Well, it appears we teetered into the bear field. . . turkeys and all. So much for testing lows. We are still blowing through them. The FED has placed its vote of "no confidence". Even Wal-Mart disappointed. War looms. Leading Economic Indicators pointing downward. The economy is tailspinning. It just doesn't know it yet.
Speaking of which, the mainstream media is amazingly quiet about the economy. It is so focused on war and new TV shows that it is ignoring the most important news of the 21st century. . . that we could be on the brink of a recession like none seen in recent history. Remember how quickly jobs are lost, when companies begin to panic. I remember in the 70's, hearing of tens of thousands of jobs lost each and every day for weeks. It seemed endless.
The point is that as things worsen, there is a drainpipe effect, which seems to suck everything in its path down with it. . . the baby with the bathwater, if you will. This is why I have been discussing the Real Estate market so much in the past month or so. If we start to see bank failures, credit card company failures and mass layoffs, we will likely also see a real estate bust. While all of these are not inevitable, historically they are the remnants of a crashing stock market.
Another artifact is domestic violence. Without the media making people aware that the economy is really in bad shape. . . on a daily basis. . . I fear that individuals and families may start pointing blame for their sudden misfortune at the bread winner / heads of household. Families see life on TV as unharmed by the effects of the economy, yet their own is falling apart for still UNEXPLAINED reasons.
We know economics and how things trickle down to eventually touch every person. But the average working Joe doesn't understand the cause and effect chain reaction that the economy has on us all. He just knows that today he is struggling more now with business than he has in a long while. . . or fears a layoff. . .(At least that is the talk I am hearing from the good ol' boys here in Tennessee.)
Now . . . while we are airing fears. . . let me say that two factors worry me most. . . which could trigger an unstoppable meltdown (what we dread most). . . and that is "inventory levels and associated consumer prices" and "credit card default".
Inventory levels in America are ridiculously vulnerable. Think about the number of autos we make ahead of the demand. . . the warehouses filled with consumer goods . . . and even stock rooms at mom and pop shops. When consumer confidence is shaken to the point where consumers stop parting with their money, it doesn't happen over months or years. . it is instantaneous. . . which does not leave time for businesses to recognize the approaching problem and scale back inventory. Thus, as demand withers, so do prices. And you can see the downward spiral effect this can have. I can imagine consumer goods available by the truckload for pennies on the dollar and still no takers.
Likewise, creditors are still feeling the effects of 9/11. If the economy were to weaken considerably on the heels of this sharply declining market, we could see a dramatic rise in defaults from both business and consumers. The interest rates are not seen by consumers as "fair" anyway . . consumers could just 'give up' on it all. This could trigger bank failures, like we saw in the 70's, and the world economy would essentially be on its own to survive what essentially is started in America.
There are some strong bottoms in '94-'95 that should hold, though they are way down there. Then you must ask "how long" will it take to stage a full recovery. . .should we see these bottoms and should our economy unravel as it appears to be in the process of doing? Don't count on war to stimulate the economy. . . we won't be building battleships and airplanes, like in the 40's. America needs to embrace its strengths and stay as united as possible. What we do not need is political divisions to further weaken our role as world leader.
And that brings me full circle to the politicians and the essay on integrity and house cleaning that was written a few weeks ago.
May God bless you all. . . and may you prosper in good health.
Rande Is |
