[ad#200-left]People have argued with me as to the severity of the current economic situation. Browsing the business pages of the New York Times today, it is evident that there is a global scare on right now. This by itself does not suggest that things can’t return to “normal”, but when taken in concert with other forces at work around the world, peak oil, climate change, and suggestions that we start paying for carbon; the credit crunch and global financial shockwaves that are rebounding around the world will have a tough time slowing down despite all our best efforts at throwing money at the sinking mega-corporations.
I don’t have much more to say about this, except to highlight some of this week’s articles in the New York Times…
Everything, it seems, has grown worse here. The recession started earlier and its bite has been deeper. Housing prices have fallen by as much as 50 percent. Bank shares have plummeted by more than 90 percent. Unemployment is approaching 10 percent.
With job cuts rampant and businesses retrenching, more empty space is expected from New York to Chicago to Los Angeles in the coming year. Rental income would then decline and property values would slide further. The Urban Land Institute predicts 2009 will be the worst year for the commercial real estate market “since the wrenching 1991-1992 industry depression.”
Waterford Wedgwood PLC, the maker of classic china and crystal, filed for bankruptcy protection on Monday after attempts to restructure the struggling business or find a buyer failed.
Source: Crystal, China Maker Waterford Wedgwood Collapses – NYTimes.com
Inside the magazine it was a different story: the January 2008 issue had almost 70 pages of ads, while the January 2009 issue had 41, according to the Media Industry Newsletter, a decline of 41 percent.
In its latest concession to the worst revenue slide since the Depression, The New York Times has begun selling display advertising on its front page, a step that has become increasingly common across the newspaper industry.
The fact is that recent economic numbers have been terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren’t lending; businesses and consumers aren’t spending. Let’s not mince words: This looks an awful lot like the beginning of a second Great Depression.
So will we “act swiftly and boldly” enough to stop that from happening? We’ll soon find out.
We weren’t supposed to find ourselves in this situation. For many years most economists believed that preventing another Great Depression would be easy. In 2003, Robert Lucas of the University of Chicago, in his presidential address to the American Economic Association, declared that the “central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades.”
AMERICANS enter the New Year in a strange new role: financial lunatics.
Rather than tackle the source of the problem, the people running the bailout desperately want to reinflate the credit bubble, prop up the stock market and head off a recession. Their efforts are clearly failing: 2008 was a historically bad year for the stock market, and we’ll be in recession for some time to come. Our leaders have framed the problem as a “crisis of confidence” but what they actually seem to mean is “please pay no attention to the problems we are failing to address.”
I’m not a economist or a pessimist, I’m a realist. Things have to change. Propping up an economy based on smoke and mirrors and removed from real earthly values has no future.