How the Crash Will Reshape America

How the Crash Will Reshape America

(Source: The Atlantic Monthly, March 2009)
The current economic crisis is unlikely to result in the same kind of shared experience. To be sure, the economic contraction is causing pain just about everywhere. In October, less than a month after the financial markets began to melt down, Moody’s Economy.com* published an assessment of recent economic activity within 381 U.S. metropolitan areas. Three hundred and two were already in deep recession, and 64 more were at risk. Only 15 areas were still expanding. Notable among them were the oil- and natural-resource-rich regions of Texas and Oklahoma, buoyed by energy prices that have since fallen; and the Greater Washington, D.C., region, where government bailouts, the nationalization of financial companies, and fiscal expansion are creating work for lawyers, lobbyists, political scientists, and government contractors.

No place in the United States is likely to escape a long and deep recession. Nonetheless, as the crisis continues to spread outward from New York, through industrial centers like Detroit, and into the Sun Belt, it will undoubtedly settle much more heavily on some places than on others. Some cities and regions will eventually spring back stronger than before. Others may never come back at all. As the crisis deepens, it will permanently and profoundly alter the country’s economic landscape. I believe it marks the end of a chapter in American economic history, and indeed, the end of a whole way of life.

Searching for an Optimist at Davos

Searching for an Optimist at Davos

(From Slate Magazine, ... went to Davos but could not spot the 'famous optimistic Davos Man'. What's going on in the World? Only big profits for Pharmaceutical Conmpanies in 2009, or will a bit of fresh air and some physical activity do the trick? Will people after the 2010 WEF meeting cautiously ask how your health is and whether you need some help? )

CNBC's Jim Cramer likes to say that there's always a bull market some­where. When one region is down, the theory goes, another is up. At the World Economic Forum in Davos, Switzerland, however, the only bull market was in pessimism. On the Promenade, Davos's main drag, a woman accosted me, asked whether I knew what was in the Book of Revela­tion, and wondered whether I had been inscribed in the Book of Life.
Historically, such apocalyptic thoughts have been rare at this meeting of the world's financial and political elite. A Davos Man is an optimist by nature and profession. Ordinarily, self-assurance is so thick in the resort town, you can cut it with a Swiss Army Knife. But the only place I saw people laughing in the face of danger and wearing exhilarated expressions was on the sparsely populated ski slopes.
Yet many CEOs bore the harrowed looks of survivors of the Donner Party. Once they trickled in, many having endured the indignity of flying commercial for the first time in years, they were treated to an avalanche of doomsaying. Alarmists, from hedge-fund manager George Soros to historian Niall Ferguson, spun elaborate tales of catastrophe. Ferguson boldly concluded that the United States was destined for a decade of extremely lame growth. Economists were universally downbeat, which isn't totally surprising. (They don't call economics the dismal science for nothing.) Those who had successfully predicted the debacle, like Nouriel Roubini, New York University's Dr. Doom, were elevated to prime speaking slots. Last year, the hot topics were sustainability and decoupling—the notion that developed markets could boom even if the United States stalled. This year, failure and depression were the chief subject of discussion.
Read on, follow the link..
http://www.slate.com/id/2210100?wpisrc=newsletter

The high end Art Market, the auction houses and the end of the bubble.

The incredible shrinking saleroom (Dec 24th 2008)
The high end Art Market, the auction houses and the end of the bubble.

With more than 200.000 lay-offs in Wall Street alone and many more in London and other financial districts around the world, stock markets off between 35 % and 55% globally, property prices like in East Hampton fallen by over 35%, and the gobal recession taking shape, the high end Art Market can be expected to take a heavy hit.

(from The Economist) THE moment the art market plummets is almost always signalled by a sudden catastrophic sale. This time was quite different. The top of the market can be narrowed down to the two-hour cocktail slot on Monday, September 15th 2008, when Oliver Barker raised more than £70m ($107.8m) in the first session of “Beautiful Inside My Head Forever”, the epic sale of Damien Hirst by Damien Hirst.
Thousands of people came to see the show in London during the ten days it was on view in the run-up to the sale. So many people registered to bid that Sotheby’s had to open up two extra rooms to accommodate the overflow. Against a background of one of Mr Hirst’s colourful spin paintings, Mr Barker worked the rooms hard. Just two lots of 56 failed to sell, and only three sold for less than the low estimate.

Third-quarter results, which cover the long summer period when there are no sales, revealed little. Only the fourth-quarter figures, due out in February, will show the full picture.
Auction house executives are already bracing themselves. “We are predicting dramatically reduced sales volumes,” Edward Dolman, Christie’s chief executive told The Economist on December 18th. “We’ve seen confidence dwindle away. People are not certain where prices are. Buyers all round are being very circumspect.” Death, divorce and debt will continue to provide artworks for the auction market. But discretionary sellers, who don’t have to sell, are likely to want to sit it out until things improve. “We’re not predicting much discretionary selling at all next year,” Mr Dolman said.

The Bulls are very resilient

The Bulls are very resilient and do not give up easily.
Despite all the bad economic news, the job losses, the worsening 2009 outlook and predictions, the Bulls do not lack optimism. Some are even predicting a rally starting in January next year and the Dow going back to 12.000.
Over-optimism and lack of Realism or just a New Reality? We'll see.
One thing is for sure, it's an uncertain creative process starting with new thinking and new ideas.
In the dark days before Christmas we do not need people going into a depression.
Unfortunately the DOW, NASDAQ and S&P500 are sinking again today, it's more like 2 steps backward and 1 step forward.

Stocks Follow a Pattern, Dropping in Last Hour (New York Tines Permalink)
By JACK HEALY Published: December 5, 2008
Oil prices closed down $3 a barrel to $43.79 as the economy slows and demand eases.

The Return of Protectionism?

The spread of free markets and liberal democracy is crucial in this time in history.

But we are beginning to hear louder 'voices for protectionism and nationalism'.
On the G20 (emergency) meeting this weekend we expect to hear pleas for new forms of protectionism from the already highly protective Agricultural Industry.
The mood to allow some kind of protectionism is in Europe already changing, with France as usual in the lead - although Mr Sarkozy seems to be a lot smarter than his predecessors about 80 years ago but he won't stay with Carla forever.

The EU and the USA are experiencing difficult economic times and are very likely to use the instrument of protectionism for convenience. The next U.S. president will also get under pressure from the automotive industry and the unions facing massive layoffs. So, let's see how this is developing, and whether this recession will turn into a depression.