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alstry (35.21)

America's Pain Threshold

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August 26, 2008 – Comments (3)

Two of America's three largest employers, Restaurants and Government(approximately 20% of the workforce) is facing serious financial headwinds.  Many states, counties, and cities on the brink of insolvency(see previous post and Alabama County Prepares for Bankruptcy in Debt Crisis ).  Restaurants shutting down accross the country.

In coming months, restaurants are expected to close more locations, build fewer new ones, offer more low-priced promotions and tighten worker scheduling to contain labor costs.

This summer's slow restaurant sales have hurt restaurant servers, who derive much of their income from tips. The restaurant industry employs 13.1 million people, making it the nation's third-largest employer, behind the U.S. government and the health-care industry, according to the National Restaurant Association.

Servers say their tips have been down, partly because some customers are leaving a smaller percentage gratuity than before, and also because waiters have fewer tables per night and lower total bills. Mr. Otis said Darden's restaurant managers are scheduling servers to work more hours to make up for the weaker tips.

http://online.wsj.com/article/SB121975653729272679.html?mod=hps_us_whats_news

Restaurant workers, almost 10% of our workforce, are facing job loss and/or income decrease while the expenses in their day to day lives exploding.  Same with government workers.....the governator just fired over 20K and reduced pay to minimum wage for 200K more.

Add in construction workers, real estate agents, mortgage brokers, auto workers, and airlines workers and we are looking at another 5% of the work force who have seen their incomes and benefits evaporate over the past few years.

Any wonder why the data is sooooo distorted when presented to the nation. 

Remember, Social Security and Medicare is unfunded.......we need these workers to contribute to pay current obligations for our current retirees.  Most actuarial tables don't contemplate a substantial decline in contributions from current workers.  Despite this, we are still running a $50 Trillion dollar deficit....now factor declining contributions and the game is just about over.

Now the pain facing the nation is being reflected in the earnings of our banks.

WASHINGTON (MarketWatch) -- Banks had the second worst earnings in the since 1991, the Federal Deposit Insurance Corporation said Tuesday. Earnings for the quarter totaled just $5.0 billion compared to $36.8 billion a year ago, a decline of 86.5%, the FDIC said in its second-quarter banking profile. Higher loss provisions were the main reason for the drop. "The results are pretty dismal," said FDIC chairman Sheila Bair at a press conference.

The above banks do not include Money Center Banks and Wall Street Investment Banks, if we included those the results would be much worse.  To put things in a little perspective, back in 1991, the DOW was trading at about 3000 throughout the year.  The difference back then was the trailing 12 month PE of the DOW was much better in 1991 than it is today.

Jobs evaporating by the millions.  Banks and Businesses shutting down.  Government on the brink of insolvency.  Our retirees depending on workers that may not be able to support them.  In sum, few look forward at what is around the corner.......soon we shall see.

3 Comments – Post Your Own

#1) On August 26, 2008 at 10:28 PM, DemonDoug (94.07) wrote:

i think the loss of bank earnings is going to absolutely crush local and state governments.  Won't make a dent in federal money though cuz we can always just print out a few hundy billion more t-bills to keep the war in iraq going and to fly our secretary of state to georgia to tell the president we support him while watching the russians bomb and kill the georgians.

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#2) On August 26, 2008 at 11:34 PM, russiangambit (29.51) wrote:

Do you think people realize how bad things really are? All I hear from the media is the usual bickering about who owns what and who will raise taxes by how much. And Bush administration is too busy with the whole Georgia-Russia mess.

Who cares? I want to know how we will fix our financial insolvency here at home.

I think people who know are too scared to admit to it since they don't want to create panic.

Today on CNBC there was an ancor who kept asking "why the maket is going down, all the news is so good?". Unbelievable.

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#3) On August 26, 2008 at 11:53 PM, alstry (35.21) wrote:

Trading Places??????

We bankrupted the Soviet Union by the 80's arms race under Reagan.

Could Russia tip us over by reigniting the arms race with our nation financially and emotionally exhausted?

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