The wheels are falling off the economic train in the US. We’re bailing out worthless organizations like Bank of America and Citi Bank when we should just guarantee the deposits, let the banks fail and start over (because in time they will fail anyway). These institutions have become so large and are so full of worthless assets that they may be to big to fail, yet by piling on shit (for lack of a better word) like Merril and Countrywide into the empty shell known as Bank of America, we now have institutions that are simply to big to save.
There simply isn’t enough money available to make these institutions solvent. These banks are still giving out billions in bonuses while taking tens of billions in tax payer dollars. As written earlier, the US housing collapse is going to accelerate through 2012 until things begin to settle at a bottom. If you are trying to sell a house now, you better take an offer while you can or you’ll be begging for half that price in 12-18 months in many areas.
The US auto industry is a joke. Chrystler, led by Bob Nardelli, who did his best to kill Home Depot and walked away with 200 million wants another 5 billion dollars to keep going while GM is looking for around 30 billion. The US tax payers have no business bailing out a company like Chrystler that is owned by a private equity company and run by a character like Nardelli who padded his own pockets at Home Depot while screwing the company. GM may be a better investment but 30 billion is quite a large sum.
Failure of the US auto industry would seem to have the potential to send this country into an all out tailspin financially. It could result in millions of lost jobs directly and indirectly as well as a huge loss of tax revenue in the billions of dollars for the US government. It might actually make financial sense to bailout these companies, though we all know they simply don’t deserve to receive this kind of aid given the lack of smaller fuel efficient and alternative fuel vehicles in their lineups.
As more and more people lose thier jobs, the amount of money available to spend to keep economic activity going shrinks. Retail is in the tank. Onine retailers are faring a little better than physical stores but sales are still declining and consumers are putting off purchases in many cases.
What will the next few years hold? Right now it doesn’t look to good. Retail sales always fall seasonally in many industries and this summer will be no different. We may see hundreds, even thousands go out of business this summer as they struggle to secure credit and see retail sales decline significantly more than they already have.
The next round of housing collapse will be the result of “investors” losing their shirts on investment properties financed with Alt-A and Option ARM mortgages they have no hope of paying back.
It appears the US government has taken or will take the only sensible steps it can take in light of everything going on at the present time. While there is probably a lot of crap in the stimulus bill pushed through by the Obama administration, it at least appears to be somewhat sensible. People need to go back to work so that the economy produces something instead of simply providing tax cuts to the righ in the hope that tax cuts will stimulate spending and trackle down thorugh the economy. Spending on education, infrastructure, and health care need to be the bedrock of any stimulus and it appears they are. For far to long we’ve been spending lavishly on war and the military. Those bailout funds that will prove to be completely wasted money need to go to building this country back up.
There is a good chance you will get laid off this year, you might lose your health insurance, the job market and housing markets will get much worse before they get better and the stock market will continue to fall with a bottom somewhere between DOW 3,000 and 5,000 and you’ll continue to watch your 401K balances in any form of equity mutual fund fall dramatically.
Over the next 3-5 years this country and many others will continue to struggle. Companies will need to change. It doesn’t take a genius to realize this. When you look around at your own company and any clients you may have you probably see the same incompetence exhibited by the financial companies in the US. Policies, proceedures and initiatives that may be well intentioned but will lead nowhere and have no purpose, things being done in the same way they have always been done because they have always been done that way and top level executives completely clueless towing the line to protect their own jobs while the company and its business tanks.
Once we work through the credit, housing, job and overall financial crisis things will start to rebound. That may take a few years but we’ll get there. Prepare for an intense recession of full scale depression. Keep your fixed costs low, work smart, learn all you can and be prepared for whatever adversities then next few years will bring.