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XMFSinchiruna (27.48)

Trickle-Down Economics at Work: How the Crisis Will Continue to Trickle Down to Us!

Recs

50

August 12, 2009 – Comments (8)

As if small businesses were not already feeling the pinch from: the secular shift in American spending behavior, rising unemployment (yes, it is still rising), assets lost to the market drop, and negative home equity ... they are now facing the loss of another significant lifeline: smaller community and regional banks.

Small banks need to raise $21 billion (as if the first number offered ever lasts!?!)

http://www.marketwatch.com/story/panel-warns-small-bank-face-whole-loans-threat-2009-08-11

"The capital shortfall for those relatively smaller banks is primarily due to the lack of reserves, which on average account for only 25% of the expected loan losses."

"The COP report argued that problems for small banks are compounded by the fact that they hold "greater concentrations of commercial real-estate loans," which pose a potential threat of high defaults."

 

Deutsche Bank sees 48% of all U.S. mortgages underwater in 2011:

http://www.housingwire.com/2009/08/06/deutsche-sees-48-of-all-us-mortgages-underwater-in-2011/

"According to a report Deutsche released this week, the 25m represents a projected 48% of all US mortgages. While subprime and option adjustable-rate mortgages (ARM) are the biggest source of underwater borrowers in the current market, Deutsche said a larger percentage of prime conforming and prime jumbo borrowers will join the fray."

"Increased defaults in the middle class will suppress consumption, added Deutsche, further slowing housing recovery."

Zillow sees the number at 30% by mid-2010 ... FYI

The negative-equity rate will rise and spin off more foreclosures,” Stan Humphries, Zillow’s chief economist, said in an interview. “I see a substantial downside risk to prices and don’t think we’ll see a bottom until the middle of next year.”

CIT is still facing bankruptcy

 

Cash for Clunkers was a blip on the radar

After sparking an initial rush to showrooms, the Cash for Clunkers program seems to be running out of fuel.

Interest in Cash for Clunkers has fallen 15% since its peak, and the number of people planning to buy cars could fall to pre-Clunkers levels by next week, an auto research group said Tuesday.

 

Banks will collect an astonishing $38.5 billion in overdraft fees this year ... who needs TARP?

 

Even TheStreet is placing unemplyment at 14.3%.

This article notes that official unemplyment figures only fell because of those who stopped looking for a job.

 

Thank goodness the recession is over ... otherwise I'd be concerned.

Sheesh!

 

"The money powers prey upon the nation in times of peace, and conspite against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, and more selfish than bureaucracy. I see in the near future a crisis approaching that unnerves me and cause me to tremble for safety of my country; corporations have been enthroned, an era of corruption in High Places will follow, and the Money Power of the country will endeavor to prolong its reign by working upon the prejudices of the People, until the wealth is aggregated in a few hands, and the Republic destroyed."

 - Abraham Lincoln

 

 

8 Comments – Post Your Own

#1) On August 12, 2009 at 10:39 AM, binve (< 20) wrote:

Great post! (and title) :) Thanks!

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#2) On August 12, 2009 at 10:55 AM, 4everlost (29.38) wrote:

Sinchy,

Cool stuff, I really like the Lincoln quote.  Rec 5 here.

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#3) On August 12, 2009 at 11:26 AM, outoffocus (22.85) wrote:

Abraham Lincoln was very prescient.

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#4) On August 12, 2009 at 11:31 AM, ReadEmAnWeep (47.45) wrote:

+ 1 for the fitting quote at the end.

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#5) On August 12, 2009 at 6:18 PM, uclayoda87 (29.23) wrote:

I didn't know GS was present in Abraham Lincoln's time.

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#6) On August 12, 2009 at 9:25 PM, silverminer (31.30) wrote:

Jim Sinclair's commentary today:

Dear Extended Family,

The economic intervention so far in this crisis has been limited in focus and vast in size.

So far all that has happened of note is that the losing side of the OTC derivatives have been bailed out to pay off the winning side. Yes, there has been some direct economic stimulus, but in comparison it is very small.

There has been much talk about regulating new OTC derivatives but this has nothing to do with the huge and growing mountain of WMDs outstanding. Exchanges have been studying listing derivatives, but so far no exchange can devise a method of accurate valuation and as a result no clearinghouse function is possible. No clearinghouse means no listing of the OTC form of derivative. This also has no application to the standing mountain of WMD paper.

All of the above speaks to financial intervention that has not been focused on offsetting the problem of a mountain of worthless paper that still threatens the financial system and therefore in time, as now, the real economy.

Intervention to stop a downward spiral must be focused on the primary economic factor causing the economic downward spiral. It has not been and now the real economy is in trouble.

The standard principle of Management of Perspective Economics is that markets will impact the thinking of all levels of business. Therefore a positive stock market can offset a deep recession and planners have taken comfort in the appreciation of world equity market indices.

The reason that this is a 1932 type rally is twofold. Nothing has really been done that can be called focused intervention to offset the economic downward spiral, and because problems have spread out of finance into the real economy.

Stay the course.

Do not be diverted by MOPE, SPIN or strong PR of technical opinions to the contrary, a form of spin.

We are far from the end to our problems. Very far.

Respectfully yours,
Jim

 

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#7) On August 12, 2009 at 11:03 PM, HighRisk41 (38.21) wrote:

Now we all know what it feels like to be flushed down the toilet. Except for the Elites... govt, goldman sachs, AIG ect ect.. They are doing the flushing and laughing the whole time.  +1   we all should be a little worried.

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#8) On August 20, 2009 at 7:24 PM, XMFSinchiruna (27.48) wrote:

The new trickle down effect

 

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