Stock Market Dollar Store: U.S. Dollar Down 12.5 Percent and S&P 500 Up 50 Percent since March. How the U.S. Treasury and Federal Reserve Juice the Stock Market.
Americans have missed one serious correction since the manic stock market took off in March. Since that time the value of the U.S. dollar, the bedrock of our economic system has fallen a stunning 12.5 percent. Currencies should not fluctuate this much especially the world’s reserve currency. Back in December, I talked about how the U.S. Treasury and Federal Reserve were determined to destroy the dollar for the sake of bailing out our massive debt. The plan in the short run has created a stunning stock market rally that has set the S&P 500 on fire to a 50 percent rally. In a recession this profound, you don’t typically turn things around in two years (the recession started officially in December of 2007). Yet this appears to be more of a bear market rally since the unemployment picture will remain bleak for months to come.
Commercial Real Estate, Construction and Finance Employment: How Commercial Real Estate will drag the California Economy Deeper into Recession. 32 Percent of California Construction Jobs Gone.
California is heavily dependent on real estate. That should be of little surprise to you but many have a hard time understanding how devastating the housing crash is to employment in various sectors. California for 30 years relied on housing even though in many years, it was in a bubble. That is why in 2009 the state has had to patch up some $60 billion in budget deficits. You might think the housing industry is big but in Southern California alone, the housing industry contributed some $24 billion in revenue (enough to patch up our last budget). With the massive over building we have assured ourselves that construction will not be leading California out of any sort of economic slump like it had in previous recessions.
Financial Brinkmanship: Forcing Americans to Spend and Discouraging Savings. Americans Decide to Save Forced by a New Austerity. Banks Offering Zero Percent on Your Savings Account.
Spending more than you earn is a financially devastating recipe for individuals and nations. I’ve read countless pop financial books on how to gain and sustain wealth and those that have any substance always emphasize saving your money, spending less than you earn, and being prudent with your funds. In no book did I ever read that going with a cash for clunkers gimmick was a way to automatic wealth. Many Americans faced with a deep unemployment crisis have had to morph their spending habits by force. I’ve talked about this new found austerity and how it is having a profound impact on society. These will be fundamental structural changes. Just like the Great Depression generation some of these new habits will stick for life.
California Budget Miscalculation: The $60 Billion Budget Gap. Cargo Levels near Decade Lows. Why the Financial Recovery will come last to California.
The largest singular economy in the United States is still facing a fiscal mess. California is still trying to grapple with the budget deal that is now in place. The challenging part seemed getting a budget passed but the more challenging aspect of the budget process is enacting the $26 billion in fixes. Over the last two chaotic years, the state of California has had to figure out how to bridge a stunning $60 billion budget gap. Much of this has to do with the 30 year housing bubble that exploited the gold rush mentality of California. Since the bubble burst in 2007, the state’s revenues have fallen off a cliff and with it, taking down most of the money that the 8th largest economy in the world takes in. Many economists are now predicting a peak unemployment rate for the state of 13, 13.5, and 14 percent. There will be tough times ahead for the state and I would expect that come fall and winter, we will be seeing another gap in revenues.