Wednesday, February 18, 2009

Retail consultant says our standard of living will nosedive; Obama helps 9 million homeowners

Howard Davidowitz (a consultant to the retail industry with this site) warns that “"Worst Is Yet to Come:" Americans' Standard of Living Permanently Changed” as Americans and westerners switch from consumerism to “survival mode” including some increasing savings. Yahoo! offers a telling interview of Davidowitz with Aaron Task on Tech Ticker. The Yahoo! link, on its strike page today, is here. Watch the four minute video. Parents will not be able to afford non-public education, which may not be bad; but consumers will not be able to borrow to consume as they did.

The only way to improve standards of living again is to produce real wealth, and do is sustainably. That starts with building an infrastructure for plug-in electric car battery transfers. And it also starts with local solar and wind power, even on individual homes. It also means building an “Energy Internet”. We should have been doing this instead of inventing financial instruments to lure people into buying homes and cars they could not afford.

ING, the last major company of my “career”, has posted a loss for the entire year 2008 loss of 171 million Euros. The press release is here. ING recently received $13 billion more in bailout money from the Dutch government. Forbes has an interesting perspective by Vidya Ram, “ING Safe but Not Sound”, link here. ING has the reputation of being a very progressive place to work (for example, domestic partnership). It has not been able to escape the damage from the collapsing housing and financial markets, and seems, like almost all other large global institutions, to have competed by going along with the herd. Nobody escaped.

CNBC's video of the ING earnings is here. Numbers were "slightly better" than expected, despite the doom and gloom.

Today President Obama offered his temperate plan to help up to 9 million mortgage holders against falling home prices. The CNN story by Tamy Luhby is "Obama: Aid 9 million homeowners; Wide-ranging $75 billion plan will use government money to subsidize rates and insure servicers against falling home prices," link here. Obama, in a speech, warned that the plan would not help investors who had tried to make easy money by flipping houses (like that one character on Dr. Phil who was in debt by several million at age 23, with a wife and baby), or consumers who had been reckless. In many case, loans would be brought down to current value, with the government making up the difference. In some cases, the plan will pay loan servicers and mortgage holders for what they should do anyway (so much for "moral hazard"). Lenders may now feel incentivized to talk to borrowers before the borrowers actually become delinquent. Fannie Mae and Freddie Mac would get "help". Obama wants legislation to allow bankruptcy judges to reduce mortgage balances.

The Feb. 19, 2009 New York Times, p A16, has a graphic that explains the mortgage relief program here. The title is "The New Housing Plan: President Obama's housing plan is expected to help as many as seven million to nine million homeowners by making it easier for them to either refinance their mortgages or renegotiate payments".

Picture: Rain on the snow. Winter starts to ease.

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