It looks as though things are going to get really bad
before they get worse.
Dominoes: The GOP Senators have killed (a) the Big Three Bailout and (b) at least two of the Big Three (c) the real economy.
Imagine! US household debt decreased in 3Q08 for the first time on record. For a nation built on ever-expanding debt, this is more than a little head cold.
Two Front Teeth: Inbound freight at the Port of Long Beach was down 11% in November. The retailers suspected. Outbound was down 18%.
OPM: In October Bernard L. Madoff was the 23rd largest market maker on the NASDAQ, of which he had once been chairman. Today he is among the all time champion swindlers, having fiddled away at least $17 billion of his client's money. It is unclear whether he was running a Ponzi scheme for nearly a decade or had fallen into it to cover his abysmal failure as a trader.
Fortune: China's exports fell 2% in November, year to year, after growing over 20% a year for the past few years. In an economy that depends on exports for 40% of GDP and depends on double digit GDP growth to keep the country together, this is not good news. And if the Chinese economy craters, who will buy US debt? And at what price?
Waste Watchers: Even with the drop in food prices since last summer, prices for basic staples are nearly 30% above the average 2 years ago. The UN's FAO reports that 800 million people are "food insecure" - which means that they are frequently forced to skip meals. The World Bank warns that this is not confined to sub-Saharan Africa and is not temporary.
Henry Higgins: To the world, they are pirates. They may see themselves, with some justification, as the Somali Coast Guard.
States Rights: Ohio and 4 other states may soon exhaust the funds used to pay unemployment benefits. That will lead to either increased taxes on a declining tax base or cutting benefits to the unemployed. You have been following the problems in Greece, haven't you?
Montezuma's Revenge: Mexico says its increasing domestic oil consumption will result in an annual 5.3% decrease in exports even though it may increase overall production to 3 mbd by then. In other words, the US will have to find a replacement for its third largest supplier.
Late, Too Late, Way Too Late: Expect the worst. That's the word from climate scientists. Hansen's goal of 350 ppm has been passed, never to be seen again. The governments' goal of stopping CO2 concentrations at 450 ppm by 2050 is not possible. CO2 emissions are rising faster than anyone thought possible a few years ago; it is "improbable" that CO2 levels can be limited to 650 ppm. Any temperature rise over 2°C is "dangerous" and we've already risen 0.7°C and the stuff we've thrown into the air recently guarantees 0.5°C more, leaving but .8°C rise for from now to forever. By the way, 650ppm equals a 4°C rise which equals bad times. Very bad times.
Quick Stats: Unemployment up, a lot. GDP down, some more. Budget deficit way up. Government debt, ditto. Trade deficit rises. Cut this out and keep it handy so I don't have to keep posting these items.
Ben Bucks: If Bernanke gets to issue his own debt, independent of the US Treasury, what's to back it? Or would Bernankies be backed by the Treasury? What's the point if the Fed doesn't set different rates from the Treasury market? Sounds much like creating a distinct class of currency separate from the 'old' Federal Reserve Notes that are backed by the US Treasury. Is this the path to devaluation? Or debt repudiation?
We're Here To Help: Moody's estimates 10 million foreclosures over the next five years. A while back Congress passed a $300 billion foreclosure reduction/prevention program aimed at 'saving' 400,000 houses. Since the program started in October, fewer than 200 people have applied and a total of no loans have been modified. Score = PR 400,000, Reality 0.