The Observation Deck

Two nights ago on CNBC there was a collection of economists, who were finally willing to level with Americans.

The comment that got me was, "Go out on your busiest business street and take a look. By year's end, 35% of those businesses will be bankrupt. Next year we will say the same."

It was their collective opinion that it will not bottom out for at least 8 years, and be a minimum of 15 years before ALL felt some relief.

Shop Locally.

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Jim O'Bryan wrote:It was their collective opinion that it will not bottom out for at least 8 years, and be a minimum of 15 years before ALL felt some relief.

Economic growth for the last fifteen years was mostly driven by artificially inflated home values. For economic and political reasons the federal government created a ponzi scheme based on inflating home values beyond their historic norms. Panic buying and the free market took it from there.

There seems to be a consensus among Democratic lawmakers that the key to economic renewal is to reinflate the housing market. The federal government is eager to provide cheap money, looser lending standards and easier bankruptcy rules.

The general idea is that inflating housing values will enable people to refinance so they can buy more stuff. That way lies ruin.

If Obama's economic plan relies more on "rescuing" the housing market than on sound economic policy short term growth will be followed by an even worse economy. The old New Deal prolonged the depression. A new New Deal will do even more damage.

Bill Call wrote:If Obama's economic plan relies more on "rescuing" the housing market than on sound economic policy short term growth will be followed by an even worse economy. The old New Deal prolonged the depression. A new New Deal will do even more damage.

To me it just sounds like another Ponzi Scheme.


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big box retail grew enormously during the last 20 years via outsourcing and free trade deals. Aggressive firms could expand by leveraged buyouts and sophisticated financing. New waves of consumer electronics helped fill the shelves. most of those electronics involve new media and additional media. media runs on advertising and marketing. consumers were trained to want to buy even more.

It was Reagan's administration who struck on the idea of ratcheting down interest rates continually without any constrictions based on budget deficits or trade deficits. We won world war II: everyone will buy bonds and t-bills forever.

The Just in Time inventory approach to retail, combined with smaller profit margins of big box stock turnover rates, engenders a "grow or die" attitude. This yields the result of growing really fast and then dying. There are fewer winners, but the remaining winners are much bigger. it is a race to the bottom.

the lower capital gains taxes and corporate income taxes of the Reagan Years induced stock speculation. Stocks are essentially a higher-tiered currency. Folks come up with innovative ideas to acquire them, then "Innovate" new metrics for believing they should be worth more. the leveraged buyout mania and corporate mergers and acquisitions mania left a small portion of Americans as large millionaires. The anecdotal evidence is more and more towns got hollowed out. Big Chuck mentions in his autobiography TV 8 being bought several times in the 80s and taken over by new Professionals who had no idea how to do anything.