alstry (35.70)

10% Umemployment?

April 04, 2008 – Comments (3)

Consumer credit delinquencies in the fourth quarter of 2007 reached their highest levels since 1992, according to the American Bankers Association’s Consumer Credit Delinquency Bulletin. The composite ratio, which tracks eight closed-end installment loan categories, rose 21 basis points to 2.65 percent of all accounts in the fourth quarter on a seasonally-adjusted basis.

All eight major loan categories tracked by the banking association — including home equity loans, property improvement loans, indirect and direct auto loans, personal loans, mobile home loans, marine loans, and rec vehicle loans — experienced increased delinquencies during the fourth quarter, something the ABA said was “a rare occurrence.”

http://www.housingwire.com/2008/04/03/home-equity-line-delinquencies-continue-to-rise-report/

Today, umemployment crossed 5%.  We are hearing everyday that more and  more companies are laying off by the thousands....Dell, Motorola, Schering-Plough, ATA, just to name a few.

Remember folks, we built this economy on the banks giving us a bunch of easy money.  Lots of reckless loans were made driving business to fanstastic levels.  Income didn't matter because money was everywhere....you just had to ask.

Now the banks are saying No Mas.  Business is slowing.  Defaults are rising.  States are running out of money.  And jobs are being cut by the thousands every day.

My estimates are that many companies will cut employment by 25-35% to adjust for slowing sales.  Many business will fold completely.

Until our nation figures out a way to replace the trillions of dollars of easy money that was being loaned every year and spent into the economy...we should start to see deterioration accellerate. 

My guess is that by the end of the summer, unemployment could exceed 10% if current trends continue.  It is a penny a day and doubling it.  This  month, umemployment increased .3%, next month .6%, the following month 1.2%, after that 2.4%.  By July, we could hit 10% and gas could be above $4 per gallon.

The basis for the above estimates is that credit based bubbles creates a closed system(especially if there was little productive growth outside of credit based growth).  Like an airtight room being fed oxygen....when you stop flowing oxygen in the room(credit), people start falling slowly at first and then start dropping rapidly as time passes. 

Time is now passing and expect businesses and jobs to start dropping like flies.  Unless of course the Fed writes you a $30 Billion dollar check.

Does releasing a few hundred thousand prisoners out of jail increase unemployment if they can't find jobs....after all the state was paying them a small stipend while incarcerated?

If so please revise the above  estimates accordingly.