5 Big Lessons From The Lehman, Global Economy Meltdown - Canadanewsmedia
Connect with us

Economy

5 Big Lessons From The Lehman, Global Economy Meltdown

Published

on


It’s been a decade since Lehman Brothers went bust and the global economy was gobsmacked. What have we learned? The most obvious lesson is that greed is not good.

Everyone from home flippers in Florida to high-powered Wall Street traders hawking crappy mortgage securities were in on this avarice avalanche. I know because I had a front-row seat starting in 2007 when I was writing a column for Bloomberg News. My book Cul-de-Sac Syndrome summarized some of the debacle.

The worldwide wreckage that came after the Lehman bankruptcy is still haunting us. Some 6.5 million jobs were lost (including mine). Trillions in home equity evaporated (ours never recovered). Credit markets from Athens to New York would never be the same. Government debt has skyrocketed.

Getty Royalty Free

While many observers say that the 2008 meltdown led to our current age of uncertainty and political turmoil, I wouldn’t go that far. Sure, the crash cruelly killed a lot of jobs and retirement funds, but trends in globalism, automation and corporate employment shrinkage were at work long before Wall Street nearly tanked our economy.

The biggest banks and corporations got bigger and richer still. There was no moral justice on that front. Corporatists are still fueling a debt burden which is exacerbated by trillion-dollar federal deficits, rising interest rates, $1.4 trillion in college debt and fewer, higher-paying jobs.

Then there’s the even-more palpable theory that the crash incinerated a few rungs on ladder of middle-class economic progress. Once you could bank on home equity as a nest egg. You didn’t really have to save in a 401(k), which was never meant to be a mainstream retirement account. Since both got creamed in 2007-2009, the American dream got scorched.

“The financial crisis didn’t just kill the dream of getting rich from your day job,” writes Nelson Schwartz in The New York Times. “It also put an end to a fundamental belief of the middle class: that owning a home was always a good idea because prices moved in only one direction — up. The bubble, while it lasted, gave millions in the middle class a sense of validation of their financial acumen, and made them feel as if they had done the Right Thing.”

Where are we now? Thanks to the draconian, anti-middle class tax code changes of late last year, you’d do well to have a business,  a passive investment portfolio or own stock in a multinational corporation. If you earn your money primarily from wages, you won’t be able to keep up with inflation — particularly in health care, retirement and education. Here are five takeaways:

— Make Savings Automatic. It doesn’t matter if you’re saving through a 401(k), 403(b) or your own Roth IRA. Set up a regular amount to invest every month. This is money you don’t touch, so you can’t spend it. Also have an emergency fund. When we got nailed by the crash, we got hit with job loss and life-threatening illness — in the same year. Had I not aggressively saved in the prior seven years, we would’ve been financially ruined.

— A Big Basket is Best. Those who loaded up on one kind of stock or real estate were burned big time in the last crash. Diversification makes sense. This means stocks, bonds and real estate from across the world. You can find a pre-diversified mix in any target-date fund, which you can buy on your own or through a retirement plan.

— Know Your Gut-Punch Threshold. How much money can you afford to lose when you really feel it? For some it’s 10%, for others 20%. You have to gauge your gut-punch pain to invest prudently. Adjust your portfolio accordingly. When the Lehman bust hit, my wife and I were 80% in stocks. That was too much, because we lost 40% on paper. We rebalanced. For most, the bond percentage of your portfolio should match your age.

— Don’t Watch the Pendulum. The market and world economy swings back and forth and can get really wobbly. You have no idea which way it’s going to swing, so don’t get hypnotized. Keep investing in all markets. Saving is the key, not finding the perfect moment to invest. Oh, about that pendulum: Those who stayed in just a cheap, broad-based stock index fund — and basically did nothing — roughly tripled their money since 2009.

— Invest in Yourself. You are your best investment. The world is changing. Artificial intelligence and automation are going to snuff millions of jobs. The best thing you can do is improve your human skills. Improve your knowledge base (but avoid for-profit colleges). Communicate better. Collaborate. Think about complex systems and how you fit in. Start a business that builds on your unique skills. I don’t care how old — or young — you are. Keep learning. Stay nimble in mind and body.

I’ll leave the ongoing post-mortem of Lehman and the resulting chaos to others. Focus on yourself and the goals you have for you and your family. That’s the only thing you can do anything about. The rest is history, which tends to repeat itself.

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

IMF warns storms clouds gathering for global economy – The Globe and Mail

Published

on

By


One of the International Monetary Fund’s top officials warned on Tuesday that storm clouds were gathering over the global economy and that governments and central banks might not be well- equipped to cope.

The fund had been urging governments to “fix the roof” during a sunny last two years for the world economy, IMF First Deputy Managing Director David Lipton said.

“But like many of you, I see storm clouds building, and fear the work on crisis prevention is incomplete,” he said at a banking conference hosted by Bloomberg.

Story continues below advertisement

He also warned that strains could leave policymakers under pressure and in uncharted waters.

“Central banks would likely end up exploring ever-more unconventional measures. But with their effectiveness uncertain, we ought to be concerned about the potency of monetary policy.”

Many governments won’t have much room for manoeuvre, either, having already racked up high debts.

“We should not expect governments to end up with the ample space to respond to a downturn that they had 10 years ago,” Lipton said. Stimulus may also be a hard sell politically, considering the financial burden it creates, he said.

The biggest immediate risk, though, is the current trade war between the United States and China. If all of the threatened tariffs are put in place, as much as three-quarters of a percent of global GDP would be lost by 2020, the IMF has estimated.

“That would be a self-inflicted wound. So it is vital that this ceasefire (recently announced between Washington and Beijing) leads to a durable agreement that avoids an intensification or spread of tensions.”

If it doesn’t and a stalemate sets in, there could be a damaging “fragmentation” of the global economy that causes a downturn, he said.

Story continues below advertisement

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

Goodyear halts tire production in Venezuela as economy slips – Prince George Citizen

Published

on

By


VALENCIA, Venezuela — Goodyear Tire & Rubber Co. is halting production in Venezuela, making it the latest international corporation to abandon a South American nation in economic crisis, officials said Monday.

Spokesman Eduardo Arguelles told The Associated Press that Goodyear-Venezuela had made the “difficult decision” to no longer produce tires in the country, which has seen an economic contraction worse than the U.S. Great Depression.

article continues below

“Our goal had been to maintain its operations, but economic conditions and U.S. sanctions have made this impossible,” Arguelles said.

The company had endured tens of millions in losses in recent years as the Venezuelan bolivar plummeted in value against the U.S. dollar. The company based in Akron, Ohio, moved to deconsolidate its Venezuelan subsidiary in the fourth quarter of 2015, but continued to operate with a staff of about 1,100 from the depressed industrial city of Valencia.

Workers who arrived at the plant Monday were stunned to find it was no longer in operation.

“They closed doors without saying anything,” said Luis Aponte, a union worker who said government workers were on site assessing the situation.

There was no immediate response from the government.

The announcement came after a letter issued “to whom it may concern” circulated online stating the company had been forced to cease operations and that starting Monday no one in Venezuela would be authorized to continue producing the company’s products.

The letter also said Goodyear would fulfil its financial obligations to workers.

Goodyear’s retreat from Venezuela adds it to a growing list of corporations that have ceased operations in the country. Some of those enterprises, like General Motors, had assets including factories and vehicles seized by the government. Others chose to cut their losses because shortages, inflation and currency and prices controls made business difficult.

Kellogg, Bridgestone, Kimberly-Clark and General Mills have all closed or reduced operations in recent years.

Julian Rodriguez, 62, said he spent over three decades working for Goodyear and was unsure how he’d make ends meet after losing his only source of income.

“This is a grave situation,” he said.

The International Monetary Fund has estimated that inflation in Venezuela could top 1 million per cent by the year’s end.

President Nicolas Maduro activated an economic recovery plan in August that including increasing the minimum wage and printing a new currency, among other measures, but thus far the economy has shown few signs of improvement.

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

Premier Ford Meets with Mayors to Grow the Economy and Deliver Better Services – Government of Ontario News

Published

on

By


Ontario’s Government for the People Renews Commitment to Municipal Partnerships

TORONTO — Premier Doug Ford met with Ontario mayors at Queen’s Park today to discuss their shared priorities, such as improving transportation infrastructure, increasing the supply of housing to bring down costs and making sure that municipalities are open for business.

“Ontario has some fantastic mayors, and we have some great working relationships. Today, we strengthened those relationships,” said Ford. “We’re going to work together to get things done. We’re going to build transit and infrastructure. We’re going to make sure everyone can afford a place to call home. And we’re going to show the world that Ontario is open for business.”

In a series of meetings throughout the day, Premier Ford met with Guelph Mayor Cam Guthrie; Kawartha Lakes Mayor Andy Letham; London Mayor Ed Holder; Mississauga Mayor Bonnie Crombie; Oro-Medonte Mayor Harry Hughes; Ottawa Mayor Jim Watson; and Windsor Mayor Drew Dilkens.

During one-on-one meetings with each mayor, Premier Ford discussed upcoming plans for the private retail sale of cannabis and restated his commitment to public health, public safety and protecting Ontario’s youth. He also discussed ways to deliver better services to the people of this province and get more money back in the taxpayer’s pocket.

All leaders committed to meeting regularly to make progress on the issues that matter most to people across Ontario’s municipalities.

“When it comes to Ontarians’ day-to-day lives, municipalities make the most direct impact,” said Ford. “Today, I had some great conversations with Ontario mayors about how to tackle the issues that people face every day. We’re committed to working for the people and respecting the taxpayer.”

For high-resolution photos from the meetings, click here.

Quick Facts

  • There are 444 municipal governments in Ontario.
  • Ontario’s Government for the People recently signed a joint memorandum of understanding (MOU) with the Association of Municipalities of Ontario (AMO) committing to regular consultation on provincial legislation or regulations that have a significant impact on municipalities.

Additional Resources

Let’s block ads! (Why?)



Source link

Continue Reading
Arts14 mins ago

Opinion: City council’s bold investment in the arts will elevate Calgary when we need it most – Calgary Herald

News21 mins ago

Organized crime behind surge in Canadian vehicle thefts, auto insurance fraud: experts – Global News

News23 mins ago

Suspect in custody after RCMP close highway near Berwick for ‘unfolding situation’ – TheChronicleHerald.ca

Business25 mins ago

Tesla testing out new Autopilot features like roundabout navigation – MobileSyrup

News26 mins ago

What are the most frequently stolen vehicles in Alberta? – Global News

Politics1 hour ago

Climate Politics Hypocrisy At COP24 In Poland – Forbes

Economy1 hour ago

IMF warns storms clouds gathering for global economy – The Globe and Mail

Business1 hour ago

Ford's F-350 is the top choice for Canada's thieves: Report – BNNBloomberg.ca

Technology2 hours ago

The Galaxy S10 could be Samsung’s last flagship with a headphone jack – The Verge

Science2 hours ago

‘Zombie bacteria’ found miles beneath Earth's surface hint life might have begun in the depths – Yahoo News

Science2 hours ago

The Morning After: 'The mother of all demos' – Engadget

Science2 hours ago

The brightest comet of 2018 will be lighting up night skies this week (PHOTOS) – Daily Hive

Technology2 hours ago

OnePlus 6T McLaren Edition brings 30W Warp Charge, 10GB of RAM – GSMArena.com news – GSMArena.com

Technology2 hours ago

Groundbreaking Infinity Blade removed from App Store, hard to support – SlashGear

News2 hours ago

RCMP close Highway 101 at Berwick for 'unfolding situation' – CBC.ca

Trending

Copyright © 2018 Canada News Media

%d bloggers like this: