William K. Tabb
By Rand Clifford
06 October, 2008
While compulsory lying, distractions and inane diversions reduce our fourth estate into corporate government’s fifth column, it seems omission is the key tactic so solidly embedding mainstream corporate media into an exploiter of the people. Americans remain well informed regarding celebrities, entertainment, sports and weather—but when it comes to information people need to vote intelligently, understand what corporate government is really up to, or understand environmental issues, corporate media is little more than special-interest propaganda. And when it comes to the complex relationship of the nation and its citizens to the 95% of global population that are not American…strategies such as omission perpetuate the fossilized notion of “we’re number one” being all that Americans really need to know.
So what if instead of subjugating, dividing and stupefying the the people, corporate media actually lived up to its noblest reason for being and served the peoples’ best interests? What might be some of the headlines we’d see, and the essence driving them?
Closed-door session of the House prompts representative outrage, leaks
(March 13, 2008) The House of Representatives held only its sixth closed session since 1812, and the first since July 1983, when it secretly discussed U.S. support for the Contras in Nicaragua. The publicly stated reason for the recent closed session was for members to discuss new citizen surveillance provisions. However, conversations off the record have indicated that the meeting was primarily about nine key issues:
1) the imminent collapse of the U.S. economy to occur by September 2008
2) the imminent collapse of U.S. federal government finances by February 2009
3) the possibility of civil war inside the USA as a result of the collapses
4) advance round-ups of “insurgent U.S. citizens” (those opposing the New World Order) likely to move against the government
5) detention of those rounded-up at “REX 84″camps constructed throughout the USA
6) possibility of retaliation against members of Congress for the collapses
7) the location of “safe facilities” for members of Congress and their families to reside during expected massive civil unrest
8) the necessary and unavoidable merger of the United States with Canada (for its natural resources) and Mexico (for its pool of cheap labor)
9) the issuance of a new currency – THE AMERO – for all three nations as the proposed solution to the upcoming economic Armageddon….
Imagine how much the above information would help people understand the enormity of, and better navigate lies blooming around the following:
Constitution violated, U.S. infantry troops to be deployed on U.S. soil starting October 1
The “Raiders”, First Brigade Combat Team of the Third Division, are now under the command of US Army North, the Army’s component of NorthCom—the Pentagon’s northern command, which was created after 9/11 to defend the US “homeland” and aid local, state and federal authorities. Posse Comitatus was an act passed by Congress on June 16, 1878, which prohibits federal uniformed services from being deployed on non-federal property to maintain “law and order”….
Under the Constitution, federal armed forces are banned from law enforcement on home soil. So much for Posse Comitatus—as with so many Constitutional protections being stripped to “protect” the people. And now, amid all the scripted and pacifying rhetoric, as from 1st BCT’s Commander, Col. Roger Cloutier, an ominous picture is forming.
“I can’t think of a more noble mission than this,” said Cloutier, “…to take care of citizens at home…and depending on where an event occurred, you’re going home to take care of your hometown, your loved ones. It makes me feel good as an American to know that my country has dedicated a force to come in and help people at home.” And, “I don’t know what America’s overall plan is—I just know that 24 hours a day, seven days a week, that there are soldiers, sailors, airmen and Marines that are standing by to come and help if they’re called.”
“Take care of? Help?” 1st BCT, the “Raiders”—they are an elite killing force of 4000 troops, the first brigade to be deployed in Iraq three times. Fresh from kicking down doors and arresting insurgents before taking them to internment camps, they are now being trained to use the first ever nonlethal package the Army has fielded. “It’s a new modular package of nonlethal capabilities,” said Cloutier, referring to crowd and traffic control devices designed to subdue the unruly and dangerous without killing them.
“Helping”, “taking care of”, “protecting” and more…wholesome euphemisms fogging the simple reality that Americans are FINALLY starting to wake up, and are going to need military kinds of subduing without killing them. With conditions of deepening economic crisis, the growing chasm between working Americans and the obscenely wealthy who control the government is becoming a threat to political stability that existing political framework cannot contain. Though the 1st BTC is scheduled to be deployed domestically for one year, their replacements are being groomed for permanent deployment on a larger scale.
Corporate government is demonstrating their true allegiance by so transparently maneuvering to protect the defacto ruling wealthy elite from righteous indignation of working people as the nation is destroyed from within. Does American government consider the people little more than a contemptible—and dangerous—nuisance now that the greatest transfer of public wealth up to the wealthy elite in history…is history? Consider this missing headline:
U.S. troops and recruits quizzed about willingness to shoot friends and family members
Soldiers recently returning from Iraq reveal that U.S. troops are being trained to conduct domestic round-ups and confiscate guns, and being quizzed about shooting American citizens—including their own friends and family members—as part of a long-standing program to prepare for the declaration of martial law….
For 15 years military chiefs have been assessing whether U.S. troops would be prepared to round up, disarm, an possibly shoot Americans who disobey orders during a national state of emergency. Origins of this can be traced back to an October 1994 Marine questionnaire out of the Twentynine Palms Marine Base in California. Recruits were asked 46 questions, including whether they would kill U.S. citizens who refused to surrender their firearms.
Pastors and other religious representatives are being groomed into secret police enforcers who teach their congregations to “obey the government” in the run up to martial law, property and firearm seizures, mass vaccination programs and forced relocation.
The following missing headline answers questions regarding citizen relocation:
Over 800 American concentration camps are fully operational and ready for prisoners
These camps are to be operated by FEMA (Federal Emergency Management Agency) following declaration of martial law (at the stroke of a Presidential pen plus the Attorney General’s signature on a warrant)….
While currently empty, all camps are staffed and manned by full-time guards, standing ready to receive U.S. prisoners who disagree with the government. Like Nazi extermination camps, many of the FEMA camps have Red/Blue lines:
Red List – These are enemies of the New World Order. Two weeks before martial law they could be taken from their homes and flown to camps for immediate extermination. Generally, these are people in leadership roles or other public positions.
Blue List – Also enemies of the New World Order but not necessarily leaders. After martial law these people could be rounded up for “re-programming” in the camps. Survivors will be used mostly for slave labor.
Omissions such as mentioned here—a comprehensive list would be enormous…even one covering just the last eight years. Such a list includes: obvious and repeated federal election fraud; truth about 9/11 and its coverup; truth about our illegal wars of aggression; truth about the current bankster coup and the trillion-dollar taxpayer drop in the bailout bucket which will largely go to foreign investors to avert lawsuits against fraudsters such as Secretary of the Treasury, Henry Paulson; truth about the scuttling of the United States as a sovereign nation to make way for the corporate/fascist New World Order….
The main theme in omissions always orbits crucial truth people need to know, truth the ruling elite want suppressed. As it stands now, the more truth involved, and the more important that truth to the American people, the more likely a story is to be omitted.
We’ve come far down this road to oblivion, hustled along by lies, fraud, deception, distraction, fiendish exploitation of our own pathetic gullibility…and omission. How might we shatter the gullibility?
Imagine the American people…imagine us turning around and marching back toward truth. Can we still save the Republic, still save ourselves? The Big Bailout just blew us miles further, down the road.
By PAUL CRAIG ROBERTS
America has become a pretty discouraging place. Americans, for the most part, will never know what happened to them, because they no longer have a free and responsible press. They have Big Brother’s press. For example, on September 28, 2008, a New York Times editorial blamed the current financial crisis on “antiregulation disciples of the Reagan Revolution.”
What utter nonsense. Every example of deregulation that the New York Times editorial provides is located in the Clinton Administration and the George W. Bush administration. I was a member of the Reagan administration. We most certainly did not deregulate the financial system.
The repeal of the Glass-Steagall Act, which separated commercial from investment banking, was the achievement of the Democratic Clinton Administration. It happened in 1999, over a decade after Reagan left office.
It was in 2000 that derivatives and credit default swaps were excluded from regulation.
The greatest mistake was made in 2004, the year that Reagan died. That year the current Secretary of the Treasury, Henry M. Paulson Jr, was head of the investment bank Goldman Sachs. In the spring of 2004, the investment banks, led by Paulson, met with the Securities and Exchange Commission. At this meeting with the New Deal regulatory agency tasked with regulating the US financial system, Paulson convinced the SEC Commissioners to exempt the investment banks from maintaining reserves to cover losses on investments. The exemption granted by the SEC allowed the investment banks to leverage financial instruments beyond any bounds of prudence.
In place of time-proven standards of prudence, computer models engineered by hot shots determined acceptable risk. As one result Bear Stearns, for example, pushed its leverage ratio to 33 to 1. For every one dollar in equity, the investment bank had $33 of debt!
It was computer models that led to the failure of Long-Term Capital Management in 1998, the first systemic threat to the financial system. Why the SEC went along with Paulson and set aside capital requirements after the scare of Long-Term Capital Management is inexplicable.
The blame is headed toward SEC chairman Christopher Cox. This is more of Big Brother’s disinformation. Cox, like so many others, was a victim of a free market ideology, itself a reaction to over-regulation, that was boosted by academic economic opinion, rewarded with Nobel prizes, that the market “always knows best.”
The 20th century proves that the market is likely to know better than a central planning bureau. It was Soviet Communism that collapsed, not American capitalism. However, the market has to be protected from greed. It was greed, not the market, that was unleashed by deregulation during the Clinton and George W. Bush regimes.
I remember when the deregulation of the financial sector began. One of the first inroads was the legislation, written by bankers, to permit national branch banking. George Champion, former chairman of Chase Manhattan Bank, testified against it. In columns I argued that national branch banking would focus banks away from local business needs.
The deregulation of the financial sector was achieved by the Democratic Clinton Administration and by the current Secretary of the Treasury, Henry Paulson, with the acquiescence of the Securities and Exchange Commission.
The Paulson bailout saves his firm, Goldman Sachs. The Paulson bailout transfers the troubled financial instruments that the financial sector created from the books of the financial sector to the books of the taxpayers at the US Treasury.
This is all the bailout does. It rescues the guilty.
The Paulson bailout does not address the problem, which is the defaulting home mortgages.
The defaults will continue, because the economy is sinking into recession. Homeowners are losing their jobs, and homeowners are being hit with rising mortgage payments resulting from adjustable rate mortgages and escalator interest rate clauses in their mortgages that make homeowners unable to service their debt.
Shifting the troubled assets from the financial sectors’ books to the taxpayers’ books absolves the people who caused the problem from responsibility. As the economy declines and mortgage default rates rise, the US Treasury and the American taxpayers could end up with a $700 billion loss.
Initially, the House, but not the Senate, resisted the bailout of the financial institutions,whose executives had received millions of dollars in bonuses for wrecking the US financial system. However, the people’s representatives could not withstand the specter of martial law and Great Depression with which Paulson and the Bush administration threatened them. The people’s representatives succumbed as they did during the New Deal.
The impotence of Congress traces to the Great Depression. As Theodore Lowi in his classic book, The End of Liberalism, makes clear, the New Deal stripped Congress of its law-making power and gave it to the executive agencies. Prior to the New Deal, Congress wrote the laws. After the New Deal a bill is merely an authorization for executive agencies to create the law through regulations. The Paulson bailout has further diminished the legislative branch’s power.
Since Paulson’s bailout of his firm and his financial friends does nothing to lessen the default rate on mortgages, how will the bailout play out?
If the $700 billion bailout is based on an estimate of the current amount of bad mortgages, as the recession deepens and Americans lose their jobs, the default rate will rise. The $700 billion might not suffice. The Treasury will have to go hat in hand to its foreign creditors for more loans.
As the US Treasury has not got $7, much less $700 billion, it must borrow the bailout money from foreign creditors, already overloaded with US paper. At what point do America’s foreign bankers decide that the additions to US debt exceed what can be repaid?
This question was ignored by the bailout. There were no hearings. No one consulted China, America’s principal banker, or the Japanese, or the OPEC sovereign wealth funds, or Europe.
Does the world have a blank check for America’s mistakes?
This is the same world that is faced with American demands that countries support with money and lives America’s quest for world hegemony. Europeans are dying in Afghanistan for American hegemony. Do Europeans want their banks, which hold US dollars as their reserves, to fail so that Paulson can bail out his company and his friends?
The US dollar is the world’s reserve currency. It comprises the reserves of foreign central banks. Bush’s wars and economic policies are destroying the basis of the US dollar as reserve currency. The day the dollar loses its reserve currency role, the US government cannot pay its bills in its own currency. The result will be a dramatic reduction in US living standards.
Currently Treasuries are boosted by the habitual “flight to quality,” but as Treasury debt deepens, will investors still see quality? At what point do America’s foreign creditors cease to lend? That is the point at which American power ends. It might be close at hand.
The Paulson bailout is predicated on cleaning up financial institutions’ balance sheets and restoring the flow of credit. The assumption is that once lending resumes, the economy will pick up.
This assumption is problematic. The expansion of consumer debt, which kept the economy going in the 21st century, has reached its limit. There are no more credit cards to max out, and no more home equity to refinance and spend. The Paulson bailout might restore trust among financial institutions and enable them to lend to one another, but it doesn’t provide a jolt to consumer demand.
Moreover, there may be more shoes to drop. Credit card debt could be the next to threaten balance sheets of financial institutions. Apparently, credit card debt has been securitized and sold as well, and not all of the debt is good. In addition, the leasing programs of the car manufacturers have turned sour. As a result of high gasoline prices and absence of growth in take-home pay, the residual values of big trucks and SUVs are less than the leasing programs estimated them to be, thus creating more financial problems. Car manufacturers are canceling their leasing programs, and this will further cut into sales.
According to statistician John Williams [ http://www.shadowstats.com/section/commentaries ] who measures inflation, unemployment, and GDP according to the methodology used prior to the Clinton regime’s corruption of these measures, the US unemployment rate is currently at 14.7 per cent and the inflation rate is 13.2 per cent. Consequently, real US GDP growth in the 21st century has been negative.
This is not a picture of an economy that a bailout of financial institution balance sheets will revive. As the Paulson bailout does not address the mortgage problem per se, defaults and foreclosures are likely to rise, thus undermining the Treasury’s estimate that 90 per cent of the mortgages backing the troubled instruments are good.
Moreover, one consequence of the ongoing financial crisis is financial concentration. It is not inconceivable that the US will end up with four giant banks: J.P. Morgan Chase, Citicorp, Bank of America, and Wachovia Wells Fargo. If defaulting credit card debt then assaults these banks’ balance sheets, who is there to take them over? Would the Treasury be able to borrow the money for another Paulson bailout?
During the Great Depression of the 1930s, the Home Owners’ Loan Corporation refinanced one million home mortgages in order to prevent foreclosures. The refinancing apparently succeeded, and HOLC returned a profit. The problem then, as now, was not “deadbeats” who wouldn’t pay their mortgages, and the HOLC refinancing did not discourage others from paying their mortgages. Market purists who claim the only solution is for housing prices to fall to prior levels overlook that rising inventories can push prices below prior levels, thus causing more distress. They also overlook the role of interest rates. If a worsening credit crisis dries up mortgage lending and pushes mortgage interest rates higher, the rise in interest rates could offset the fall in home prices, and mortgages would remain unaffordable even in a falling housing market.
Some commentators are blaming the current mortgage problem on the pressure that the US government put on banks to lend to unqualified borrowers. However, whatever breaches of prudence there may have been only affected the earnings of individual institutions. They did not threaten the financial system. The current crisis required more than bad loans. It required securitization and its leverage. It required Fed chairman Alan Greenspan’s inappropriate low interest rates, which created a real estate boom. Rapidly rising real estate prices quickly created home equity to justify 100 percent mortgages. Wall Street analysts pushed financial companies to improve their bottom lines, which they did by extreme leveraging.
An alternative to refinancing troubled mortgages would be to attempt to separate the bad mortgages from the good ones and revalue the mortgage-backed securities accordingly. If there are no further defaults, this approach would not require massive write-offs that threaten the solvency of financial institutions. However, if defaults continue, write-downs would be an ongoing enterprise.
Clearly, all Secretary Paulson thought about was getting troubled assets off the books of financial institutions.
The same reckless leadership that gave us expensive wars based on false premises has now concocted an expensive bailout that does not address the problem, which will fester and become worse.
By Kristin Roberts
WASHINGTON (Reuters) – The United States has asked Japan and NATO allies who have refused to send troops to Afghanistan to pay the estimated $17 billion needed to build up the Afghan army, according to U.S. defense officials.
The push to quickly increase the size of Afghanistan’s army and spread the cost of the initiative underscores the financial and military strain the war has placed on the United States and NATO members, many also operating in Iraq and elsewhere.
“The faster we get the (Afghan army) to the size and strength they need to be, the less they depend on us for providing security, and God knows we operate far more expensively than the Afghan national security forces do,” said Pentagon press secretary Geoff Morrell.
“At a minimum it’s going to cost $17 billion. That’s a hefty price-tag and someone’s got to pay it,” Morrell said.
“This may be one of those cases where countries that have had a reluctance to contribute forces, in particular combat forces, may be able to take part in this mission through a financial contribution to the development of the Afghan National Army.”
The new Pentagon push to share costs more widely reflects a realization among U.S. officials that some allies simply will not put troops into the war despite heavy pressure from Washington – something Europe has been telling the United States for more than a year.
But it also threatens to create just the type of two-tiered NATO alliance that U.S. Defense Secretary Robert Gates warned against early this year.
FIGHT, OR WRITE A CHECK
Gates in February said NATO risked a split between allies willing to “fight and die” and those who were not.
Morrell last week cast it as “those who fight and those who write checks.”
The NATO mission in Afghanistan will be discussed later this week at a meeting in Budapest. It will be the last NATO meeting of defense ministers during the Bush administration and Gates, who has repeatedly and publicly chided allies for two years to put more resources into the war, is expected to press the issue of cost sharing.
The meeting comes as the Bush administration conducts a comprehensive review of its strategy in Afghanistan, where security has steadily deteriorated despite a doubling of foreign troops over two years. Britain’s commander in Afghanistan, in fact, has said the war against the Taliban cannot be won.
U.S. officials said NATO was not conducting any parallel review, although the senior commander has just submitted an updated and secret list of troop and equipment requirements.
The United States has 33,000 troops in Afghanistan. About 22,000 are part of NATO’s force of nearly 48,000 troops. The United States contributes the most troops by far among allies, followed by Britain with about 8,000.
Commanders say they still need three more brigades, or about 10,000 to 12,000 troops. Those troops will most likely come from the United States next year, Morrell said.
The Afghan army plans to double in size to 134,000 soldiers over five years at a cost of $17 billion to $20 billion, according to estimates from U.S. officials.
The United States has already approached Japan about paying part of that bill. But Morrell said the request was made to Japan’s previous government, whose prime minister abruptly resigned in September, and that the request may have to be made again to the new government in Tokyo.
He did not say what other countries were asked to pay.
(Editing by Anthony Boadle)
Financial crisis pummels stocks
Investors have not been bowled over by government intervention
World stock markets have plunged after government bank bail-outs in the US and Europe failed to stem fears of slower global economic growth.
London’s key UK share index lost 7.85% – its biggest percentage fall since 1987 and in Paris the Cac-40 suffered its largest fall on record.
On Wall Street, the Dow Jones fell below 10,000 points for the first time since 2004.
Earlier, Asian stocks had taken a hammering from investors.
A failure of government intervention to improve banks’ willingness to lend had left markets anxious, said analysts.
This was despite a $700bn (£398bn) US bank bail-out being passed late last week, and efforts by several European countries including Germany and Denmark to boost confidence in their banks.
“The Fed’s bail-out plan may have been passed on Friday but so far there’s been no real reaction in credit markets and because of this the natural assumption is going to be that the measures won’t work, even if such a call is rather premature,” said Matt Buckland of CMC Markets.
In an attempt to reassure investors, the President’s Working Group on Financial Markets, said on Monday that it was moving quickly to exercise the new powers it had been given as part of the Wall Street rescue package.
The group, which was formed after the 1987 stock market crash, said it would move “with substantial force on a number of fronts”.
As one of the first effects of the rescue plan, the Federal Reserve announced that it would start paying interest on the reserves that banks are forced to deposit at the central bank.
Analysts said that Germany’s increased 50bn euro ($68bn; £38.7bn) bail-out of Hypo Real Estate, the country’s second-biggest commercial property lender, had alarmed investors.
Germany earlier appeared to announce an unlimited guarantee for private savings – though later said this was not the case and had instead given only a “political commitment” that savers would not lose deposits.
However, Denmark had already moved to offer full protection, while Sweden massively increased the level of protection it offered.
The Hypo RE rescue came amid other developments including:
- Iceland’s government offered unlimited guarantees on savers’ deposits. It had earlier agreed measures for the country’s banks to sell off some foreign assets in an attempt to shore up its entire financial system.
- Trading in shares of Benelux bank Fortis was suspended – the day BNP Paribas took a controlling interest in the troubled finance group under an emergency deal with the Belgian and Luxembourg governments
- Central banks across Europe – including the ECB and Bank of England – offered more than $74bn to banks in short-term loans in separate efforts aimed at trying to making cash available for the banking sector.
- International Monetary Fund managing director Dominique Strauss-Kahn said Europe needed a collective response to the financial crisis and warned countries not to act alone.
- Spanish Prime Minister Jose Luis Rodriguez Zapatero and French President Nicolas Sarkozy arranged meetings with the heads of their respective country’s main banks to discuss the global financial crisis – and said the two leaders would meet later this week.
In London, the FTSE 100 index was down 391.1 points, or 7.85%, at 4,589.2 – having lost 8.5% at one point.
Germany’s Dax index lost 7.39%, while France’s Cac-40 index dropped 9.04% – its biggest one-day fall since the index was created in 1988.
On Wall Street, the Dow Jones index pulled back some losses but was still 4.05% lower, down 418.39 points, at 9,906.99 points, while the Nasdaq lost 4.93%.
Earlier, Japan’s Nikkei index had closed down 4.3%, or 465 points, at 10,473.1 – its lowest close since February 2004. Hong Kong’s Hang Seng index slid 5%, while key Russian markets slumped by 15%.
Markets in India, China, Australia and Singapore also lost ground, while the main Indonesian market lost 10% – the biggest one-day fall on record.
Trading on key stock markets in Brazil and Russia was temporarily suspended after share prices plummeted by 10% and 15% respectively. Russia’s RTS index ended 19.1% down.
The prospect of a slowdown denting energy demand saw oil prices fall further, dipping under $90 a barrel.
In London Brent crude dropped $3.38 to $86.87 a barrel, while US light, sweet crude fell $3.85 to $90.05 a barrel.
UNDERSTANDING THE FEDERAL RESERVE
CREATING MONEY FROM NOTHING
Main Street and Wall Street both better be bracing for layoff because they are coming. I talked about that a bit in Jobs Contract 9th Consecutive Month.
Mass Layoffs Rise
One measure of future unemployment can be found by looking at mass layoff announcements. These are mass layoffs that have been announced, and are coming down the road, but are not yet reflected in the unemployment numbers. Please note that U.S. September Job Cuts Rise 33% From Year Ago, Challenger Says
Job cuts announced by U.S. employers climbed 33 percent in September from a year earlier, led by reductions at computer- and automakers, according to a private placement firm.
Firing announcements rose to 95,094 last month from 71,739 in September 2007, Chicago-based Challenger, Gray & Christmas Inc. said in a statement today. Hewlett-Packard Co., the world’s largest computer-maker, said last month it would eliminate 24,600 jobs, accounting for much of September’s increase, Challenger said.
Economic data continues to suggest the Credit Crunch Has Reached Critical Mass and is rapidly picking up steam. Unemployment is poised to soar still higher. There is no driver for jobs, nor will the misguided $700+ billion bailout plan of Paulson provide any.
Bracing for U.S. Corporate Budget Cuts
BusinessWeek is is talking about Bracing for U.S. Corporate Budget Cuts
William P. Lauder was already adjusting his corporate budget for a tough holiday season. Then the financial crisis hit. Amid the turmoil, the Estée Lauder Cos. (EL) chief executive stopped at a Denver mall and found it practically empty. Now he’s preparing for the worst. “We always do scenario planning, but not to the degree that we are doing now,” says Lauder. He’s asking each brand manager at the New York cosmetics giant three questions: “What must you have? What would you like to keep going? And what can you give up?”
Faced with squeezed credit and unpredictable sales, U.S. companies are bracing for budget cuts that could be far-reaching, painful, and in some cases unprecedented. Even before September’s turmoil, Moody’s Economy.com predicted that corporate operating expenses—a proxy for budgets—would rise, on average, no more than 7% annually through 2012 across 59 industries, down from several consecutive quarters of double-digit gains.
A mediocre outlook has suddenly grown worse. “Just in the last two days, I have had clients rethinking not only their 2009 budgets but all the way to 2011,” says Anthony D. Begando, founder and CEO of Tenon Consulting Solutions in Alpharetta, Ga. On Sept. 25, Rite Aid (RAD) CEO Mary F. Sammons cited “the growing uncertainty of this economy” when announcing a $50 million cut in capital spending over the next six months.
Among the costs coming under immediate scrutiny are marketing and new construction. AT&T (T) and General Motors (GM) have already slashed their 2008 marketing budgets amid tough economic conditions. On Sept. 15, Visa (V) consolidated its ad account from four agencies to one to save money next year. Casino companies scrapped several high-profile expansion projects over the summer.
Faced with such instability, some executives feel it’s more prudent to jettison troubled businesses than to fix them. Consumer-product maker Newell Rubbermaid (NWL) now plans to dump $500 million of low-margin products, such as $10 plastic garbage cans, reversing a previous plan to turn them around. Newell CEO Mark D. Ketchum says it’s the best strategy, given the tough road ahead. “Two words come to mind when I think of 2009—difficult and volatile,” says Ketchum.
The most painful trim, of course, is in payroll. Many executives expect layoffs to be swifter and deeper than before, accompanied by pruned salaries and bonuses for those who remain.
Shotgun Marriages and Bankruptcies
The recently announced shotgun marriages and bankruptcies are going to cost tens of thousands of high paying and or high benefit jobs. Here is a partial list.
- Merrill Lynch (MER) and Bank of America (BAC) merger.
- Lehman bankruptcy
- Washington Mutual and JPMorgan (JPM)
- Citigroup (C) and Wachovia (WB), OR Wells Fargo (WFC) and Wachovia (WB)
Expect to see more mergers, more bankruptcies, and more layoffs as a result of mergers and bankruptcies.
Hewlett-Packard Co., the world’s largest computer-maker, fired a massive warning shot announcing it would eliminate 24,600 jobs, signaling it will not be just financial activities that are affected.
This holiday season is going to be a dismal one. Expect to see reduced profit margins and cutbacks in hours worked between now and Christmas. Those who supplemented income by working two jobs or by working overtime during the holiday season will find reduced opportunities this year. Expect to see more store closings in January as the shopping center economic model continues its slow death.
Commercial real estate, the last main bastion of job creation, is now crashing. There is no other source of jobs other than health care, and health care alone cannot fuel this economy.
Brace for massive layoffs as they are coming.