My God Brother Steve called me “Bean Bean”. Here is a link to the story. Many of my friends refer to me as “Bean”, or “The Bean”. In fact, most call themselves “Brian’s Beans”.
I call people I like or admire (some times both) “Human Beans”.
Most seem to think I know what I talk about. And, it seems like magic.
It certainly feels like magic.
In any event… As promised in my prior post “Question everything and accept Nothing”, here is some critical thinking, and potential economic predictions…
WARNING: This may come across a tad grim. But, I promise to be more playful in the next few weeks.
My guess, looking through the economic fog that currently surrounds us, is that the global economy is on the edge of a major event. I am thinking of something in terms of a waterfall-like decline.
Chaotic, tumultuous, steep. As we go over the brink – let’s admire the view. Here are (some of) my forecasts for 2009.
The past two years were phase one of the downturn: a financial crisis affecting Wall Street, banks and brokers. The next two years will be phase two: a sustained decline affecting “Main Street” — industry, commerce, retail, governments, etc.
This is me, again, thinking in terms of the Laws of Natural Selection.
So, there will be “selective success” in-and-amongst Main Street – backing up through banks and Wall Street. … You know, manipulation and related shenanigans. But, this is how it always works. And, needs to work. America likes progress. So, if members of the House and Senate want to keep their seats, they must needs deliver.
So… Barack Obama will invoke all manner of interesting stimulus. This will probably start in the first quarter with banks pumping money into the marketplace with private equity and Venture Capital in hot pursuit.
This is when and where the rich get richer (never mind Democratic ideology – that is all hog-wash any way) and the shrinking middle class becomes all the more befuddled.
It id likely going to be a front; but, it will be jarring nonetheless. January will start the first quarter with a bang.
(1) A hail of pink slips (but mostly redundant workers that can be replaced with contractors) as most businesses seek to reduce headcount by 5% – 10% — and seriously affected businesses do much more. Like retail, as they close their marginal stores. I think the unusual number of layoff announcements during the December holidays foreshadowed the main event,
(2) Retail bankruptcies. The extraordinary number of retail bankruptcies during the Christmas shopping season sets the stage for the tsunami hitting in the first few months of 2009. See “Retailers Brace for Major Change“, Wall Street Journal, 27 December 2008.
The big stories for 2009
The primary theme of this downturn has been the unexpected breaking of “links” — components of our economic system. One such, the opening act of the crisis, was the mass failure of mortgage brokers starting in December 2006. The a long series of banks, investment banks, insurance companies, and the government-sponsored enterprises followed them into collapse — or forced marriages (mergers and acquisitions) /1, or life-support on the government’s teat.
Cork: So what will be the surprises for 2009?
(1) Many non-financial firms will collapse (meaning that their functioning is seriously disrupted due to financial problems). Some of this is expected: in the auto, retail, and construction industries. Most will be unexpected, big and small. Some will result from banks cutting off their loans (anecdotal reports suggest this is happening now to small firms). Some will result from revenue declines. This will drive many small and medium banks over the edge, following their larger cousins. There will be lots of bankruptcies as 2009 runs and even more in 2010.
(2) Many local governments and agencies could collapse, perhaps even some states (e.g., Michigan, California [again]). More bankruptcies, although this might be a 2010 story — however (this is where it REALLY gets interesting) this will be strongly mitigated by Federal aid and Wall Street /2.
(3) The recession will spread from the developed nations (most now in recession) to the emerging nations.
- For example, watch China, as most experts expecting GDP growth of 4% – 8%. Outright decline is possible, and would force everyone (optimists and pessimists alike) back to the chalkboards to revise their calculations.
- Watch the oil exporting nations, many of which will run large fiscal deficits. Iran needs $90 oil to balance its budget, Algeria $56, Saudi Arabia $50. Mexico has forward sold much of its 2009 production; after that the deluge if oil prices have not recovered.
Cork again: What about the government?
The primary implication of the above (well considered) speculation is that the Obama Administration starts behind the curve. The major factor will be when (or if) they update their OODA (observation-orientation-decision-action) loops to run as rapidly as events — responding to current events instead of (like Bernanke and Paulson) the situation as it was 3 months ago.
I am confident that this will happen at some point in the downturn. Perhaps they might eventually understand the overall processes at work, and act preemptively (look for preemptive Presidential pardons. This is a tip that government and Wall Street “understand” one another).
In the next few weeks I will (unless I get distracted and forget) sketch out why government policy will not help much during 2009 (NOTE: fiscal policy might be the big story for the US economy in 2010). However, in brief – and, in my opinion, the window for Congress to act was November and December. Bold action could have buffered (not prevented) the shock, as described here on 7 October /3. But, I think that window has closed. However, the recommendations remain valid; if implemented during the next few months, they will help in late 2009, and (on a large scale) in 2010.
Meanwhile… I bet we haven’t even begun to consider the nightmare and madness all this means for poverty-strickened nations like Africa in terms of even larger-scale starvation, disease and war. That will signal a real tipping point when shredded economies have no choice but to turn on one another just to survive. More on this later. But, look at a world map and consider what naval alliances could be formed.
Peace be to my Brothers and Sisters.
Brian Patrick Cork
1/ However, this has also given us our first legitimate World Bank candidate. Gotta love the Illuminati.
2/ You know the drill… Buy low, sell high. The survivors will own even more than they imagined before this all began.
3/ A significant day – always chock full of signs and portent.