John McDonald

Blogging about politics, life, and the web

Not the Economic Recovery most were Hoping for

May 30th, 2009

Our leaders are infinitely optimistic about economic issues – and they should be, since the modern economy is mostly a confidence game.

We’ve moved well past fundamentals into an economic world driven by faith – not a faith in raw numbers or sustainable economic systems – but a faith in the authority of the experts who specialize in snuffing out panic and public doubts.

In the last week, bond markets have shifted around radically. Despite Federal Reserve efforts to keep interest rates low, investors are demanding higher returns on “safe” investments like U.S. government debt. With so much debt hitting the markets at the same time investors are seeing their existing capital deflate, it almost surprises me that the offerings would sell at all – at any rate of return.

For the mortgage market, the creep up of rates could lead to extra complications when adjustable loans reset. And even without rising rates, the option-payment ARMs will lead us down another path of defaults and unwinding of leveraged investments based on questionable bubble-era mortgage pricing.

Trust me – I don’t want to be pessimistic! I would love to see hosting sales return to 2008 levels. It seems like despite how many new coupons and discounts I offer, the sales just can’t keep up any more. There’s even some indication that college enrollment has slowed down or even stopped growing – fewer students are signing up for scholarship & financial aid services, even when adjusted to seasonal slowdowns that accompany summer semesters.

For some banks with access to near-zero government loans, the recovery might be as real as the price increases in commodities over the last few months. As long as the value of those dollars continues to fall, they’ll continue to turn out a profit at the expense of generally higher costs. Wages stink and employment is still falling – and sure, unemployment is a lagging indicator, so we’re only seeing the effect of the last wave of mortgage failures and bank defaults. The next one is still brewing – inevitably on the horizon.

Comments

2 Comments

RSS
  • Steve (display booths) says on: June 11, 2009 at 9:50 am

     

    hi John,
    I agree with you that things don’t look so good. And with the huge amount of debt being built up, it looks like this country is digging the hole deeper instead of trying to get out. I’m not sure how long things can be “put off”. But enough doom and gloom. 🙂
    I would email you but I don’t see a contact address. I’m not sure if you know, but your other websites are DOWN. Message says, “This Account Has Been Suspended. Please contact the support department as soon as possible, and please have your site name ready.”.
    Hope that’s just temporary! Steve, aka display booths

  • John McDonald says on: September 16, 2009 at 8:13 am

     

    Yes, holy crap, it took me three months to find & approve this comment so you can see how screwed up things have been. When we went to Ireland in early June, someone managed to get into one of my sites for the purpose of sending out massive amounts of unsolicited email. Bluehost wasn’t too happy about that, needless to say!

    Everything should be just about back to normal now with the exception of the site that got attacked. Fortunately or unfortunately (i’m not sure) that site never really made any money and it was just a place for me to post political rants. I did save my favorite rants, but most of that site is lost to the abyss.

Your email address will not be published. Required fields are marked *

*