Thursday, October 15, 2009

Is There Such Thing as a “Recover-less” Recovery?

This is certainly an interesting time for the economy and the world in general. After being rocked by one of the worst financial blows recorded we are seeing a mixed bag of results:

The Stock Market?

Up. Now hovering around 10,000.


Up. Now at 9.8% but as many analysts point out the real number is closer to 17%. It’s predicted to reach 10.5%.

CMBS Delinquency Rate?

Up. September posted a rate of 3.64% as opposed to .54% a year ago.

Home Foreclosure Rates?

Up. “As of last month, 7.58 percent of U.S. homeowners were at least 30 days late on their mortgages, up from 7.32 percent in July”.

U.S. Debt?

Up. It’s currently over $11 trillion.

There are no doubt numerous other indicators which should be thrown into the tea leaves but aside from the stock market it seems like we are in for a somewhat downtrodden recovery. The recession may be characterized as “over” but do most people really feel that way?

The term “jobless recovery” is thrown around a lot but looking at all these numbers, one wonders if there is also such thing as a “recover-less recovery”. If unemployment continues to rise, people will naturally spend less and more defaults will be observed. Furthermore, due to the large amount of debt accrued over the past few years, one would expect a lot of earnings to be dedicated to debt obligations, not current spending.

When giving out coupons for products businesses are often faced with the prospect of “borrowing from future sales”. They may increase sales numbers this month but next month they will go down. Collectively we did just that over the past decade, borrowing from future prosperity to have it “right now”. Naturally we are now experiencing the subsequent drought. There is nothing to really do; giving out more coupons (stimulus) only puts off the problem till later. That is why the recovery does not really feel like one. The economic growth that was supposed to sustain us today was spent yesterday.

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