Monday, July 12, 2010
Economy on the brink?
Is The U.S. Economy Going To Turn Around As We Approach The Christmas Season And The End Of The Year?
Many analysts are hoping that as the holidays approach the American people will get back to their old ways of spending massive amounts of money and that this will help jumpstart the U.S. economy.
So is there reason for optimism?
Vacancies and lease rates at U.S. shopping centers continued to get even worse during the second quarter of 2010. In fact, in some of the most depressed areas of the United States, many malls and shopping centers could end up looking like ghost towns by the time Christmas rolls around.
So what are some of the areas in the U.S. that are the worst economic disaster zones?
Well, everyone knows about Detroit. Once regarded as one of the crown jewels of American industry, Detroit is now a rusted-out war zone that is a shell of its former self.
South of there, the state of Illinois has now become a complete and total disaster zone. The government of Illinois has stopped paying even its most essential bills and it now ranks eighth in the world in possible bond-holder default. Universities and government agencies are experiencing absolute chaos as they try to figure out how they are going to continue to function without any money.
Of course then there is California, where the Schwarzenegger administration has won an appellate court ruling saying it has the authority to impose the federal minimum wage of $7.25 an hour on more than 200,000 state workers as California wrestles with its latest budget crisis. Things are now so bad in California that in the region around the state capital, Sacramento, there is now one closed business for every six that are still open.
Next door to California, in Nevada, things may be even worse. Official unemployment in Nevada is hovering around 14 percent (unofficially it is much higher of course) and it is estimated that a whopping 65 percent of all homes in the state of Nevada are underwater. There is perhaps no state in the U.S. that has been hurt more seriously by the housing crash than Nevada.
Unfortunately, things look like they are going to get even tighter for state and local governments in the year ahead. Economist Mark Zandi is warning that up to 400,000 state and local government workers could lose their jobs in the next year as states, counties and cities grapple with lower revenue and less federal funding.
On top of all this, there is the threat that the Gulf of Mexico oil spill could push the teetering U.S. economy completely over the edge.
Many cities along the Gulf of Mexico coast were already economic disaster zones even before this oil spill.
But now we are talking about an economic nightmare of unprecedented proportions.
The seafood, tourism and real estate industries along the Gulf coast have been decimated and people are leaving in droves. It could be years, or even decades, before things get back to some kind of "normal" in the area.
Some are even warning that this oil spill could cause the collapse of BP, and if that happens it could bring about absolute chaos on world financial markets.
Well, it turns out that BP is a major source of global liquidity and is a major player in the worldwide derivatives market.
If someday the worldwide derivatives market crashes, there won't be enough money in the entire world to fix that problem.