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This chart over at The Market Ticker fully explains why the US is in trouble.
Of course, the national debt is doing the same thing, leading to this conclusion.
A new report from an economist at the UCLA says Hoover’s “big labor policies,” turned a recession into a depression. I don’t think that bodes well for Mr. Obama’s turning GM over to the labor unions, nor his forcing government contracts only to be filled by union companies, in terms of getting the economy straightened out. The banking situation doesn’t appear to be getting any better, either. Bloomburg notes the Fed is arguing that revealing the names of the banks who have received TARP funding would financially harm the receiving banks. This is one of the primary arguments against auditing the Fed, something that needs to be done, no matter how painful, if the economy is ever going to recover.
The race is on for the next shoe to drop. Will it be the US Government, itself, going insolvent? Or will it be commercial real estate, in the form of REITs? From Whiskey and Gunpowder:
If you carefully consider the combined statistics on commercial mortgage debt, equity, and future rental cash flows, you come to the conclusion that the value of many REITs is permanently impaired. Even if a core group of higher-quality REITs escapes bankruptcy, their equity will still be impaired because lenders will only refinance properties on very tight terms: strict covenants, high interest rates, and requirements of hefty equity infusions into upside-down properties. This is a transfer of wealth from REIT shareholders to creditors. This wealth transfer is occurring through many channels, but the most important one relates to claims on future rental cash flow, which will be bleak regardless of who owns it.
Whisky and Gunpowder also notes the US is in its “third stage:”
The United States is in the third and fatal stage of a great country’s life-cycle – the political stage. In this stage, money and power migrate from the financial community to the political community. The politicians get away with taking trillions out of the productive economy and spending them on their pet projects and private corruptions.
The August Forecast points out that the unemployment rate is actually much higher than it appears.
If one considers the people who would like a job but have stopped looking — so-called discouraged workers — and those who are working fewer hours than they want, the unemployment rate would move from the official 9.4 percent to 16 percent.
This feels about right, given the state of the shopping malls, and other sales figures we are seeing, but it’s a bit contrast to the official numbers being sold to the American Public right now. Overall, regardless of all the “green shoots” stories we’re seeing, the fundamentals are weak, and ripe for another fall, just like during the Great Depression itself. Buckle your seatbelts, we’re still likely in for a wild ride.
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