aarc

Wall Street Breakfast: Must-Know News

The panic sell-off today is not entirely surprising.

I have been arguing in previous posts that the next catalyst or "stimulus" for a sustained market meltdown is going to be big companies (out of financials) going bankcrupt with GM as the most obvious candidate sitting right into the middle of the cross-hairs.

Non-financial companies going bankcrupt will exacerbate the unemployment problem since they hire more employees per unit income as compared to the bank, brokers and insurance companies.

Companies other than financials are burning though their cash reserves at unprecedented rate with no alternatives available for shoring up their resources in this equally unprecedented economic crisis with the market downpour now entering the 19th month of unrelenting sell-off. They are also demoralized at the current stage with the massive public outcry over government bail-outs of the financial firms. Their chances for possible gov't assistance is in great jeopardy if and when they start reaching insolvency stage caused by sustained consumer spending crunch of which the economy is 70% dependent.

This is not the start of a sustained market meltdown.

The Obama administration has found a "palatable" way to provide assistance to GM for the next immediate future by asking Wagoner to step down.

This is not the solution to prevent big companies outside the financials from going down the drain.

The government has to either provide a Comprehensive Economic Recovery and Stabilization Plan or they do it peacemeal starting with an Economic Re-investment Program.

The Comprehensive Economic Recovery and Stabilization Plan is going to take considerable time to outline and be able to establish specific courses of actions.

The Economic Re-investment Program can be initiated immediately. It requires establishment of an FDIC sponsored and guaranteed Private-Public Bank that will provide immediate capital infusion to distressed companies both financial and non-financial if and when those companies start needing fresh capital support and to provide fresh capital to new businesses.

This approach should be able to arrest the mounting unemployment and create new jobs needed for an economic recovery and stabilization for the immediate future.

The Private-Public Bank will be co-owners of distressed companies and are entitled to future profits and dividends if and when those companies become profitable again.

Likewise, the Private-Public Bank will be exempt of all taxes and fees regarding all profits, capital gains, interest gains and other potential future rewards as a part of of the deal to encourage private investors as well as individuals to participate in Saving America from a potential major economic dislocation that can threaten capitalism, the government, and Democracy itself.

It is hightime that both the government and the private sectors stop and reverse this economic downturn that is going on for more than 18 months - and prevent potential civil unrest that can lead to rebellion as the government got entangled with using the taxpayers' money as a means of stop-gap measure for helping the finance sector.