Despite the rising stock market, virtually everything else continues to deteriorate in the economy. An earlier post dealt with this anomaly.
There literally is not one thing that can be claimed as a positive. And that includes the phony GDP third quarter “improvement” and presumably a better (preliminary) number for the fourth quarter. Here is a quick (not all inclusive) list as to why things will get worse rather than better:
- Bankruptcies and unemployment continue to increase.
- Foreclosures are increasing and will get worse.
- The Housing market will worsen as a result of more foreclosures and more mortgage resets in 2010
- The Federal Government’s deficits continue to grow
- Foreigner financing, necessary to support our deficits, is decreasing
- The private sector continues to decline as evidenced by state income and sales tax collections
- Private and state pensions continue to fall further behind actuarial soundness putting special pressures on local and state governments
- States continue to spend beyond sustainable levels
- Consumers will underspend for several years because of too much debt
- Health care “reform” adds costs and problems to the out-years
- Legislation passed and proposed causes small business to hunker down and refrain from expanding or hiring
- The banking system continues to deteriorate
- Credit is being increasingly withheld from small business and commercial real estate
- The FDIC is out of money
- Bailouts, promised to produce returns for taxpayers, are turning sour
- Fannie and Freddie are now completely guaranteed by taxpayers
- The FHA is repeating the same mistakes as Fannie and Freddie
- There is no private mortgage market left; much of existing mortgage and all new mortgages are underwritten by taxpayers
- Raising taxes is not feasible because it will kill the economy
- Rising interest rates will do the same
- The Fed will not be able to remove excess liquidity from the system
- The Federal government is unable (unwilling) to cut spending
- Unless the Fed continues QE, the Federal Government will be unable to pay its bills
- The Commercial Real Estate problem has just started to be felt
A summary of some of these items was included in a short slide presentation by David Rosenberg.
A perspective on one state’s budget woes (yes, it goes way beyond California, Michigan and New York) can be obtained from this Mish article.