From The Ramparts
Junious Ricardo Stanton
Crystal Ball Gazing
“In the real estate realm, the proverbial ‘other shoe’ hasn’t dropped yet, but certainly is dangling - and that’s commercial real estate. As homeowners writhe in agony and stop spending, retailers will go out of business, businesses of all stripes will suffer and commercial real estate will implode. The leverage left over from just the private equity foray into commercial real estate in the acquisitive 2006-2007 period is staggering. Refinancing will be impossible. Banks are stuck with hundreds of billions of dollars of leveraged loans that they took on as bridge and mezzanine financing from the private-equity shops alone, at the time believing they would be able to securitize those loans and sell them off to investors.” U.S. Economic Outlook for 2009
By Shah Gilani http://www.moneymorning.com/2008/11/22/us-economic-outlook-for-2009/
I don’t profess to be an oracle, prophet or a soothsayer; but based on the recent trends, the current economic tailspin and the political machinations of 2008; I think I can safely predict 2009 is going to be a very turbulent year. Economically it will be very painful and unsettling for most AmeriKKKans. The US economy will continue its inevitable collapse which will devastate most households. If you think 2008 was volatile, 2009 will be really unnerving. Here are my simple predictions for 2009. There will be more bank failures. Thus far,(the last week in 2008), there have been twenty-five bank failures in the US. Things have gotten so bad, the corporate media rarely reports them any more. They don’t want people to panic and start runs on banks. If that were to happen the whole system would collapse. If the media reports on bank closings at all, its usually buried in the Saturday editions small print. The drill is the FDIC and bank regulators swoop in and close the affected bank on Friday to get it ready to re-open on Monday either in receivership of the FDIC or after its assets had been taken over by another bank.
Unfortunately given the current financial situation, more banks will go belly up or get gobbled up in 2009. The situation is exacerbated due to the fraud and lack of honesty on the part of the banks themselves. “Because of a lack of transparency into the balance sheets of borrowers holding such complex and illiquid securities as collateralized debt obligations, credit-default swaps, and non-performing loans, and because of increasing recessionary fears affecting businesses and households, lenders don’t want to increase their loan exposure. Banks are holding onto the cash and liquid securities they control, using them as a cushion against their own potential losses. The U.S. Treasury Department’s direct-to-bank capital injections do not alter these banking realities. In fact, as a Money Morning investigative story recently demonstrated, instead of using these taxpayer-provided infusions to increase their lending, these banks are using the money to finance takeover deals.” U.S. Economic Outlook for 2009
By Shah Gilani www.moneymorning.com/2008/11/22/us-economic-outlook-for-2009/ The fact banks don’t trust each other and are hoarding the T.A.R.P. money is a signal things are not going to get better any time soon.
The housing crisis will continue. Look for folks who purchased ARM loans in late 2006 through 2007 to face loan resets in 2009. These resets will make it extremely difficult for them to make their monthly notes. Even if there weren’t a new round of ARM resets, far too many AmeriKKKans are going to go into default because of job loss or downsizing. Another factor causing personal economic strain is hyper inflation. The Federal Reserve Bank is creating money out of thin air at a rapid pace. Inflation or the increase in the money supply is devaluing the US dollar. As a result, everything costs more and workers’ wages are not keeping up with the monetary devaluation. Consequently the cost of living is constantly going up but the standard of living is going down. “A strong economy must be built on a solid foundation of steadily rising wages. If wages don't keep pace with production, the only way the economy can grow is through the expansion of debt, which leads to disaster. Consider this: the US economy is 72 percent consumer spending. That means the Gross Domestic Product (GDP) cannot grow if salaries don't keep up with the price of living. Low Income Families (LOF)--that is, any couple making less than $80,000--represent 50 percent of all consumer spending. These LOF's spend everything they earn just to maintain their present standard of living. So, how can these families help to grow the economy if they're already spending every last farthing they earn?” Wages, It all gets down to wages. by Mike Whitney www.globalresearch.ca/ This means it will be more difficult to make ends meet as the ends get further and further apart and resources are harder to come by. Meanwhile housing prices will continue to fall leaving many hapless homeowners owing more on the mortgage than the house is worth! This deflation is the natural response to over inflated housing costs in a recessionary period.
The next major crisis impacting working class folks will be the credit card crunch. As more and more people max out their credit cards, they will be forced to pay higher monthly fees. Keep in mind their paychecks will remain static. Even if they get a raise it will not cover the rising cost of living. So where is the money going to come from to pay the higher credit card fees? If you are late or come up short on your credit card bill, this will impact your credit rating which will ( until the new laws kick in), raise your interest rates and fees and negatively impact your credit rating.
It will be a Catch 22 revolving door. Along with the credit cards, student loans and auto loans will cause consternation. Many folks will default on their loans which will also impact the macro economy. Not repaying the loans on a timely basis will deprive the system of money to make more loans thereby exacerbating the credit crunch and the recession.
Look for commercial real estate to take a major hit as “big box malls” and retail strip malls suffer massive losses of income due to the protracted recession. More retail chains will close or scale back and many malls will go into default and close for good. This situation will be due to consumer spending cut backs and the mall management’s inability to get loans due to the credit freeze.
This will put increasing pressure on local governments because the retail stores and malls provide rateables and tax revenues for the municipalities, counties and states. This drop in revenue coupled with the lack of property taxes due to foreclosures and defaults will put a severe strain on already stressed state and local governments. Their only solution will be to seek relief from Washington, raise taxes and cut spending. It will be difficult to float bonds because of the lack of confidence in the markets. So they will be forced to make cuts in services. Usually the cuts will be in the area of services like after school programs, libraries, recreation centers and in a severe crunch, laying of employees including first responders. A drop in real estate tax revenues will also impact school districts. Who will have to make up the revenue some way or make cuts in their budgets.
Consumers already burdened by hyper inflation (the billions of dollars the Federal Reserve pumped into banks and insurance companies is devaluing the money in our pockets) which is causing prices to skyrocket will be hit with additional state and local taxes. It will be hard to save money but by cutting back on spending perhaps folks will be able to save more money than they do now. This which won’t be too difficult to do because US savings are currently at negative levels.
More families will become homeless as they either walk away from mortgages they can no longer afford or they get evicted due to delinquent payments. We are seeing the community safety nets, the food pantries, the charities and shelters being stretched to the limit as more and more people require assistance. This will continue in 2009 because the unemployment rates will continue to escalate. “Another hidden fact: for thirty five years, the private sector has not produced a net increase in jobs. The growth of jobs in computer-mediated services and software production was counterbalanced by losses in manufacturing; mergers and acquisitions in the retail industry were barely matched by growth in fast food employment. In the past decade as the private sector failed to create new jobs but relied increasingly on contingent and temporary labour to meet their short-term labour requirements, the public sector -- especially education and health care -- became the main source of new, decent paying jobs. And as the Federal government abdicated responsibility for a variety of services, state and local bureaucracies added jobs.” Facing the Economic Crisis by Prof. Stanley Aronowitz www.globalresearch.ca/index.php?context=va&aid=11494
There will be bad news with regards to pensions, 401K and retirement funds in 2009. The implosion of Wall Street and stock market coupled with more swindles and derivative Ponzi schemes will wipe out large percentages of private and public pension funds. This will put a massive strain on state and local taxpayers and the Pension Benefit Guarantee Corporation which is a federal government entity similar to the FDIC which guarantees private pensions in the event a company goes bankrupt. We the taxpayers will be continually forced to pay for the mismanagement and fraud of the financial and corporate sectors.
You are reading this thinking, will there be any good news in 2009? Yes but only if we look at this situation as a lesson and change our ways. If we wake up, we may avoid being continuously played for suckers. We must hold the politicians and policy makers accountable because much of this is their fault. We must learn our own personal lessons and stop going for the get rich quick, max for the minimum okey-doke. We must get back to being good stewards of our own money and living within our means instead of getting into frivolous debt believing we are creating wealth. (We are, but for the bankers not for ourselves) We must demand our governments (local, state and federal) do likewise. If we fail to learn our lessons we will be doomed to further recklessness and end up as debt peons, wage slaves and tax serfs.