<p>This one is differeent, in some ways it is more like the 1930’s then anything else we have seen in that this one is going to linger, and the impact is widespread. While the crisis was spawned by a financial meltdown caused by a financial bubble, a lot of the problems are structural. Thanks to the opening of places like India and China as they went to market economies, industries were able to send jobs to incredibly cheap labor markets at pretty low capital costs (and don’t believe the crap about ‘doing a better job’, working in IT, I can tell you outright it is the 80% cost savings, not skill set; while some very talented people come out of India and China, many of them are as mediocre or worse then what I have seen here over the years; plus if their workers are so good, how come they have to work for companies outside their country rather then developing companies and goods/services themselves?).</p>
<p>What makes this especially bad is the financial sector that normally would lead the way in recovery, commercial banking, is still reeling from bad loans and from their gambling with risky speculative investments, and because of that even if a company wants to expand, they cannot get financing. The debt on the three biggest banks, Citi, BOA and Wells Fargo just got hammered in ratings, and the credit default swaps issued against that debt is at ridiculously high levels, telling you how shaky they are (credit default swaps, for those not in the know, are sort of like insurance policies for bonds; you pay a certain amount for them, a percentage of the value of the loan, and if the bond defaults the issuer would owe you the face of the bond. Right now, some of the bank bonds are running near 40% of face value to buy a swap, be like getting a million dollar life insurance policy and paying 400,000 for it…). </p>
<p>I think this is a long term one, and I think given the global nature of things, is going to take a long time to work out, and it is going to be ugly. Quite frankly, eventually people are going to get tired of the excuses, are going to realize that cutting the budget deficit (though a real goal) isn’t going to create jobs, that stimulus won’t do so long term, that sending jobs to China and India increases the bottom line but doesn’t create demand for what the company makes, that to be able to create jobs here takes capital spending and innovation, rather then looking for dirt cheap labor, and that bashing unions, ‘lazy’ workers and the like is eventually going to fall on deaf ears. Mike Bloomberg, the mayor of NYC, recently got blasted for saying job creation is critical, that we could end up with young people rioting in the streets if this keeps up…and those pooh poohing that should go and read real histories of the great depression, not the drivel promoted in some sections of the media, to see how bad that is. Likewise, if we keep with this massive concentration of wealth in the hands of the few, where most people are losing ground and top level compensation is growing 20% a year or more, where more and more of the wealth and income ends up in very few hands, you will really see a revolt IMO. </p>
<p>This is not a cyclical recession, this is a fundamental economic shift, and unless things are done to help adjust, the falling out is going to be brutal, and a lot of assumptions people have had here and around the world, are going to fall by the wayside and they won’t be happy. I also think there is going to be a global backlash against places like China and India, that people are not going to tolerate countries manipulating trade rules and regulations to benefit themselves and also are not going to allow the one sided nature of the way things stand, where basically they are import/export countries, they import jobs and raw materials and export goods but import little of anything else. We came close to this with Japan, but they realized it was in their interest to not allow that to happen.</p>