One more time--and for your own sanity if nothing else--please ignore the propaganda about a near-term recovery.
A REAL RECOVERY ISN'T HAPPENING ANYTIME SOON
A real recovery--one that ignores the imminent announcement of Goldman Sachs' $2 billion-plus quarterly profit, which is anticipated tomorrow--one that takes into account what NY Times Op-Ed Columnist Bob Herbert referred to on Saturday as, "The Human Equation," isn't going to happen anytime soon.
NY Times Op-Ed Columnist
The Human Equation
By BOB HERBERT
Published Online: July 10, 2009 Published In Print: July 11, 2009
...The crisis staring America in its face and threatening to bring it to its knees is unemployment. Joblessness. Why it is taking so long -- seemingly forever -- for our government officials to recognize the scope of this crisis and confront it directly is beyond me.
There are now five unemployed workers for every job opening in the U.S...
--SNIP--
...At the present rate, upwards of seven million homes can be expected to fall into foreclosure this year and next. Welfare rolls are rising, according to a survey by The Wall Street Journal. The National Employment Law Project has pointed out that hundreds of thousands of unemployed workers will begin losing their jobless benefits, just about the only thing keeping them above water, by the end of the summer...
--SNIP--
...Anyone who believes that the Obama stimulus package will turn this jobs crisis around is deluded. It was too small, too weakened by tax cuts and not nearly focused enough on creating jobs. It's like trying to turn a battleship around with a canoe. Even if it were working perfectly, the stimulus would not come close to stemming the cascade of joblessness unleashed by this megarecession...
--SNIP--
...The joblessness the nation is experiencing is crushing any hope of a real economic recovery. With so many Americans maxed out on their credit cards and with the value of their homes deep in the tank, the only money available to spend in most cases is from paychecks. The best and the brightest in Washington may have a theory about how to get the economy booming without dealing with the employment crisis, but I'd like to see that theory work in the real world.
(I'm not posting this because I get some cheap thrill from blogging about gloom and doom; contrary to the sarcastic comments of one or two high-profile bloggers on our economy. I'm posting these diaries to help others get their heads on straight so that they're enabled to do whatever they may to protect themselves and their loved ones from the economic fury that is about to rain down upon them--if it isn't already.)
Don't believe the hype about "recovery" as it relates to projected Gross Domestic Product ("GDP") nos., still-negative balance of trade improvements that conveniently ignore temporarily depressed-but-soon-to-spike oil prices, or related statistics, either. A negative balance of trade in a massive worldwide recession/depression is what it is. "Projected" (which shouldn't mean too much to anyone who's sane right now, since our government has consistently stated for the past year that its economic projections were significantly off-base and understated on an almost ongoing basis) GDP growth of 1.5%, for the second-half of the year, when added to the GDP stats for the first-half of the year are pathetic. In fact, it takes a sustained growth in G.D.P. of approx. 3.0% and month-over-month employment expansion of greater than 150,000 new jobs just to be able to legitimately state that we're in a real recovery. Then, we're only seven million (plus-minus) jobs away from reaching the point where we were at the outset of the recession (i.e.: "Millennial Depression"), which commenced in December 2007.
But, don't take my word for it. Listen to what Larry Summers said Saturday: "The worst is yet to come."
Worst yet to come: White House economic advisor
Agence France Presse
When it comes to the economic crisis, the worst is yet to come, top White House economic advisor Lawrence Summers said Saturday.
"I don't think the worst is over," Summers told the Financial Times. "It's very likely that more jobs will be lost. It would not be surprising if GDP has not yet reached its low."
--SNIP--
The comments by Summers echoed the cautious approach to economic projections taken by most Obama administration officials of late.
Obama himself emphasized at the end of this week's G8 summit in Italy that "recovery is still a way off."
"It would be premature to begin winding down our stimulus plans and... we must sustain our support for those plans to lay the foundation for a strong and lasting recovery," he told a post-summit press conference.
"PLAN C"
Enter "Plan C," "Treasury Works on 'Plan C' To Fend Off Lingering Threats;
Troubling Issues in Lending Could Still Disrupt Economy."
Treasury Works on 'Plan C' To Fend Off Lingering Threats;
Troubling Issues in Lending Could Still Disrupt Economy
By David Cho and Binyamin Appelbaum
Washington Post Staff Writers
Wednesday, July 8, 2009
As the financial system tries to right itself after its near-collapse last fall, the Treasury Department has assembled a team to examine what could yet bring it down and has identified several trouble spots that could threaten the still-fragile lending industry.
Treasury Works on 'Plan C' To Fend Off Lingering Threats
Informally known as Plan C, the internal project is focused on vexing problems such as the distressed commercial real estate markets, the high rate of delinquencies among homeowners, and the struggles of community and regional banks, said government sources familiar with the effort.
Part of the mission is assessing which firms are the most vulnerable and trying to decipher what assets these companies hold and whether they pose a danger to the wider financial system. Plan C is a small-scale, relatively informal approach to a problem the administration hopes to address in the long term by empowering the Federal Reserve to oversee systemic risk.
The team is also responsible for considering potential government responses, but top officials within the Obama administration are wary of rolling out initiatives that would commit massive amounts of federal resources, said other sources in close contact with the administration. The sources spoke on condition of anonymity because the discussions are private. Instead, the administration thinks some ailing sectors of the credit markets should work out problems on their own, the sources said.
The creation of Plan C is a sign that the government has moved into a new phase of its response, acting preemptively rather than reacting to emerging crises, officials said.
--SNIP--
The officials in charge of Plan C -- named to allude to a last line of defense -- face a particular challenge in addressing the breakdown of commercial real estate lending.
Banks and other firms that provided such loans in the past have sharply curtailed lending.
The story continues on to detail the reality that as much as $3 trillion, if not more, of commercial real estate debt could go down the tubes over the next few years if commercial real estate owners/developers can't find sources to refinance that debt for them.
The "Plan C Team" has also identified homeowner delinquencies as a significant, ongoing threat to our nation's economic well being. (As unemployment continues to increase, so will delinquencies.) However, the administration's approach to supporting Main Street leaves much to be desired. While our nation's unemployment levels--numbers that are far worse than those that are publicized--continue to increase, efforts to stabilize and support Main Street are inconsistent.
THE PENDING COLLAPSE OF C.I.T. FINANCIAL
Are you ready to handle another 6,000 small- and mid-sized companies going out of business in YOUR state (on average, that's the number projected in every state) over the next couple of months? More than likely, the anticipated failure of C.I.T. Financial over the next few days/weeks will do to Main Street what the collapse of Lehman Brothers did to Wall Street.
For small business owners in America--the folks that employ a majority of our population--it's already a horror show. Forgetting everything else negative that's occurring in our economy at the moment (commerical real estate collapse, alt-A and option-A.R.M. mortgage resets, increasing unemployment, more foreclosures in April than in all of 1932, etc., etc.), after the bankruptcy of C.I.T., it'll most certainly get far worse. (See: CIT Group Says Its Failure Risks Demise of Customers.")
CIT Group Says Its Failure Risks Demise of Customers
By Pierre Paulden and Caroline Salas
July 13 (Bloomberg) -- CIT Group Inc., the century-old lender that hasn't been able to persuade the government to back its debt sales, says its demise would put 760 manufacturing clients at risk of failure and "precipitate a crisis" for as many as 300,000 retailers.
A collapse would ripple across the "small and medium-sized businesses who rely on CIT to operate -- to pay their vendors, ship goods to their customers and make their payroll," the New York-based lender said in internal documents obtained by Bloomberg News that make the case for its importance to the U.S. economy. CIT spokesman Curt Ritter declined to comment on the documents.
CIT executives spoke with regulators during the past two days, according to a person familiar with the talks, after its bonds and shares tumbled on concern that the Federal Deposit Insurance Corp. won't allow the lender into its bond-guarantee program created last year to unfreeze debt markets. CIT may default as soon as April, when a $2.1 billion credit line matures, according to Fitch Ratings.
"A CIT default would create liquidity issues for the corporate sector," Ed Grebeck, chief executive officer of debt consulting firm Tempus Advisors in Stamford, Connecticut. "If CIT isn't doing trade finance and lending, its customers will look to other banks for replacement and from what I've seen, they aren't willing to step up."
(NOTE: If you're unfamiliar with C.I.T., the skinny on them is they're one of the largest, most important, but least known, behind-the-scenes players in the retail/small business sector in the U.S. They have approximately 950,000 [i.e.: divided by 50 states, that's 19,000 businesses per state, on average] small- to mid-size businesses as clients--funding everything from franchisees [i.e.: Dunkin' Donuts] to inventory to private-label, retailer-to-consumer credit accounts, aircraft and everything in-between.)
The failure of C.I.T. Financial--if it occurs--aside from being the largest failure of a financial services firm in the U.S. since Washington Mutual, a few months ago, will be felt across the country, in hundreds of thousands of small and medium-sized businesses. It's direct effect upon our nation's unemployment rate will be nothing less than brutal. (Personally, I know of dozens of small- to mid-sized, Main Street businesses that will most likely have to close their doors before Labor Day as a result of this matter, alone.)
SORTA', KINDA' THINKIN'....
Naked Capitalism publisher Yves Smith pretty much sums up my sentiments about all of this in: "White House Sorta, Kinda Thinkin' 'Bout Using TARP Money for Small Business Loans as Small Business Lenders Go Bust."
White House Sorta, Kinda Thinkin' 'Bout Using TARP Money for Small Business Loans as Small Business Lenders Go Bust
Yves Smith
Naked Capitalism
The Washington Post has a pretty bizarre story up tonight. The Administration is thinking about releasing TARP funds as loans to small businesses.
Stress the thinking part. As in big-time thinking. As in long way from action. Which begs the question as to why this is a news story...
WALL STREET'S SHORT-SELLING VERSUS MAIN STREET'S SHORT SHRIFT
As for me, I'm kinda', sorta' thinkin' about how many credit default swaps (and related derivatives) Goldman's bought into as far as the C.I.T. matter's concerned...IMHO, it's more about our priorities as a nation: What's more important? Wall Street profits from short-selling, or the suffering on Main Street from our government's short shrift?