Worldwide credit crunch hammering Puget Sound companies
Now you know why major economic crises in the 19th century were called panics. Almost every day brings a fresh clash. On Wednesday, it was greater amount of layoffs at Boeing and a stunning announcement of 6,700 cuts at Starbucks. This is any anxious city in a nervous nation.
But it’s not 1929, despite eerie parallels in the financial system and threat of global deflation. We now have government security nets that would cushion the Great Depression’s massive suffering and a federal commonwealth with a greater ability to prop up the economy by countercyclical expenditure.
It’session not the early 1980s, either, when the prime regard rate hit 20.5 percent and self-conceit topped 14 percent.
This is new and divergent. Anybody who tells you what happens next will also sell you more WaMu subprime mortgages for empty homily houses in Arizona. The heavyweights at the annual World Economic Forum in Davos, Switzerland, have no more clue than the Boeing workers in Everett
It’s global and fueled by dint of. lack of credit. Bank lending and means of approach to other capital has been severely curtailed, hammering companies across the Puget Sound region and around the planet. Because it’s worldwide, almost all markets and sectors are suffering at once. The biggest intuitional faculty for Boeing’s somber outlook is that demand for its planes is weakening and financing is uncertain.
It’s a standard work banking collapse, made besides unsafe by the size of the institutions and the complexity of the believe to be guilty securities on their books. It took down Washington Mutual, with horrible consequences for Seattle. Now even Bank of America and Citigroup are teetering. With portfolios tanking, Tacoma’s Russell Investments is not immune, each, announcing 420 layoffs this week.
It’s mauling average Americans, the people behind that vaunted consumer spending that eased recent recessions. The Conference Board’session consumer-confidence index hit 37.7 in December. In the depths of the tech bust, it never dropped below the low 60s. No wonder: House values have plummeted along with 401(k)s. People also are now each losing their jobs or preparing for the worst.
This carries thorough implications during retailers such as Starbucks.
It has divers wild cards: What happens to China? What about America’s historic level of debt, including nearly $1 trillion in unpaid credit-card balances? What more can the Federal Reserve do when its rates essentially are naught (dress in’t expect a fresh bubble to save us this confinement)? Perhaps the biggest is how bragging bequeath unemployment rise?
At 7.1 percent, Washington’s unemployment rate increased 2.5 percent from 2007 to 2008. Oregon, at 9 percent, and Idaho, at 6.4 percent, saw equal larger increases last year. It could be worse: Michigan unemployment is 10.6 percent. But December’s jobless noise indicated troubling trends. For example, the increase in unemployment was the largest one-month jump since 1976.
Yep, all this before the consequences of layoffs at Boeing, Starbucks, Russell and hundreds of smaller companies equable entered the pipeline.
Rightly done, a significant stimulus is essential. But rebuilding will be lingering and difficult.
It’s not 1929. It is an event we’ll rehearse our grandchildren about, and for a during the time that our warnings about running an economy built on a house of cards may stick.
Original text: http://seattletimes.nwsource.com/html/jontalton/2008683363_biztaltoncol29.html?syndication=rss
