My New Blog

We all need a little sugar today. The globe is in its own version of an economic wrestling smack down, but no one is pretending. Fear is driving these matches of “where do I put my money”. In the far East, the cash cow Asians are taking their money out of their stock markets and banks and putting it under their mattresses, leaving their banks and markets heading to the same unknown fate as the U. S. markets. Bankrupt Iceland is trying to set up an alliance with that big, oil rich bear….Russia. Once the frenzy subsides (and it will) our global economy will realize that we need each other. Please stop comparing our self-inflicted pain to the Great Depression. There is no comparison. After the 1929 stock market crash, the government didn't do much of anything except keep interest rates high and implement a large tax increase. During the 1930’s Europe was crippled financially still reeling from the effects of World War I. The Modern Middle East was non existent. (Can you believe that Gordon Ramsey has a restaurant in Dubai?) Asian nations did not have financial centers. And Russia? Oil was just a three letter word. The banks need to start lending to each other—that is why the Fed dropped the Fed rate—so the consumers,(that’s us), can borrow money for our businesses and the things we want or need. The fear factor is making individuals and businesses liquefy their stock and hoard their cash. There are a lot of countries that have money, including the USA. Just ask A.I. G. We bailed them out so they could spend $440,000 on spa treatments and banquets for their executives. Isn't that sweet? So where is our sugar?

FYI: As part of my personal cost cutting program, I am now back to pre-2002 wine purchases. The Grillin and Chillin box wines are back at World Market. If you put them in a decanter your friends will never know it came from a box.

DIANE GERDES

The 700 billion dollar bail outplan has the world markets on an unexpected terrifying roller coaster ride. Fear and innuendo are guiding the global stock markets that are in serious need of Prozac. Although each of us would appreciate a few million dollars and promise not to spend it on spa’s and expensive dinners like AIG did with a portion of their save –the- banks- money, our lifestyles will be affected if the banks cannot start to play nice with one other. If you are a small business, say an Arizona gnome maker in Phoenix, and your clients are in Japan, the gnomes are shipped by rail to L. A. and by ocean barge to Japan. Before the journey begins, the Japanese buyer provides a letter of credit to the Arizona gnome maker for money that will be wired to his Phoenix bank upon delivery. The Phoenix business owner takes the letter to his Phoenix bank to get credit to build more Arizona gnomes. The breakdown is between the Phoenix bank not accepting the line of credit to the gnome maker and the Japanese bank not extending the line of credit to the Japanese buyer. Suitcases of cash is not an acceptable form of payment for gnomes unless they are Colombian and the buyer is Tony Soprano.

The smart guys that devised the bail out plan left out one provision: mortgage interest rates. The mortgage rates have bounced up dramatically and the Suits are standing around with stunned looks on their faces. Dudes, move it and make some changes. The housing market will not recover if the mortgage rates are high. (Hey, I did not even go to Harvard or work at Goldman Sachs for this solution. And I always accept suitcases of cash. )

FYI: Our front yard gnomes (made in Phoenix, not Columbia) gave our SUV a going away party this week. With gas prices continuing to drop, our giant, gas loving vehicle has retained the parking place of honor in our driveway. The drawback for lower gas prices is that the push for alternative fuel is fading.

DIANE GERDES