The economic collapse of the USA and therefore the rest of 'the world as we know it' seems inevitable. It's not a matter of if, but of when. Increasingly that 'when' looks likely to be this northern hemisphere winter.

The global financial system has been held together by string and sticky plasters for some years now and finally the hens appear to be coming home to roost... Only another war is going to get George W. Bush and his cronies out of the coming major recession, maybe! Or then again it could be deliberate "demand destruction" to mitigate against Peak Oil and Climate Change, to protect the investments, money and power of the global financial elites.

Whatever it is it's going to be a wild ride....

Hang on tight


Below is taken from FTWs news post on 11th October 2005

[China pulls very few punches here and this public statement about Beijing’s tea leaf reading pulls few punches. It was kind of them to estimate a collapse in a year or two instead of right now. Had they said right now it might have started a dollar run before China could liquidate holdings at the top of the bubble. Now, before the winter cold hits and energy shortages become more than an inconvenience, the two key signs we should watch for are a Chapter 11 filing by GM (likely) and any moves by other countries to liquidate dollar holdings.

Critics and skeptics are quite right that a Chapter 11 filing is only for reorganization. But it would also allow GM – if the courts permit it – to dump all of their pension obligations off on the US Treasury and the Pension Benefit Guaranty Corporation which is already insolvent. Don’t think of the damage caused by weakened GM shares. Think of what happens when millions of pension checks stop flowing. At least two airlines (Delta and Northwest) are dancing around that same move right now. – MCR]

It's time to take seriously a US-led global recession

By Lau Nai-keung 
2005-10-06 07:37 
China Daily

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

I think it is time that we should take a serious look at the possibility that the US is going to take us down towards a worldwide recession in one or two year's time.
It is well known that the US is the world's biggest economy, taking up about 30 per cent of global GDP, but it is now also the world's biggest debtor country. According to the most authoritative person on this subject, the US Comptroller General David Walker, who audits the federal government's books, the tab for the long-term promises the US Government has made to creditors, retirees, veterans and the poor amounts to US$43,000 billion, US$145,000 per US citizen, or US$350,000 for every full-time worker.
And this figure does not even take into account all the personal debts such as credit card bills and mortgages. With a low interest rate of 1 per cent running for the past three years in a row, savings plummeted to just 1.8 per cent last year, below 1 per cent since January and at zero in the latest estimate from the Bureau of Economic Analysis. In 2000, household debt broke 18 per cent of disposable income for the first time in 20 years. Credit card debt alone averages US$7,200 per household.
The US Government indebtedness is financed this way: The US now runs a trade deficit roughly 6.5 per cent of its GDP and the gap is widened every day. Its citizens are spending ever more on foreign goods, and with the US dollar as the international currency, the US Government just prints money to finance the deficit. And with this money, central banks in the surplus countries purchase most of the US Treasury bonds as currency reserve.
By now, Japan is the largest creditor of the US Government, and the Chinese mainland has been a fervent buyer for the last few years. As for Hong Kong, most if not all of our reserves are in US dollar denominated assets. The US Government in turn uses this foreign borrowed money to finance as much as 90 per cent of the federal deficit which stood at US$412 billion last year. The federal deficit is expected to be running at about US$2 billion a day at the moment.
Put it simply, the Americans have been living way beyond their means for much too long. On top of this, the Bush Administration is cutting tax at least three times while fighting an expensive war in Iraq, which has already cost the country US$700 billion, and currently progressing at US$5.6 billion per month. Now the US economy is dependent on the central banks of Japan, China and other nations to invest in US Treasuries and keep American interest rates down. The low rates keep American consumers snapping up imported goods.
Any economist worth his salt knows that this situation is unsustainable. This includes the country's economic guru driver Alan Greenspan, who recently warned his countrymen that the federal budget deficit would hamper the nation's ability to absorb possible shocks from the soaring trade deficit and the housing boom. Now he may have to add two more worries: soaring oil prices and cyclones.
The US is now clearly in huge trouble, economically, socially, politically, and internationally. The Bush Administration bungled big in cyclone Katrina's aftermath in New Orleans, and then a minor rerun from Rita in Houston, and this will trigger the general outburst of people's dissatisfaction with the government, leading to great internal turmoil lasting for many years. In all likelihood, long-term interest rates are going to rise, and the greatest property bubble the world has witnessed is going to burst in the next one to two years.
The countdown is in progress, and there is no way that anybody can do anything to reverse it either by short-term measures such as fiscal and monetary policy, or through long-term reform of tax policy, entitlement programmes and even the entire federal budget. This is as inevitable as gravity, and it will take place under a new and inexperienced chairman of the Federal Reserve Board. I do not want to sound alarmist, but I see very bad omens.
To make things simple, let us just examine some key economic issues raised by some economists:
What if the dollar plummets? Do stocks follow? How about pensions?
What if interest rates soar? How would all the new homeowners, who stretched to buy with adjustable and interest-only loans, cover their mortgages?
How would consumers with record credit-card debt make their payments? Would they stop buying? Stop taking vacations? What will happen if they go bankrupt? New rules going into effect later this year make it harder on such debtors.
How would a government, which depends on the taxes of a strong economy to operate, keep all its promises?
To us, the good news is that when the country is in deep trouble, the US will not have the energy to pick on China. Even when it is necessary to start another war to divert people's attention, it would pick one much smaller in size and weaker in strength, like Iran. This will provide a much more amicable environment for China to make good use of its "period of strategic opportunity" till 2020 for the country to pass through a turbulent zone between per capita income of US$1,000-3,000.
But in the short term, now the US not only sneezes, and all symptoms indicate that it is going to suffer from a SARS-like trouble, the whole world should take extra precaution not to get infected. One thing is for sure, some time in the not too distant future, every central bank and institutional investor is going to dump US dollar and US Treasury bonds. Once, when a country like South Korea dumps the dollar, the still unsold US Treasuries in the asset column of Asian central banks - US$2,000 billion according to some estimates - will collapse. The cheapened dollar will cause a sudden jump in the US inflation, which forces the Fed to jack up interest rates. A giant leap in inflation will cause a severe recession, or perhaps a depression, in the US. These countries' exports to America will dry up, which in turn will spread the global economic downturn like wildfire.
After the stampede, everybody is going to get hurt, not least the central bank of China, and the Hong Kong Monetary Authority, which are major US creditors and with the US as their number one export market. The recent currency reform of the RMB is most timely, and it is about time we should do something about the Hong Kong dollar. At the same time, China should make extra efforts to rekindle internal consumption, and diversify its market really fast before the great US bubble bursts.

(HK Edition 10/06/2005 page2)


[It still looks like the US economy is headed for a major crash this winter as we’ve been saying all year. The fourth quarter is only eight days old and we have yet to be told, or to feel, the full impact of the hurricanes on energy production while politicians and business writers talk only about refineries instead of the massive rig and pipeline destruction that they conveniently omit from their coverage. Lesser-noticed stories are now talking about ten years before full Gulf production is restored and then they are shy about stating that full production will ever be restored. The new refinery bill, jammed through the House yesterday, will have no impact for at least ten years. It will hand out a lot of money to oil companies and ease their operating costs. The new bankruptcy law, passed this summer and much harder on both corporations and individuals will take effect on October 17 th and it’s now beginning to look like GM may file for Chapter 11 before the 17 th also.
Recently the US Department of Justice raised questions as to whether GM’s pension funds were solvent and disputed GM’s accounting. A corporate bankruptcy lawyer recently told me that GM is probably planning on entering Chapter 11 before the 17 th so that it might dump its pension obligations on the Pension Benefit Guarantee Corporation (PBGC). What the press won’t tell you is that the PBGC has been insolvent for almost two years. We reported that to you in “Crossing the Rubicon”. The first casualties of the crash will be major pension funds. After that the mutual funds will start showing weakness. Then the floodgates will open as the energy realities start to hit home for all of us with the winter cold.
 There are two key tipping moments that should start the big crash this winter. The first key moment is the October 17 th start date for the new bankruptcy laws. The second key moment will arrive with this winter’s cold. The US is currently in the grace period when summer heat has diminished and the cold has not begun. We already know that natural gas and heating oil prices are soaring. I’m not saying it’s certain that GM will file before the 17th but if it were me, I’d bet on it. Remember the old saying, “As goes GM, so goes the nation.”
It’s also likely that we’ll see several major companies file before the 17 th as well. – MCR]

Delphi files for bankruptcy

By David Bailey
Sat Oct 8, 8:52 PM ET

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

Auto-parts maker Delphi Corp. (NYSE:DPH - news) filed for bankruptcy on Saturday, hurt by high wage and benefit costs. It was the biggest bankruptcy filing in U.S. automotive history and promises to have a broad impact across the industry.
The largest U.S. auto parts supplier, as expected, filed for Chapter 11 protection in U.S. Bankruptcy Court in New York. Subsidiaries outside the United States were not included.
The Troy, Michigan-based company has struggled since it was spun off from former parent General Motors Corp. (NYSE:GM - news) in 1999, posting net losses of $741 million in the first half of 2005 alone. It had sought financing from GM and sharp cuts in wages and benefits from the United Auto Workers union to restructure unprofitable U.S. operations.
The Chapter 11 filing for reorganization potentially allows steep cuts in wages, benefits and jobs to go forward without the UAW's approval, marking a big setback for the trade union. The filing is also likely to deepen financial woes at GM, which shares many of the problems that drove Delphi into Chapter 11.
"We are going to be taking a hard look at every line of business," Delphi Chief Executive Steve Miller said.
Delphi , which makes almost every component found on a car, has about 185,000 employees worldwide. It has about 50,600 employees in the United States, including 25,200 represented by the UAW.
Recent UAW reports that Delphi proposed cutting wages by more than half to $10 or $12 per hour were "directionally correct," Miller said.
"I've been saying from day one that we need to be competitive with other suppliers or we will simply go out of business," Miller said.
He spoke of "a significant reduction" in U.S. employment but declined to be specific.
Delphi 's filing listed assets of $17.1 billion as of August 31 and debts totaling $22.17 billion. It had revenue of $28.6 billion in 2004, including $12.7 billion from GM in North America.
The parts maker said it expects substantial cuts in its U.S. manufacturing operations. It plans to finance operations with $4.5 billion in debt facilities, plus other financing lines.
Delphi has arranged for $2 billion of debtor-in-possession financing from a group of lenders led by Citigroup Inc. (NYSE:C - news) and JPMorgan Chase & Co. (NYSE:JPM - news).
Delphi 's bankruptcy is among the 15 largest since 1980, based on rankings on the Web site.
Delphi said it plans to emerge from bankruptcy in early to mid-2007, after substantially cutting U.S. manufacturing operations and modifying labor agreements to reduce wages and benefits.
Under terms of its spinoff, GM may be liable for pension and retiree benefits for UAW workers at Delphi, though analyst forecasts of the cost to GM have varied broadly in the range of billions of dollars.
Analyst David Healy of Burnham Securities said GM will probably continue to get parts from Delphi on time, but the bankruptcy's financial impact on the automaker "should run into several billion dollars."
"It's not going to kill GM, but it's certainly not welcome," Healy said.
GM said the Delphi restructuring could "create operating and financial risks for GM," but added that the filing did not necessarily make it liable for post-retirement health-care and pension benefits for Delphi employees.
The range of exposure extends from potentially no material impact if guarantees are not triggered to $10 billion to $11 billion at the high end, with amounts closer to the midpoint more possible than either end, GM said in a statement.
The UAW called the filing "an extremely bitter pill."
UAW Vice President Dick Shoemaker noted that just a day before the filing, Delphi increased severance packages for 21 top executives, citing a need to make them more competitive.
"It's another classic example where 'uncompetitive' means that those people at the highest level get more, those that aren't fortunate to be at the highest levels get less," Shoemaker said.
Delphi hired Miller, a turnaround specialist, as chief executive and chairman in July with an aim of restructuring outside bankruptcy with the help of GM and the UAW. However, the transaction proved too complex, Miller said.
Bankruptcy law allows a debtor to seek the rejection of labor contracts and impose wage and benefit cuts, but in most cases issues are resolved before a company asks a judge to take that step, said Miller. He previously served as nonexecutive chairman at bankrupt auto parts maker Federal-Mogul Corp. (OTC BB:FDMLQ.OB - news) and as chief executive of Bethlehem Steel.
The filing tops out a rocky year for Delphi, which probed accounting improprieties that forced out its former chief financial officer and five other executives and led to financial restatements and probes by federal regulators.
Delphi is the third large U.S. parts supplier to file for bankruptcy protection in 2005. Auto interiors producer Collins & Aikman Corp. (Other OTC:CKCRQ - news) filed in May and auto-body frames producer Tower Automotive Inc. (Other OTC:TWRAQ - news) filed in February.
(Additional reporting by Ilaina Jonas in New York and Poornima Gupta in Detroit)
Copyright © 2005 Reuters Limited.


As Delphi Goes, So Goes G.M.?

October 11, 2005

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

Watch out Detroit, you could be next.
That is the warning for domestic automakers from Robert S. Miller Jr., the straight-talking chief executive of Delphi, who took his company, the nation's biggest maker of auto parts, into bankruptcy protection last weekend.
In an interview on Monday with reporters and editors at The New York Times, Mr. Miller, who uses Steve as a first name, predicted that General Motors and the Ford Motor Company could find themselves following Delphi into bankruptcy court in the next few years unless they take drastic steps to reduce their own labor costs. Mr. Miller said his company would do what it could to prevent more bankruptcies in the industry.
But Mr. Miller, sounding like the Oracle of Delphi, made clear that he believed that the major auto companies were now engulfed in the same industrial turbulence that had forced the revamping of the steel and airline industries with which he was intimately familiar.
"This is not just a Delphi issue, this is an auto industry issue," Mr. Miller said, "and has to be dealt with" by G.M., Ford and Chrysler, a division of DaimlerChrysler. "I am very concerned about what happens to the Big Three. It is an incredible watershed for the entire industry as we head into the future."
Given Mr. Miller's track record at companies like Bethlehem Steel, Morrison-Knudson and Federal-Mogul and his status as a director at UAL, the parent of United Airlines, his words need to be heard, said Michael Useem, a professor at the Wharton School of Business at the University of Pennsylvania.
"If he has concluded the problems of Delphi are endemic to the industry," Mr. Useem said, "that would say, 'pay attention.' "
Mr. Miller vowed to inflict "minimal collateral damage" on G.M. "We need them as a customer," he said. "I shudder at the thought that the collapse of Delphi would trigger the collapse of G.M," adding that he did not think G.M. was in imminent danger of bankruptcy.
But Mr. Miller made it clear that Delphi would shrink severely. He said that by the end of the bankruptcy, the company, which has annual sales of about $28 billion a year, could end up with around $20 billion. He cautioned that the figure was only a rough estimate.
Most in danger are plants producing basic parts that can be built more cheaply overseas, he said, while Delphi wants to protect those that make complex components like instrument panels and electronic systems.
Delphi, a division of G.M. until 1999, sought bankruptcy protection in federal court in New York on Saturday, in the largest Chapter 11 filing in the history of the automobile industry.
G.M. represents roughly half of Delphi's business, and about 4,000 Delphi workers have the right to return to G.M., meaning that the company would be responsible for their wages and benefits, including pension and health care costs, on top of its own liabilities.
G.M. has estimated that its cost from a Delphi bankruptcy could be as much as $11 billion. Today, G.M. shares fell $2.81, to $25.48, in the first day of trading after the filing.
Delphi's decision to seek bankruptcy protection came after the company held weeks of negotiations on a rescue plan with both G.M. and the United Automobile Workers union, which represents 34,000 workers at Delphi plants in the United States.
On Saturday, the union's president, Ron Gettelfinger, denounced Delphi's move as an "extremely bitter pill" and vowed to protect workers' interests. Mr. Miller, however, said he believed that U.A.W. officials would be realistic about the problems he faced in turning Delphi around.
"The union knows that life is changing and all we've been debating is at what speed do these changes take place," Mr. Miller said.
The Delphi situation puts intense pressure on G.M. to win cuts from the U.A.W. in the next set of contract talks, scheduled for 2007. "If they come to a contract that is the same as they have now, they're finished," Mr. Miller said.
That makes the result at Delphi even more critical, said Martin King, an auto industry analyst with Standard & Poor's. Yesterday, S.& P. cut its rating on Delphi's debt to D for default.
"This is a unique event," Mr. King said of Delphi. "It's clearly going to have implications for companies other than Delphi."
In one nod to the U.A.W., Mr. Miller said Delphi would not seek emergency pay and benefit cuts, called interim relief, which bankruptcy law allows if a company can prove it cannot survive otherwise.
Instead, Mr. Miller said Delphi would try to negotiate cuts with the U.A.W. before asking a judge for permission to set aside union contracts and impose lower wage and benefit rates.
Over the weekend, Delphi said that it wanted to conclude those discussions by mid-December. Otherwise, the company is prepared to ask that contracts be terminated and seek a court hearing by mid-January.
If no deal can be reached, a judge can impose the cuts, and the U.A.W. can strike at Delphi. But Mr. Miller said he did not believe U.A.W. officials would allow that.
"I believe they are realistic and responsible people and they do not want to risk the chaos that will come from rejection," Mr. Miller said. A spokesman for the U.A.W. did not return calls seeking comment.
Nearly every union at airlines that have filed for bankruptcy this decade agreed to wage and benefit cuts, rather than have them imposed. Once in bankruptcy, many companies also move to terminate their retirement plans and replace them with less-generous programs, a step taken by United Airlines and US Airways.
On Monday, Mr. Miller said he intended to work with the union to try to preserve Delphi's pension plan, which like those at the American auto companies is severely underfunded.
But Mr. Miller made it clear that U.A.W. members - whose compensation is worth $65 an hour including wages and benefits such as pensions and health care - would have to give up something else to keep their plans. He also said that any deal must ensure Delphi's eventual profitability to enable the company to survive over the long run.
Delphi officials say they may aim for wages and benefits of $20 to $25 an hour, similar to what is paid at other parts makers in the United States.
Mr. Miller said that in bankruptcy, Delphi would be able to sharply reduce a big contribution to its pension plans that is coming due next year.
Before it filed for bankruptcy, Delphi said that it would have to put $1.1 billion into its employee pension fund in June 2006; it has borrowed money for that purpose. But Mr. Miller said that he believed the bankruptcy code allowed Delphi to reduce the size of the contribution to $160 million. The remaining $1 billion "can be paid later," he said. He said he expected no objection from the lenders. It was not clear, however, whether federal regulators would accept that approach. By law, companies that promise pensions are required to set aside enough money to pay them, following a predetermined schedule. Skipping or unilaterally reducing pension contributions can sometimes bring on an enforcement action.
In the end, Mr. Miller said, the U.A.W., led by Mr. Gettelfinger, faces some difficult choices trying to do the best it can for current workers and retirees.
"If the union says, 'No, I don't want to give on wages and benefits' and we come to some kind of compromise where we are breakeven instead of profitable, then you can kiss the pension plan goodbye," Mr. Miller said.
"This is a trade-off," Mr. Miller said, "not because I wanted to put Ron Gettelfinger on the hot seat. He is on the hot seat. I can't solve it. I can't protect what everyone wants to have."
Mary Williams Walsh contributed reporting from New York for this article.


When Bankruptcy Becomes Personal

By Michelle Singletary
Sunday, October 9, 2005; F02

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

If you're overwhelmingly in debt, you are not alone.
If you're screening every telephone call to avoid dealing with your creditors, you are not alone.
If you've finally decided to file for bankruptcy protection, you are not alone.
On that last point, perhaps it will ease your shame to know that bankruptcy filings for the period from April 1 to June 30 of this year were the highest in history for a single quarter, up 11 percent, according to the Administrative Office of the U.S. Courts.
The overall quarterly increase was fueled by consumer Chapter 7 filings, which rose 17.7 percent, to 362,481 from 308,028, for the second quarter of 2004. Under Chapter 7, a person's assets are liquidated, except those exempted by law, and debts are wiped away. Such cases are usually simple. The average filer doesn't even appear before a judge.
This recent surge in bankruptcy petitions is largely attributable to consumers scrambling to file before the new, tougher Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 takes effect Oct. 17.
"We are having a spike in filings such as I have never seen in 23 years of practicing bankruptcy law," said Kevin C. Gleason, an attorney from Hollywood, Fla.
How tough is the new law? Debtors will be required to get credit counseling before filing. They will have to pass a means test in order to file under Chapter 7. Otherwise, they must file under Chapter 13, which requires debtors to pay back some of their debt over a five-year period. Overall, debtors will be scrutinized much more closely than before.
With the new law approaching, I thought it was appropriate to recommend for the Color of Money Book Club "Surviving Personal Bankruptcy: Your Guide to the Personal, Legal, and Financial Issues" by Nora Raum (Gotham Books, $20).
This isn't so much a how-to book but a primer on the bankruptcy process. Raum describes the ideal bankruptcy candidate and lays out alternatives to declaring yourself broke. The book also includes the latest changes in the bankruptcy law.
Remember, I told you you're not alone. Raum opens most chapters with stories of the rich and famous who have filed for bankruptcy. For example, did you know Burt Reynolds filed for bankruptcy? Milton S. Hershey, the chocolate bar king and the man responsible for my spreading hips, went bankrupt -- twice. Tammy "Stand By Your Man" Wynette filed for bankruptcy. Talk show host Larry King also filed.
"Bankruptcy is a mystery to most people," writes Raum, who has practiced law for nearly 20 years, specializing in personal bankruptcy. "They hear the word now and then, usually in connection with some huge corporation. But they have no idea what it means to people like them. They need basic information to help them decide if bankruptcy might be right for them."
So how do you know if you may need to consider bankruptcy? Here are some telling signs, according to Raum:
• You have no idea how much you owe. "A client will tell me in the initial interview that she has around $20,000 in credit card bills," Raum writes. "But when everything is added up, that figure will sometimes be close to twice that amount. People don't really want to know how dire their situation is."
• You have too many credit cards. "Nobody needs three credit cards from Capital One," she says.
• You write checks when you know you don't have the money in the bank.
• You're hiding debt from your spouse. "If you're rushing to pick up the mail before your wife can get to it, you already know you're in trouble," Raum says.
It helps that Raum is an attorney. She sprinkles the book with firsthand knowledge of how the system works. There's a useful checklist of questions to ask during your meeting with an attorney. There's a section on pre-bankruptcy do's and don'ts. For example, if you're about to file for bankruptcy, don't even think about making last-minute charges on those credit cards you should have cut up long ago.
Overall, this is an easy read for a hard life-decision.
Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and online at


GM stock tumbles on Delphi news
Bankruptcy filing punishes GM stock, Delphi securities as investors scramble for the exits.

October 10, 2005: 12:34 PM EDT

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

NEW YORK (CNN/Money) - General Motors stock tumbled Monday along with Delphi Corp. stock and bonds on news that the auto parts maker had filed for bankruptcy over the weekend.
Delphi , the nation's biggest auto parts maker,
filed for protection under Chapter 11 of the federal bankruptcy laws Saturday after warning for months that a filing was likely. In Chapter 11, a company is protected from creditors while it works out a plan to reorganize and pay its debts.
GM (down $1.29 to $27.00, Research) shares sank about 5 percent in early trading on the New York Stock Exchange.
GM, which spun off Delphi in 1999, may be on the hook for pensions and benefits of Delphi employees that could total as much as $11 billion, the automaker said in a statement over the weekend.
Delphi (down $0.64 to $0.48, Research) shares tumbled as well, losing about half their value in morning trading after a delayed opening.
Delphi bonds also tumbled in Monday over-the-counter trading, Reuters reported.
Bondholders often get just a fraction of their original investment when a company reorganizes in bankruptcy while shareholders are usually wiped out.
Delphi's bankruptcy filing was the biggest in U.S. automotive history and promises to have a broad impact across the industry.
For example, the chances that GM will have to file for bankruptcy are now up to about 30 percent, according to one industry analyst, following the Delphi bankruptcy filing. (
Full story).
The analyst, Rod Tadross at Banc of America Securities, estimated that GM's retirement liabilities are now up to about $6 a share, as the automaker warned it could be on the hook for up to $11 billion in contract obligations to its former employees at Delphi. (
Full story).
Delphi, based in Troy, Mich., has struggled since it was spun off from former parent General Motors in 1999, posting net losses of $741 million in the first half of 2005 alone. (
Full story).
Another auto parts supplier, Dana, also took a hit from an accounting scandal.


A Doozie of a Recession

By Stephen Pizzo, News for Real
Posted on October 5, 2005, Printed on October 11, 2005

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

Of course George W. Bush will blame it all on the war and two hurricanes. In fact, it's a direct result of his own flawed economic policies and the "borrow and spend" lifestyle he sparked, not only within government, but consumers as well.
I am referring to the looming recession. It's going to be a doozie. And it has begun, as it always does, when consumers suddenly discover they can no longer keep pace with their bills.
That would have happened a couple of years ago already, had it not been for the housing bubble. Like all bubbles it was ordinary folk who eagerly fueled the Ponzi, an inverted pyramid sure to topple once it became top-heavy. As with all previous bubbles, everyone crushed by that inevitable collapse figured they were too smart to get caught by it. They figured they'd be well out of Dodge with the booty long before that happened.
So they bought homes bigger than they needed, and each time rates dropped or prices jumped in their area they refinanced, pulling a bit more booty out each time; for a pool, landscaping, or a new car. They had time. The economists said there was no bubble, prices were going up because of natural demand, not speculation. And so they stayed in Dodge. They let it ride, they let it all ride on successive spins of the wheel of fortune.
But now the hot housing market has begun to cool. Prices in the hottest markets have flattened. Houses listed for sale have grown as those who waited too long rush to cash in. Days on the market are marching upward as buyers become increasingly scarce.
That's only one indication that the end is near for George W. Bush's phony recovery -- a "recovery" bought with tax cuts he cannot repeat, and with consumer spending fueled by borrowed money, which is no longer available. Hell, consumers may not even be able to make good on the money they've already borrowed. The indicators indicate that is so:
The percentage of overdue US credit card accounts jumped to a record in the second quarter as gasoline prices surged, the American Bankers Association said. Consumers had more trouble making payments on personal, auto and home-equity loans during the three-month span, the bankers group said. Delinquencies on these loans, collectively, rose to 2.22 percent from a revised 2.03 percent in the prior quarter, the group said. Delinquencies on home-equity loans increased to 2.75 percent of all such loans, up from a revised 2.61 percent. Delinquency rates for indirect auto loans, which are made by auto dealers and held by banks, increased to 2.08 percent from 1.87 percent the previous quarter. Those for direct auto loans gained to 2.07 percent from 2.04 percent.
This is a particularly bad time for consumers to be tapped out. It comes at the beginning of the holiday spending season which can account for nearly half of many retailers income for the year. It comes just as gasoline prices reach European levels, hitting low-wage workers hardest, especially if they have to commute to work. It comes just as the first chills of winter begin spreading south from Canada and as heating oil and natural gas prices spiral to unheard-of highs.
Here's where it starts:
Credit Card Minimum Payments on the Rise
San Diego, CA (PRWEB) October 4, 2005 -- The minimum payments that credit card companies charge on a monthly basis are increasing. For credit card customers that either pay their bill in full every month or those that can afford substantially more than the minimum, this isn't going to be an issue and could even be benefit to them. For the approximately 40 million people that only pay the minimum, however, this could be devastating.
When the recession can no longer be denied, the President will blame it on 9/11, the war he started, the hurricanes and the disruption in energy production they caused. Like Michael Brown, he will blame everyone and everything, but himself.
But we know.
Stephen Pizzo is the author of numerous books, including "Inside Job: The Looting of America's Savings and Loans," which was nominated for a Pulitzer.