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We’re still seeing a lot of folks talk about “green shoots,” although it appears there is a gathering consensus that we are on a plateau headed for another cliff. Banks are still on the front line. For instance, Japan ordered Citi to curtail some operations because “lax regulations on money laundering.” Has Japan started to see what the US Federal Reserve is doing as counterfeiting, and the banks as launderers? Or is this related to the billions of dollars in bearer bonds that showed up in Italy a few weeks ago? There’s no word on how much this will impact Citi’s operations, or hurt their profitability. Commercial real estate is also bound to hurt the banks—empty stores are popping up all over the place, and many shopping centers have a couple of “big block” spaces open right now. Another area in the commercial real estate space we don’t often think about, hotels, are also in really bad shape. Bloomberg reports that defaults on hotel loans have doubled. All of this rattle in the banking industry has caused bank stocks to fall by some 24% since May of this year. There’s little hope of a recovery in those sorts of numbers.
As the unemployment rate rises, many analyst are calling for a “jobless recovery.” Generally, people calling for a “jobless recovery,” is cover for a total lack of recovery. Mr. Obama’s “stimulus” was supposed to resolve these problems, but it hasn’t—anyone with experience in watching how the Government spends money could have told you no amount of government spending can reduce the unemployment rate. Of course, Mr. Obama is still claiming that things would be worse without the “stimulus.” Forecasting the economy, though, is like forecasting the weather. Small errors quickly snowball into large errors, causing charts like this one from the Heritage Foundation.
A number of states are preparing for a shutdown in services because they are unable to meet their debt and spending obligations. A lot of this relates to radical droppoffs in tax collections as people lose their jobs, or just stop spending so much money. These financial problems at the state level are causing ratings agencies to consider downgrading the safeness of State owned debt, which would cascade into major selloffs by pension and retirement funds, creating a downward spiral of problems. Are we going to see a repeat of the 1870’s, where a lot of states went bankrupt?
All these areas of concern are having a negative impact on confidence. The consumer confidence level took a 5% dive in June, down to 49%. At the same time, investor confidence is down.
In the midst of all of this, Mr. Obama’s Cap and Trade plans and health care plans are aiming to hurt small businesses, where recoveries normally start. Mr. Obama is considering a second stimulus plan, which, if history is any guide, will have the same effect as the first one—further destruction of the US economy for the gain of socialist/progressive interest groups, such as ACORN.
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