[OPE] America deflating...

AP reports:

US Households' net worth fell 4.7 percent in the third quarter to $56.5 trillion as people watched the value of their homes and investments tank. It marked the fourth straight quarterly decline, the Fed said. http://hosted.ap.org/dynamic/stories/F/FED_INTEREST_RATES?SITE=OHALL2&SECTION=HOME&TEMPLATE=DEFAULT

This data is obtained from the "flow of funds" accounts data http://www.federalreserve.gov/releases/z1/Current/z1r-1.pdf which state that: "Household net worth - the difference between the value of assets and liabilities - was an estimated $56.5 trillion at the end of the third quarter of 2008, $2.8 trillion dollars less than in the preceding quarter."

So across the whole society, $2.8 trillion dollars of net asset value was wiped out in just one quarter!

Total US household assets are now estimated at $71.1 and total liabilities at $14.6 trillion, if you deduct the latter from the former you get net worth. These are the magnitudes we are dealing with now.

US net worth peaked in the third quarter of 2007 at $63.3 trillion, since which time it declined mostly, it's a decrease of $6.8 trillion. >From table B.100 http://www.federalreserve.gov/releases/z1/Current/z1r-1.pdf you can work out more precisely the decline is attributable to. The non-financial corporates and non-corporate business are taking an incredible hammering in their net worth. Notice also the decline in pension fund reserves.

Pretty soon investors will be able to buy up American businesses for a song, or at least a very competitive price, at least if they believe there's a future in the business. But this kind of conflagration will take years and years to recover from, that's the trouble. Paradoxically, while US net worth dwindles, they need even more credit, it has to come from somewhere, but where? That is the hottest topic of the moment.

"Another option the Fed has mulled: issuing its own debt, which would give the central bank cash and more flexibility to battle the financial crisis. To do that, however, the Fed would need new powers from Congress. "The Fed wants to show that it has tools and options and is not out of tricks because interest rates are very low," said Michael Feroli, economist at JPMorgan Economics. "The problems holding back the economy are fairly long lived in nature." http://hosted.ap.org/dynamic/stories/F/FED_INTEREST_RATES?SITE=OHALL2&SECTION=HOME&TEMPLATE=DEFAULT

Interestingly the US still ranks in the third slot of the world's best countries for business start-ups. CNN Money explains, using World Bank data: "The main sector in which the U.S. leads the rest of the world is labor law: hiring and firing workers is easy, and dismissing an employee costs nothing". http://money.cnn.com/galleries/2008/smallbusiness/0809/gallery.best_countries_for_business.smb/3.html

That is what the European Commission wants for Europe too.

Meanwhile President Bush, on a surprise visit to Iraq, narrowly escaped getting hit by shoes thrown at him during a press conference. Reports said an Iraqi journalist threw two shoes at Bush, with both missing him, as the U.S. president was shaking hands with Iraqi Prime Minister Nuri al-Maliki in his office in Baghdad. According to AFP, the attacker -- sitting in the third row -- jumped up and shouted: "It is the farewell kiss, you dog," before throwing his shoes at the president, who leaves office Jan. 20. The man who threw the shoes was subsequently dragged away by security personnel, reports said. CNN reported that the throwing of shoes is considered highly insulting in Iraqi culture. http://www.marketwatch.com/news/story/bush-makes-surprise-visit-iraq/story.aspx?guid=%7B7AB8D158%2DFD23%2D4644%2D98B6%2DB7DA5FD6B66C%7D&dist=TNMostRead
Jurriaan

I was drowned,I was washed up and left for dead.
I fell down to my feet and I saw they bled.
I frowned at the crumbs of a crust of bread.
Yeah, yeah, yeah
I was crowned with a spike right thru my head.
But it's all right now, in fact, it's a gas!

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Received on Sun Dec 14 17:24:54 2008