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alstry (35.03)

Why 50% unemployment

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September 15, 2008 – Comments (0)

First of all, I am not saying we have 50% unemployment right now.  I am saying using tradtional calculation methodolgies......we COULD reach 50% unemployment.

Let me explain the thesis a bit.  Lehman Brothers is shutting down.  For LEH employees that will be 100% unemployment.  But the impact will be felt far beyond LEH, it will ripple through all of their vendors and businesses that depended on their employees support.

Merrill is merging with BAC, there is little doubt that a bunch of those employees will be let go as well. 

But it is not just finanical services companies.....residential construction is ALREADY down more than 50%, trucking is down significantly, airlines as well(30 down so far and British Airways CEO expects 30 more failures by the end of the year).....and we could go on and on.

By all these industries collapsing, it will cause tax local, state, and federal revenues to evaporate forcing even more contraction at the government level.  The process will feed upon itself and become an adverse feedback loop.

In the end, what is the equilibruim employment level to service a delevered American economy.  Just look around, it apprears to me that we have about twice as much of everything that we really need to get by.....whether we contract to that point is still unknown.

Some people say its irresponsible to assert the above....from my perspective it is irresponsible not to warn about a potential train wreck.....especially when you are being fed a bunch of nonsense from the media and our politicans.

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