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Is the Economic Recession Over?


Maggie: I am disenchanted that after all that has taken place in the banking industry there is little transparency in the banking sector. Also it is unfortunate that banks have only raised a small portion of the capital they need.  They sadly remain insolvent and incapable of lending.
Miriam: Banks are now claiming legal but false earnings quarter after quarter; eventually however they will have to face reality and let everyone know the truth. They lack liquidity; new accounting rules allow banks to demonstrate they are solvent when in actuality they are not. If a bank is unable to sell it's securities, they may remain on the bank's balance sheet at a value decided by the bank itself. That allows banks to set their own securities price. God only knows a bank's real financial status and it's liquidity capacity.
Maggie: Also the recession is far from over. In November the 3.5% GDP growth for the third quarter was revised and adjusted down to 2.8%.
If we take into consideration that auto sales and new home construction was due to the government stimulus plan we can come to the conclusion that GDP for that quarter was close to a zero real increase.
Miriam: I know and unemployment figures do not include people only working part time and wanting a full time job or those unemployed for more than a year who have not found work. A true and real evaluation would probably yield about 18% unemployment or perhaps even more, not the10% the government claims.

Maggie: Yes and 70% of GDP growth comes from consumer spending therefore if unemployment is so high we might as well forget about true consistent growth for next year.
Miriam: Right! And there has been a 1.5 trillion dollars reduction in consumer credit in the past 18 months, and must probably there will be another trillion dollars credit reduction next year. With less credit there is less spending and less economic growth.
Maggie: The way I see it, it will take sometime but the Chinese economic bubble will likely burst, meanwhile China by having the Yuan pegged to the dollar, and deliberately holding the Yuan's value down against the dollar, is robbing us of possible new job creation.
Miriam: Things look pretty bad, I wonder why we bother going to school, we aren't likely to get jobs when we graduate.
Published Jan 05 2010, 04:41 PM by cartoon
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