Financial Crisis

The Crisis Next Time: Public Finance

iStock_000005570909XSmall.jpg

The financial crisis of 2008 paved the way for the employment crisis of 2009, which has now paved the way for the upcoming public finance crisis of 2010. Most federal, state and municipal budgets are strained to the breaking point while the economy still has not found its footing. Meanwhile our national politics is obsessed with expensive overhauls of environmental policy and healthcare reform. Our latest policy strategy is an attempt to borrow and spend our way to prosperity, ala Japan of the past twenty years.  read more »

The Economic Fallout of the Chicago Way

iStock_000005600080XSmall.jpg

Many large American cities are hurting from the recent recession. Unrealistic revenue assumptions based on ever higher real estate prices and sales tax receipts have left cities unable to pay their basic bills. As asset and consumer prices deflate, from a lack of demand, those cities with “sticky” costs – the result of overly powerful unions and excessive business regulations – are stuck in an economic quagmire.

Chicago has become a leading poster child for recent urban economic malaise. With the election of Barack Obama, 2009 was supposed to be a year in which the Windy City basked in glory.  read more »

Memo to Big City Pols: Voters’ Suspicions on Influence Peddling Is Far Cry From Stupidity

staples-center.jpg

A significant clue on why the City of Los Angeles is facing budget deficits of hundreds of million annually for the foreseeable future can be found in the relationship between elected officials and AEG, the company that’s controlled by Denver-based multi-billionaire Philip Anschutz.

AEG owns the Staples Center and the adjacent L.A. Live, which includes shops and restaurants to go with one nice hotel and another luxurious establishment that will be topped by high-priced condominiums when completed.  read more »

What Happens When California Defaults?

iStock_000006401715XSmall.jpg

The California Legislative Analyst’s Office recently reported that the State faces a $21 billion shortfall in the current as well as the next fiscal year. That’s a problem, a really big problem. My young son would say it was a ginormous problem. In fact, it may be an insurmountable problem.  read more »

DUBAI: A High Stakes Bet on the Future

dubai-silicon-oasis-sm.jpg

I picked up a copy of The Wall Street Journal-Europe on the concourse while boarding my Emirates Air flight from Paris to Dubai. The lead story provided an unexpected relevance to the trip – my first to Dubai. Dubai World, owned by the Dubai government, had announced a 6-month moratorium on payments of some of its $60 billion in debt. Since the announcement, stock markets have been dropping and recovering, company officials have attempted to calm borrowers and government officials have provided considerably less assurance than Dubai’s investors would have preferred.  read more »

Housing Bubbles: Why are Americans Ignoring Reality?

iStock_000010918138XSmall.jpg

Dr. Housing Bubble (based in California), in "The comprehensive state of the US housing market", asserts that of the 129 million residential units in the United States, some 15,950,000 are vacant, resulting in a huge oversupply of residential stock across the country.

Other United States commentators are making the same assertions, such as Colin Barr of Fortune magazine with "Housing market still faces a big glut".  read more »

When the Fat Lady Sings: The Fate of Commercial Real Estate

changinglandscape.jpg

During the first ten days of October 2008, the Dow Jones dropped 2,399.47 points, losing trillions of investor equity. The Federal Government pushed TARP, a $700 billion bail-out, through Congress to rescue the beleaguered financial institutions. The collapse of the financial system was likened to an earthquake. In reality, what happened was more like a shift of tectonic plates.

***********************************  read more »

Honest Services From Bankers? Increasingly Not Likely

iStock_000003435126XSmall.jpg

Once you understand what financial services are, you’ll quickly come to realize that American consumers are not getting the honest services that they have come to expect from banks. A bank is a business. They offer financial services for profit. Their primary function is to keep money for individual people or companies and to make loans. Banks – and all the Wall Street firms are banks now – play an important role in the virtuous circle of savings and investment. When households have excess earnings – more money than they need for their expenses – they can make savings deposits at banks. Banks channel savings from households to entrepreneurs and businesses in the form of loans. Entrepreneurs can use the loans to create new businesses which will employee more labor, thus increasing the earnings that households have available to more savings deposits – which brings the process fully around the virtuous circle.  read more »

GOP Needs Economic Populism

030309fincrisis1028.jpg

You would think, given the massive dissatisfaction with an economy that guarantees mega-bonuses for the rich and continued high unemployment, that the GOP would smell an opportunity. In my travels around the country — including in midstream places like suburban Kansas City and Kentucky — few, including Democrats, express any faith in the president’s basic economic strategy.  read more »

Report from Orlando: The Spirit Rocks On

iStock_000005636445XSmall.jpg

By Richard Reep

“In hard times, people turn to God or alcohol” jokes Bud Johnson of Constructwire, a database that tracks planning and construction projects nationwide. Johnson, 50, is an industry veteran and has never seen a recession like this in his career. “This is an exceptionally broad-based downturn,” he says, “and Orlando has been hit harder than most in the South, what with your only real industries being housing and tourism.” Both industries have been trapped like mammoths in a glacier as the credit market stays stubbornly frozen in a modern banking Ice Age.  read more »