“Cookin’ the Books” – Part II

“Cookin’ the Books” - Part II: We retained a part of Mike Folkerth’s title from his 8/10, 2009 post at mikefolkerth.com: “Culinary Accounting; Cookin’ the Books!”. We  presented some of his views, and those of another writer, the first part of the week and wanted to add some of Charles Hugh Smith’s views on the “real” state of the economy via a Part II.

So here we go with some of Charles Hugh Smith’s  views on the “real” economy as expressed in his piece, “10 Pins for the Stock market Bubble” (posted on his site, Of Two Minds (oftwominds.com), this past Monday – 8/10/09):

1.“Structural unemployment is skyrocketing, Job Losses Moderate: But structural unemployment worsened. The number of people who’ve been out of work longer than six months soared by a record 584,000 to 5 million, accounting for more than a third of all unemployment for the first time on record.

“Structural” is a polite way of saying there won’t be any jobs for the long-term unemployed this year, next year, or the year after that.”

2.”The jobless rate declined because the work force shrank. … as people lose extended unemployment benefits, they are classified as “discouraged” and are no longer counted in the ’headline” unemployment number.”

3.“Everyone seems to have forgotten we need to create 250,000 jobs a month just to stay even with population growth. So while “only” 250,000 jobs were lost last month –… –that means we’re still 500,000 jobs short of a return to a rising employment scenario.”

4.“The interest on all the debt the nation is taking on to bail out bankers and ’stimulate” the dead credit-bubble model will place a drag on growth far into the future. At the end of March 2009, Bloomberg reported that, “The U.S. government and the Federal Reserve have spent, lent or committed 412.6 trillion, an amount that approaches the value of everything produced in the country last year.” “

5.“Interest rates are set to double. There’s actually more demand for surplus cash than there is supply of surplus cash. That sets up a supply-demand imbalance which leads to higher costs of borrowing.’

6.“Tax revenues are tanking. Government revenue is at its lowest level since the Depression, and most states are on the verge of bankruptcy.”

7.”Normal accounting and reporting rules have been suspended. … mark-to-market is still a pipe dream; mark-to-fantasy reigns supreme as the easiest way to prop up insolvent banks’ balance sheets.”

8.“Commercial Real Estate is spiraling down the drain.”

9.“Consumers are retrenching generationally, not for a few months.”

10.“Residential housing is not healed; it’s still bleeding profusely. Nearly half of U.S. mortgages seen as underwater by 2011.”

“Lagniappe pin: healthcare “reform” will not lower healthcare costs by any measurable degree. … healthcare … will remain in essence a stupendous tax on the few remaining productive sectors of the U.S. economy.”

Part I and Part II of “Cookin’ the Books” this week shows all of us that there are some strong and well-reasoned arguments supporting the view that our economy is in terrible shape with a questionable prognosis for future health at best. It would seem wise to prepare for what may be some very difficult times ahead.

Until next week; keep your eyes on the horizon as the weathers changing fast.