Friday, July 31, 2009

The Depression is over!

Happy days are here again! The US GDP was "only" down 1% the last quarter. The factories have all reopened as the massive employment programs of the WPA and CCC put men and boys to work building infrastructure all across American, Government programs have refinanced all the mortgages at affordable rates.... Wait, wrong century. We continue to hemorrhage jobs at an alarming rate and as the quarter ended the extended unemployment benefits for many workers started to run out. Factories continue to be crated up and shipped to China and exports continue to decline. Foreclosures continue unabated, expected to exceed 8 million this year.

So why the "improvement" or rather less decline in the GDP? Who is turning over money? The biggest slice of pie in chart of the GDP is financial services "industry". They’re doing really well, aren’t they? Some 4800 Wall Street executives got bonuses in excess of a million dollars. Big banks got trillions from the Federal Reserve and are showing record profits on paper despite ongoing record losses on loans. Sales of foreclosed homes have also adding to business activity and selling factories and our natural resources to China helps.

Will the next quarter look as rosy? Will cash for clunkers rebuild the economy? Earlier today the FDIC seized four small banks at an estimated cost of 200 million to taxpayers. A few minutes ago they seized a larger bank in Illinois at an estimated cost of 700 million. This number of banks is less than the six taken over last Friday but the day isn’t over yet. The FDIC has "leaked" the information that they have a list of 300 banks they are watching. Banking pundits are putting the number of closing this year at around a thousand. The expanded FDIC consumer bank account insurance expires at the end of the year, Congress will probably extend it, if anybody is still taking US Dollars.