Don’t be fooled by ‘upbeat’ news

Matthew Sommer Albemarle County
Published: April 30, 2008

The Business article of April 17, “Quarterly results upbeat; stocks surge higher,” is a perfect example of “pumping.”

Nearly every finance company, JP Morgan-Chase included, is reporting terrible quarterly results, yet a vice president of a trading company is cited calling them “strong earnings” and recommending buying.

This is self-serving, like real-estate agents advising “a great time to buy.” Citigroup, though, recently advised clients to move away from U.S. investments.

Serious analysts are writing articles every day on the growing losses that banks are still facing from the steadily increasing defaults in mortgages, home equity loans, car loans and credit cards, and how rising unemployment and falling home prices will keep adding to these numbers.

According to the Web site marketwatch.com, foreclosures are spreading from the working class into the middle class as companies lay off employees, struggling to contain rising costs amid decreasing revenue.

Estimates are for 200,000 layoffs in the high-paying finance industry alone in the next 12-18 months.

The federal deficit, estimated to be around $400 billion for 2008, was already at $311 billion halfway into the fiscal year, which started Oct. 1, 2007, and the $165 billion stimulus package has yet to be added in; while corporate tax payments are down 16 percent.

None of the presidential candidates will be able to fund their extravagant promises.

The outrageous national debt and deficit spending have caused the dollar to fall drastically, and expensive bailouts will make it worse.

This is increasing the cost of food and fuel dramatically.

The mistaken popular concept is that these problems, caused by excessive debt-financed personal and public spending, can be solved by yet more debt spending.

But the basic mathematical principle is that you cannot spend significantly more than you earn year after year, without end.

Locally, rising homelessness and decreased charitable giving are the first signs of trouble. On the other end will be decreasing alumni donations to the Univer-sity of Virginia. UVa, and the rest of our local economy, are heavily dependent on state and federal funding, easy financing and cheap credit. 

Combine this all for a picture of how our local economy will be affected.