Double dipping is not allowed!!

Since we have been talking for a long time about the financial crises and I am a business major AND I need to write more blogs, I decided to write on current events circulating the economy. 

As some of you may have heard the stock market is once again on a slight decline. After raking in profits larger than those seen in previous quarters, the market fell to an alarming point. The question up for debate became a matter of whether this was going to be a double dip recession or if it was just a low in the year. Many were pessimistic about the economy and argued it would become a double dip recession, a  phenomenon not encountered before in modern society. Graphically, a double dip recession would assume the shape of an W with one dip being the 2007-2008 hit on the stock market and the other to be determined. 

Some of factors that tormented the economy included the tsunami that hit the shores of Japan, the tornados in the United States, as well as the prolonging of summer. Furthermore the economy in Europe didn't seem to be improving much since Greece continues to need assistance to sustain itself. 

Luckily, hope was in the air and, so far, the market has been making a slow comeback. It seems as though there's money to invest, but investment aren't being made due to the lack of consumer confidence. With the unemployment rate still relatively high, consumers still haven't acquired the confidence they seek to go out and buy products. Yet, in order for the employment to be created, investments need to be made. Hopefully those in more affluential positions will draw the courage they need to push the country forward towards more prosperous times. 

Free trade is once again being acknowledge for its potential to catapult the American economy forward, but the question remains at whose cost?

Artifacts of War

Both the article on artifacts and the first chapter of The Things They Carried, emphasized the idea of symbolic artifacts. They talked a great deal on the diverse items that would be either carried with the soldiers or that would be left in remembrance of the soldiers. In both cases the intentions would be to give power to an inanimate on which to throw their worries and concerns on. Much were the horrors of death that the overwhelming emotions had to be transmitted to an exterior source in order to avoid a mental overload that would of further the consequences of the war. For this very reason soldiers, later their family members, carried with them artifacts that held the most value to them so that they would be able to exchange their negativity with some of the positivity stored up from previous experiences found with in the things they carried. Similar to this effect the relatives of the dead soldiers also found some relieve in leaving behind an artifact containing a greater good than the evil that caused the need to engrave the corresponding name in that infamous black marble.

In terms of psychology these artifacts were the saviors of sanity for many soldiers during the war and the consultants of others after the war. Each individual artifact gave a very different effect compared to others although the intents behind them shared a commonality. For better or for worse the artifacts can be seen as an act of desperation showing how agonizing war, in particular this war, can be and how severe and lasting its consequences may be. Perhaps one day we will finally learn from our mistakes and find an easier softer way to handle baffling situations.

A nation of Immigrants

This nation was founded by immigrant seeking a better life and escape from prosecution. Since the beginning of this country immigrants have always been the people of low status of their respected countries. Even the very first who landed here were in some way the minority of their previous origin and were desperate enough to try anything besides their current lifestyle. This trend has continued throughout the years and should come to no surprise that it will continue to happen so long as people remain unhappy with their current living situation and are driven by desperation.

The current immigration dilemma has, however, been altered a bit by the current recession being experienced here in the united states. The recession has left people fearful of their futures which has naturally triggered their survival modes. When this natural occurrence unfolds it leads to the unification of groups, but widens the gaps of not yet bonded ones. It is because of this that situations such as the one in Arizona are occurring. Division of groups are being created out of the uncertainty of whats to come. Nevertheless, immigrant labor is still a much needed factor if we are to have any hope of liberating ourselves of the twisted chains we've stumbled into.

Immigrants carry out some of the most degrading jobs within our countries standards which happen to be some of the most essential. Migrant labor is the foundation for the rest to metaphorically stand on and begin to rebuild with the materials at hand. Logically it would be unwise to reject their offering help and send them packing for it would complicate the feasibility of rising out of this recession.

That's not to say that boundaries need to be made to prevent treating feelings from not yet acquainted groups. Human dignity needs to be the under layer to begin the stitching of a harmonious future and that begins with the rejection of SB1070.

In regards to the SB1070

The State of Arizona currently has proposed a new bill to address their current immigration issue. Arizona has for a while been prone to an abundancy of illegal immigration due to their close approximation to the boarder. As a result, an overflow of illegal workers has been a causation of concern, specially with the current increase in employment. As an attempt to address the issue at hand bill SB1070 has made its way to the courtroom for consideration.

The bill is composed of more liberating guidelines for the apprehension of illegal immigrants. These set of guidelines ask for the cooporation of all government agencies to help enforce the immigration laws of Arizona. Such laws include the fining of illegal workers with multilevel misdemeanors with corresponding consequences. The misdemeanors range from a class 1 to a class 2 with class three qualifying as a felony. On the opposing end, employers of the detainees are subject to their own set of charges. Their charges include, but are not limited to: 1,000 dollar fine per illegal worker, five year probationary period, temporary suspension of licence to conduct business or at times permanent suspension.

The immigration laws are not of novelty in these bill what is, however, is the extent to which these laws can be practiced. With the implementation of this bill any police officer can question any person suspected of residing in Arizona without proper documentation. Although the bill clearly states that nobody can be questioned simply because of their race or nationality; it certainly does nothing to address the concern of racial profiling, for once proven guilty of false documentation any justification for integration of the alleged victim will suffice to carry on legal action.

The bill rages controversies as many find it to be a bit on the racist side. It seems understandable to have a real concern for the uncontrolled masses of illegal immigration. However, the bill only seems to suggest to double efforts by enlarging and liberalizing the current law. In my opinion, this will only serve as a tool of relief by all those who carry discontent towards the weak and vulnerable. As such I don't think this is a significant source for progression and should be reviewed for a more adequate solution to a legitimate problem.

The Inducers of the Global Financial Crisis

Parental Guidance although always recommended is not always obtained, especially to those eagerly attempting to gain recognition and acceptance. However, without a firm hand in place to direct the current into the desired direction, detours will inevitably occur. Such was the case of the ever popular American government when it lacked to oversee the production habits of its capitalist prodigies, corporations. As an attempt to encourage creativity, the U.S government freed corporations of restraint by setting itself aside. Unfortunately, this lack of guidance led to inappropriate decision making followed by fear driven efforts to conceal reality. The sum of these actions account the sequence of events leading to one of the largest economic crises in the post-modern world.

The democratic vision of checks and balances this country’s forefathers had, failed to serve its purpose when government opt for a unregulated market system. In doing so, corporations, specifically financial institutions, wittily manipulated the market to create leverage for risky investments with no concern for the consequences. Consequences occurring from these risky investments would of not been so detrimental had it not been for two catalyzing stands from the government. First off, Steve Forbes points out in his editorial “How Capitalism Will Save Us,” that “in 2004 the Federal Reserve made a fateful miscalculation… and therefore pumped out excessive liquidity and kept interest rates artificially low”(Forbes 166). In short, the combination of excess cash along with low interest rates commenced the inflation of risky investments. For the next three years this trend took its toll as the Bush administration failed to counter the formation of a bubble by elevating the value of the dollar. Had they done so it would of restrained the leverage for investors to use and therefore the risk levels they were gambling at. All in all the Federal Government committed contemporary fallacies by allowing an overflow of money into the market continuing by purposely establishing a weak dollar.

Financial institutions lacked serenity when generating fee obtaining packages in the housing market. The low value and a minimum regulations towards the financial institutions created a high demand for commodities from which houses became emphasized. Investors, being greed driven, devised diverse strategies to invest using as little capital as possible. Structured finance became the tool from which financial investors could create a system that required minimal money to sanction themselves on to larger investments. This system, nonetheless, had its drawbacks. Some of those drawbacks included high levels of risks, risks which continued as securitizations, or the selling of debt for an according interest rate, became a popular banking enterprise. Despite this, the accounting strategy of banks remained to use a market-to-market strategy that would need a readjusting of their books every time that assets fluctuated in value. Financial expert Forbes seems to agree that this is a fine principle for when the equity of the business is very liquefiable, but when assets consist of primarily securities and derivatives, as was the case in the recent credit crisis, then it drives banks into “death spirals”(167). The reality remained that a faulty accounting system combined with
governmental weakening of the U.S dollar created a black hole for positive cash flow to gravitate towards.

The bubble took form from the injection of money into the market without the proper collection of collateral damage to keep diversification of investments. Investor’s were too engaged in their gluttonous hunt for money to slow down and consider the possible set backs. Government, on the other hand, was reluctant to oversee in detail the investments being made to impose ethical boundaries. Had they reviewed the over dosage of loan contracts, a realization of the abundance of unqualified recipients would of surely raised a series of questions. Since that was not the case the accountable assets of these institutions were lacking in their liquidity. As such, when investors attempted to cash out, stock values plummeted to the point were government intervention was their only option.

Having few alternatives, the government bailed out many of these financial institutions. Having now themselves invested in said businesses, the government will indubitably be setting ground rules to prevent futurist disasters. Now is the chance, as Ralph E. Gomory suggests, “‘…to have a tax system or a set of incentives that promote what the government wants to do’”(185).

One can only hope that the government would of realized by now that key factors to healthy investments compose of restricting excessive leverage as well as nullifying market-to-market accounting. By putting a restriction on the type of leverage Wall Street has, it should eliminate the level of risks that they will be confronted with. Furthermore, eradicating the practice of market-to-market accounting should enable a more adequate calculation of firms value. Lastly, government itself needs to focus on job creation to reduce the loss of savings and homes.   

Last words on the Financial Crisis

I don't really have too much to say on the financial crisis. It's a lame situation to be in and one being felt throughout the entire world. However, out of everything bad arises something good or to be a bit more cliche, the sun must set before it rises. I think the message is that despite this "crisis" everyone is facing, there are many benefits still to come. At this point its a matter of being patient and re-assessing our values along with personal priorities. If anything this crisis can serve as a reminder how all humans really don't differ regardless of age, gender, race, or class. We are all just as fallible as the next and each of our actions no matter how big or small have an impact not just on ourselves but all those around us. That impact doesn't stop there,however, because now those people who have been impacted by our actions, for better or for worse, are now going to impact all those around them by the influence of our action on their next action and so on and so forth. Pretty soon, whether we are conscious of it or not, that action we thought no one would really care for, or wouldn't really matter has had an overwhelming effect.

It's this very concept that brought the world as a whole to a close halt. A halt that may have been needed to save us from insanity. The world was revolving around ideals from Henry Ford's times. Efficiency and speed was the name of the game and such was its success that it took its failure to bring us to realize that we've grown up a bit and a more mature game should be establish. So rather than pointing fingers and blaming one another we should rejoice at the opportunity we have standing before us. This is our time to come together, no longer as a nation, but as a world. Yes, mistakes were made, but actions towards correcting those mistakes are taking place as I'm writing this.

As a nation we have a long way to go and even further as a world, but that's what makes it so exciting. There's this road that needs paving and now is everyone's chance to go out and start paving it to the best of their ethical abilities. Each one of us now has the chance to leave their footprint on the world however they see fit. My personal recommendation would be to embrace that long unpaved road and put forth all the energy one has towards paving a good one. Why? Simple, because whatever you end up paving is what future generations will walk on and draw inspiration from till a new road is in need of work.

I am excited for what's to come for as they say what doesn't kill you only makes you stronger and personally I plan on using that strength to pave as much of that road as I possibly can for all to enjoy.

Wells Fargo Bank

Wells Fargo Bank is a Californian bank having over 100 years of existence. The institution is one of the leading companies as far as the financial sector goes. Come September 19, 2008 stocks were at $39.80 which at the time were relatively high with a promise to continue to rise. However, after partaking in the sub prime mortgage game it lost a great deal of reputation after having to deal with countless lawsuits. The New York Times stated that "Wells Fargo Bank “rode the stagecoach from hell” for a decade, systematically singling out blacks in Baltimore and suburban Maryland for high-interest sub prime mortgages." Further evidence is the fact that 71% of foreclosures under Wells Fargo were in predominantly black neighborhoods.The aftermath of their arrogance was felt particularly by March 6, 2009 as stocks hit $8.6, an all time low. Needless to say that the company received $25 billion dollars from TARP as a bailout.

Profit Margins before the crash seemed to be around 83% mid 2008 at one of its peaks. Post the recession it reach a high of about 91% and has flat lined ever since. It seems as if Wells Fargo is on the rebound. It has been lowering its accounts parables which in turn means an increments in assets, specifically liquid asset in the form of cash. It’s also the number one lender to small business increasing its owners equity which has been evident in the $0.67 dividend increase this last quarter. Those dividends then translate to about $3.8 billion net income furthering both the stock holder value and its liquid assets. Wells Fargo merge with Wachovia has also proven to be beneficial to the company as more of Wachovia’s banks are converting throughout places like Connecticut, Delaware, New Jersey, and New York.

It seems as if Wells Fargo has learned its lesson as it plans to shut down its sub prime mortgage sector. It's main focus is guided towards small business in an effort to push forward the economy. Tough times still lie ahead, but hope is still in the air as its charging on through correcting its errors of the past. Nevertheless, closer supervision is required to create a firm guided hand pointing towards the road progress and ingenuity.