You got to explain this to me: what toxic assets?

I have been listening to talks about toxic assets for three years and I still don't get it. Please help!
I always thought that the idea of bundles (you link a lot of good houses with one or two risky-toxic ones) was very good: it is the way to go because it limits the risk.  Also, we all know that the price of houses can level or fall because it happens every time that an average house costs more than two median salaries can afford. I know that: it was a big problem when I was still in Paris in the 80s. So of course bankers take that into account.
I have been in school long enough to know that you can estimate how much risk you can take, and banks do that every day, so what happened? I read that the banks did not care because they insured their risk.
Fair enough.
Now it is the insurance's business to estimate risk. How are they going to make money on your life if they don't know when your prostate is likely to lose its ... its spongicity? They got tables, they push a button, and they know how much of a risk you are. Estimating the risk is what they do for a living, right? And they are widely used to the theory of bundles: they bundle the risk of a hurricane in coastal zones with the risk of tornadoes inland. It is their profession to estimate the risk and to bundle it to their advantage. It is all about statistics, whether you buy, or sell, or if you are a a banker and in the end, even more so if you are an insurer.
So, if you would stop throwing to my face words like greed and toxic assets, which look like they explain the crisis but don't, and tell me what really happened,  I would be grateful: I don't get it. There are always toxic assets, being in life insurance or in housing or in car insurance. That is what estimating risk is about. I am under the disquieting impression that we are treated like a bunch of idiots. It is simple: I want to know who cheated.

Survival Skills

This country was built by people who had good survival skills. The skills were transmitted by parents to children at a time when there was no school.
Nowadays the basic skills we need are not so different, though they apply to the city jungle: we still need to learn how to handle a budget, especially if we are poor, and how to find a job, especially if we do not have a job.
A number of jobless people around here, in Savannah GA, have very good working skills, mainly in housing jobs (electricians, plumbers, carpenters who have suffered from the economic downturn), and I am surprised to see how many of them have no survival skills: they do not know how to manage a smaller budget, what is the best time to show up for a job, how to dress for a job interview, when to ask for a letter of recommendation, or even how to manage food stamps.
How come?

I am almost out of it!

New Sacrifices? Lower Salaries? or New Aims?

Please follow my reasoning before jumping in the air:
1) I am all for sacrifices when they are required and lowering salaries to keep one's job. Got to do what we got to do.
2) I am all in favor of other countries doing better, specially in the third world. If young people in the Islam world had a job, we would have less suicides and less terrorists. Peace comes with opportunities, criminal minds are forged in despair with the money of some misfits. It means that I am against protectionism: historically, it never did us any good.
3) Nobody has demonstrated that if we are more miserable, the other countries will do better for it. In fact most economists do not believe that. So let us encourage the others countries to go up, that is good for everybody, but do not let us go down: it is bad for everybody.
4)Illegal immigration is a new form of slavery: it is cheap work and no taxes and no rights. I am against it. It is just as immoral as slavery. But I am against the hypocrisy behind it all: how come these guys find jobs? Who gives them jobs? We should be clear: we still need the work of a lot of immigrants that are here: then they should have the same rights as anybody. It is better to give a tax relief to some categories of employers than to close our eyes on illegal immigrants because the American employers could not pay their social security. And the rest should not be here as a constant menace for security and the organization of society. If nobody lied about this, it would be easy to solve. All that talk about punishment and rewarding illegality is jazz. It is millions of people. Let us solve this.
5) I strongly believe that a person working hard for 8 hours a day should have enough money to survive. If you work, you should not wear the stamp of poverty. I found a good site where you can see how much money you need in any state. Verify here:
http://www.livingwage.geog.psu.edu/
You select your location, the number of people you are responsible for, and they give you a number. It is not complicated. Survival money should be the basic salary: in many places, it is not..
6) How come so many people have to work two jobs? Because businesses are in for the money. It is their legal responsibility to bring as much money to the stockholders as they can. We are a bit between a stone and a hard rock: communism we do not want because it does not work and brings endless miseries of all kinds (including the death of democracy), on the other hand capitalism is only about greed. Today's capitalists who say that everything works out in the end do not take into account the cost of human misery; they are a bit like the 19th century priests in Europe claiming that workers suffer now to get paradise in the end.
7) So we need businesses and industries to develop a conscience at the same time as they come out of the economic mess. There have been many examples in the past and until now of a conscience in small to big firms, and some have been the stuff of legends like Hershey or Ben and Jerry. But they became legends because they were the exception.
8) We need to look at the new list of Fortune 100 best companies to work for and study these companies to come up with a chart of business morality.
Then we need to teach it in business schools and try to enforce it: it is not just about money. It is about avoiding to create another generation of business people who behave like psychopaths, because that is what they learn in business schools.
9) The time to do that is now: we must regain ethics at the same time as we regain customers. Waiting for the economic recovery hoping that we can ameliorate workers situation "later" is a pipe dream.These steps have to work out together.
10)We should also look in our own closets. How come we spend so much time on TV and in our lives talking about obesity rather than talking about our own kids? What kind of society is this with one million children abused and neglected every year, and thirty million people who take illegal drugs regularly?

Too young, too old, no experience, lacks skills, overskilled?

Unemployment was for most of my life much larger in European countries than in North America. So, here, you had a chance to hear that you were skilled and good to work with, whereas in Europe, finding a job has always been an unpleasant journey.
This unpleasantness is coming to America.
I was too young at 25 and too old at 40. I have been lacking experience, and an instant later I was told I was overskilled. And soon enough, my skills became obsolete. Then I was a "woman" and I was going to get pregnant (it is not legal to say it any more, don't imagine they do not think it any more). And if you are part of a minority, disabled, or just a small size person, your prospect is worse even if that does not have anything to do with the position you apply for. Handling rejection can be tough: you got to think it has nothing to do with you while always trying to get better at obtaining a job: it is a fine line.

I always found work, though. I would say it is because:
1) I am pretty sure I am good at what I do.
2) I am obstinate: I kept trying.
3) I am not picky: a little money is much more than nothing, and a small job away is better than no job here.
4) I have been very lucky.

There was a neat discussion of unemployment numbers in the Curious Capitalist. If you wonder how so many people are unemployed and do not even look for a job, think of it this way: it is like arthritis, one gets used to it, because it is a human skill of survival to get used to bad things. In cases like this, it can be deadly: I have seen friends losing appreciation for how to dress for a job, when to get up for a job, how to talk to the boss and how to look for a job altogether. So it is best to keep trying.

Domino effect in Savannah, GA

In the relatively small town where I live, Savannah GA, there are more and more signs of recession.

• Like everywhere else, houses stopped selling. We did not get very anxious about it, as housing around here had gone up much faster than salaries: this can only go on for so long.

• The neighbors at the fringe of society in our neighborhood disappeared: the mom who was on drugs, the couple who "worked to drink", the entire household of some freshly installed students that we suspected of selling drugs.

• The new commercial building, pretty and well located, did not rent. It is usual for old business locations to stay empty for a year, but for a new building, it is surprising.

• Places that had little excuse for survival started going, going and were gone. such as the Linen and Things specially designed for people much older than me (I am almost 70 years old: it does not leave many customers of an older generation), the fast food which was always dirty, the fabric store where the manager hated all her customers, the antique shop which was filled with expensive junk, the restaurant where nobody ever greets you. They are gone, it may be sad, but it is healthy.

• We lost the very nice couple next door and their five kids. They both worked in construction, lost their job the same day and could not pay the rent. In six months, unemployment in Savannah has gone from 4.7% to 6.0 %. Construction, manufacturing, leisure and information are hit.
  

• Shops that I really liked disappeared, the nice small Mexican restaurant just slightly out of the way, the great little store of wine and cheese, who went from fair business to loosing money for the last five months.

• Smart places are in trouble like the elegant extended stay hotel nearby, the best restaurant, the gallery owner.

• LOWES sent me a card offering me 10 dollars if I spend $25.
  

• A friend of mine lost his job in the local newspaper... but we made it in the New York Times with a sad story and a beautiful picture.

Spending more to fix the economy?

One one hand, we get called names for using too much credit, and that killed our economy. On the other hand, we are supposed to spend more to support the economy because we do not spend enough and that kills the economy.

It does not make sense. Ah, wait a minute! The US Gross Domestic Product is about 14 trillion dollars a year, about the same as the European Union and twice as much as China. But most of it is made of services (79% compared to 19.8 for industry and 1.2 for agriculture). What is services? Everything not included in the two other categories: transport, health care, finance, retailers, etc). It means that over three quarters of the economy is built on our capacity to spend: buy or rent houses, dresses and books and go to the movies and end up in a restaurant. It has been decades now that businesses look for more stuff to put in our hands, from hoola hoops to cell phones. They calculate a shorter and shorter lifetime for everything we buy to force us to buy the same thing again, be it a house, a computer, a car or a refrigerator. then of course we need credit to buy the stuff. And businesses outsource and import to make more profit. So our industrial capacity disappears.

Unhappily, the more unemployed and poor retirees like me, the less we spend and the economy shrinks. This US economy: the one that is more built on spending than on building.
So the real solution is not for the government to throw a trillion dollars around, it should be to get more industry in the US. Let us get back to a 30% industry and agriculture: that is the real wealth of a country. Working and creating before spending.

Anti recession feast for two ($15, 5 minutes)

With all this talk about a big depression, I had a need for a little feast. Not much money does not have to be not much fun.

Candlelight dinner for two:

$ 7: unpeeled shrimps (here in GA in this season, you get a lot for that price). I heat moderately a spoon of olive oil in a pan, add a lot of garlic and a pinch of paprika (you may use some pepper if you prefer; this is not to be done with peeled shrimps of course, it would kill the taste), I throw in my shrimps and cover. Turn them over once. Cut the heat as soon as they are red, leave in covered pan.
$ 3: CA chardonnay Bay Bridge not too cold, excellent for the price.
$ 2 to 3: Two cups of jasmine rice served with half a lemon (If you have any, you may add a touch of saffron, but it is beautiful white). Or a pack of Traders Joe multigrain pilaf: it heats in its pack for two minutes in the microwave and it is splendidly flavored.

$ 1: a chocolate bar cut in two with a cup of good coffee or excellent tea.

And before you ask me, no I do not spend that much money every day, but I always eat well.

Beer, the recession and the great depression

The economy is on life-support said Mike Whitney in Global Research (globalresearch.ca) six months ago, on June 2, 2008. But the National Bureau of Economic Research (NBER) has been waiting until today (Dec 1st) to declare us in a recession and estimate that the recession is in fact celebrating its first birthday today. It is very nice to hear that on the news because now a lot of people think that they are so much smarter than the NBER itself and we all need a little morale boost.

I think that this group is much too serious: they look at so many complex indicators that they get confused. They should follow the beer market. Even for somebody who has little passion for the economics of beer, it is obvious that the beer market has been in trouble. And if people start buying less beer, isn't it a sure sign of recession?

At random, from the news feed that fall on my desktop, here are a few signs:

1.- Anheuser-Busch has an early retirement program for 1,000 employees (Jeremiah McWilliams, Retirement day at Anheuser-Busch,12.01.2008)

2.- The company that distributes Budweiser to downtown Kansas City, went on strike Monday. (James Dornbrook, Kansas City Business Journal,12.01.2008)

3.- Heineken's S&N hit by consumer downturn (Latest Business News from Times Online,UK, 8.22.2008)

4.- Cobra put on sale by beer peer Bilimoria (Times Online,UK, 11.24.2008)

5.- Some small brewing company had to close its doors in Spain (I cant remember where I read that); I also know that small breweries complain in Texas.

All this, if you pardon the pun, has been brewing for a long time. The signs were there on Wall Street.

So I propose that we get a beer composite index, we call it BCI to look serious and it will tell us early that we are sliding into a real depression.

PS Please look at my list of uplifting movies (Dec on the right or click movies), I gave it my best.

A trillion dollars?

I did not know we were that rich!
So whatever Washington and Wall Street do, we are in for a few depressed years. Economy has momentum, just like a ship: you can give it the right orders, it still takes time to shift direction.
So what are you going to do? Here is my plan:
- change all bulbs to fluorescent to spare on the electric bill
- get the heater/air conditioner cleaned
- buy an electric blanket
- get new spark plugs to pay less gas and better group my outings
- wax the car to keep proud of it
- buy rice in bulk, freeze a few expensive items for feasty days
and RIDE THE WAVE.
What about you?