Speaking of the economy, here’s a headline I never expected to see in The Seattle Times, let alone above the fold on the front page of the Sunday paper:
I guess this is a surprising discovery for some people—something that is considered big news. Here are some choice excerpts from the article:
“If things get really bad, we’ll have all sorts of problems,” said Dick Startz, an economics professor at the University of Washington, who thinks a recession is still unlikely.
Michael Parks, publisher of Marple’s Pacific Northwest Letter and the dean of regional economy watchers, said, “We’re obviously not immune to what’s happening in the national and global economy. We [the nation] came awfully close to systemic failure over the weekend” of the Bear Stearns debacle.
And these are the optimists.
…
WaMu’s troubles endanger a major corporate headquarters, meaning a potential loss of large numbers of well-paid jobs and local giving. And that’s what Wall Street would consider a good outcome — a buyout, which looks unlikely. Otherwise, WaMu will be left to work out its troubles, leaving the area without the economic boost from the institution’s growth years. And if history is a guide, it will still be acquired at the end of the process.WaMu won’t be the only part of the local backbone to suffer if the recession is prolonged.
Boeing, already stunned by the loss of the Air Force tanker program, could begin to pay a serious financial price for delays in the 787, undercutting its best selling point as fuel-efficient.
Cuts in consumer spending also could damage such leading companies as Microsoft, Amazon and Starbucks.
These companies are responsible for vast wealth creation, through everything from payrolls and the returns for their many local shareholders to their contracts with local vendors.
A continuing credit crunch will reach Washington businesses and could even influence venture capital, a key component of Seattle’s innovation machine.
All these “what ifs” might have seemed alarmist even two months ago. Not now.
Of course none of this really comes as much of a surprise to anyone that has been really paying attention to this irresponsible run-up over the last few years. Smart people like Peter Schiff and Bill Fleckenstein have seen all this coming miles away. Here’s a quote from Peter Schiff in August 2006:
The United States economy is like the Titanic and I am here with the lifeboat trying to get people to leave the ship …I see a real financial crisis coming for the United States.
Some people seem to want to draw some sort of distinction between the impending recession and the housing bubble. That is nonsense. The housing bubble is a direct result of the credit bubble. All sorts of insane risks were taken, loans for hundreds of thousands of dollars were given to people simply because they asked, and now the consequences are finally catching up with us.
Those that say “Seattle didn’t have a housing bubble,” apparently think that the rapid, reckless expansion of credit and all the temporary benefits that came from it did not have any positive effect on Seattle’s real estate market or general economy, and therefore the inevitable retraction will have little to no negative effect here. Again, that is nonsense.
What began as the pricking of a housing bubble has spread over the past seven months into most parts of the economy. Even solid companies and municipalities have had trouble getting loans or selling bonds. The complexity of many financial instruments and the interrelationships among banks have made it difficult to root out the bad bets and keep them from contaminating the system.
The housing bust presents perhaps the most serious obstacle to recovery, according to Douglas Cliggott, chief investment officer for Dover Management. “It’s hard to have an interest rate that makes it attractive to buy an asset that’s going down,” he said.
Indeed. Amazingly, these economic realities hold true everywhere, even here in Seattle.
(Jon Talton, Seattle Times, 03.23.2008)