There will be more pain [View All]

[AllentownJake]

To preface, if you don't like reality, please go here

http://www.youtube.com/watch?v=49jKeGyUCJE

Logically, mathematically, spiritually there has to be. The economic Gods demand it. Our leaders, and I use that term loosely because it implies they are taking us somewhere, have refused to heed the warning that things actually do need to change. They liked the world we were living in before the first wave of the economic attack in October of 2008, I kind of liked it to, however, we aren't going back, and every action they have take is an attempt to take us to a false reality that could never have been maintained. I've begun to think of them as the band on the Titanic. Dutifully playing the same tune they were playing before the Iceberg hit, to calm all those that aren't making it into the lifeboats. They better have the honor to go down with the ship.

Where we are on March 8, 2010

The unemployment monster has stalled. It can be interpreted as good news or bad news or no news. Just because something has stopped falling really bad, doesn't mean that it is about to start moving up in an inverse course that it was falling before, nor does it mean that it that something cannot happen to make it fall again. The most troubling thing in my mind is the increase in productivity with no technological advancement. People are being paid less to do more, and there are less people doing it and the people at the top of the pyramid are collecting more as a result. Wages are deflating.

The debt to GDP ratio is skyrocketing. The only debtor left that seems to be able to wrangle creditors to give them money is the US government and other sovereigns. The only creditor lending substantial sums of money out there also appears to be the US government and other sovereigns. The private portion of our financial system, appears to be totally broken. It also appears the leaders of the private portion of our financial system are taking as much as they possibly can from the broken system before the house crashes down due to the lack of any foundation.

Most of the state and municipal governments appear to be going through some sort of budget crisis. The year over year tax collections for these governmental agencies is down 87 billion. That is a pretty big hole. 11% of tax collections before the crisis started. This is coupled with the fact that more people are demanding services due to the drastic downturn in the private sector. This is a recipe for disaster, as the people who have paid into the system for years, demand the social safety net they invested in and watch it cut. Higher taxes and cut services leads to a very, very, very not happy populace.

The banking sector is nothing more than a zombie. The repeal of Mark to Market accounting rules has left assets that should be seriously impaired on the balance sheets carrying a full pre-bubble fantasy value. There are more defaults and delinquencies coming in the future. Every default and delinquency is less liquidity. This means less lending. The less they lend, the less businesses have access to the capital they need to survive, which leads to more defaults. The viscous cycle in nowhere close to over as Commercial Real Estate loans need to be refinanced on impaired assets and the residential mortgage crisis continues to spread. This is coupled with the fact that the government is taking more and more capital out of the system with its financing of the deficit. If that debt is being monetized, inflation will invariably show up. If that ever happens, the CDS Nuclear bombs that are sitting on the sidelines will do more damage than anything ever seen financially in mankind's history.

Our immediate future

If you want to know what our future is, look to Greece and Europe. It is only a matter of time, before the markets start paying attention to our own little fiscal problem in states like California, Illinois, and New York. The markets have ADD. Some of the largest cuts are to higher education. It doesn't take a rocket scientist to know, those are cuts to our future.

How did we get here? We borrowed more than we could possibly ever pay back, we consumed more than we produced, and we were apathetic to all warnings because we were comfortable. We listened to people who told us what we wanted to hear, not what was logical.


Suggestion if your feeling sad or angry watch this and pour yourself a stiff drink.

http://www.youtube.com/watch?v=HK0l2tqFDvM&NR=1

http://www.youtube.com/watch?v=X2F4EFYM_MA&feature=related