Picking through the Rubble of Post-Bubble America

[Crewleader]

by Mike Whitney / March 10th, 2008

Market conditions are the worst anyone in this industry can ever remember. I don’t think anyone has a recollection of a total disappearance in liquidity… There are billion of dollars worth of assets out there for which there is just no market.
– Alain Grisay, chief executive officer of London-based F&C Asset Management Plc (Bloomberg News)

The hurricane that began with subprime mortgages, has swept through the credit markets wreaking havoc on municipal bonds, hedge funds, complex structured investments, and agency debt (Fannie Mae). Now the first gusts from the Force-5 gale are touching down in the real economy where the damage is expected to be widespread. The Labor Department reported on Friday that US employers cut 63,000 jobs in February, the biggest monthly decline in five years. The cut in payrolls added to the 22,000 jobs that were lost in January. 52,000 jobs were cut in manufacturing, while 331,000 have been lost in construction since September 2006.

The Labor Department also reported on Wednesday that worker productivity slowed significantly in the last quarter of 2007. When productivity is off; labor costs go up which adds to inflationary pressures. That makes it harder for the Fed to lower rates to stimulate the economy without inviting the dreaded “stagflation”: slow growth and rising prices.

http://www.dissidentvoice.org/2008/03/picking-through-the-rubble-of-post-bubble-america/