The depression is accelerating
The pace of negative data points coming out is increasing. US equities markets slid to near a 10 year low yesterday, while the US Director of National Intelligence called the economic downturn worse than terrorism. He went on to say that the US government should prepare for rioting and bread lines.
The lead story on MSNBC today describes a steep downturn rapidly spreading across the world. It confirmed the fact that sentiment is quickly turning even more negative. I called it “hope dissolving into fear“, they call it “hope fades for quick recovery.” Either way.
Americans can get a glimpse of what conditions might arrive in this country be keeping an eye on other countries that feel effects at the social level before we do.
Another extremely scary indication of how bad the situation is comes from the auto industry. They were one of the first mainstream industries to get a clearly defined direct bailout. In September the Big 3 were provided with a $25 million bailout, although Ford limited its participation. Today they are before Congress asking for almost $20 million more, with no prospects for a recovery. Forbes Magazine reports that by their calculation, no amount of bailout will revive the carmakers.
Is the situation any different for banks, mortgage companies, or even the US economy overall? For the carmakers, it is clear that without more demand for cars and resulting sales, recovery is impossible. The problem is not their cay-to-day finances, but the business model. Is the business model for the US economy also flawed? This recession/depression did not happen by accident. Not only is the current financial environment depressed, but it is now apparent that much of the perceived production, profits, and appreciation over the past 7 years was an illusion.
If the bailouts, stimulus packages, and economic maneuvering do not prevent a complete crash, I suspect that the architects of the new economic structure might do a few things differently.
