The story that dominated the headlines and the media last week was whether the Detroit Auto makers should be bailed out or not.
By now you know that the bill did not pass the Senate and now it is up to the President to decide if the auto makers are going to receive a bridge loan from the failing TARP fund, which is the money from the big and historic $700 Billion bailout of the financial institutions.
I'll reserve my comments on this subject for later.
I just wanted to point out that while the automotive bailout was the topic of economic conversation there was some more startling news that you should be aware of.
First, there has been much comparison to the Great Depression regarding the Country's current economic condition and one of the arguments that those who say this is nothing like the Great Depression like to use is that there has not been as many banks going out of business now as there was during the Great Depression.
Well, while everyone was wondering should the Detroit 3 get a bailout, 2 more banks were closed down Friday, bringing the number of U.S. banks to fail this year to 25.
That along with unemployment numbers, the disappointing retail numbers as well as many other numbers should be enough to get your attention. But the numbers that really got the attention of economist all over the world and have them shaking their heads in disbelief is the erosion of American household wealth.
The Federal Reserve reported that in the third quarter alone American households had ...
$647 billion in real estate losses
$922 billion in stock market losses
$523 billion mutual funds losses
$128 billion private business losses
$653 billion losses in life insurance and pension fund reserves!
That is $2.8 TRILLION in lost wealth. Think about this, that is four times more than the Treasury's entire $700-billion bailout program. These are the worst losses ever recorded.
This is why I have been saying for quite some time that no matter how many billions the government spends trying to rescue the economy, trillions more is being wiped out in retirement accounts, mutual funds, stocks and bonds, and real estate, and that check mates the efforts of the government.
It is important that we take a realistic view of what is taking place in the economy today and ask crucial questions because getting the right answers could mean the difference between maintaining and growing your wealth or possibly losing it.
2009 is going to present us with some very serious questions ... let's hope we're prepared to answer them.
