went down "1%" and people had invested let's say $2 billion, then $20 million dollars was lost. But no one can pay this money.

The money is of loans, and banks oversaw this loss and calculated it into an asset of their banks. So the numbers say $20 million, but theres nothing there; no money at all. The bank eventually becomes hollowed out. This ripples into the Stock Market as people withdraw their money and sell stock like mad! Money pours out of the Stock Market now and what happens? You guessed it, the Market crashes. All coursing over more than a decade of unethical investments, fraud, and risk.

These banks and new companies that branched from the idea of quick money and bad ethics are the source for the near crash of the stock market. Regulation is essential more then ever as this problem serves as the balance between life and death of the U.S. economy. Education, gas, jobs, everything is wired together with the Stock Market.