- "If you want good news, the future of the
military industry looks bright, just as the pyramid business
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- Look, if you can bear it, at the dire straits in which
we find ourselves. All evidence points to the reality that the American
economy is in recession and is dragging the rest of the world down with
it.
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- That may have been the case with or without September
11, but the attack combined with the economy-killing response by the
government
has clobbered our economic prospects in more ways than a column can
report.
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- We won't know the full extent of the setback for a few
more weeks. But enough anecdotal evidence is being reported in the business
press to paint a very bleak picture. We know that because of the attacks,
we are at least $100 billion poorer today than last month. That's just
property damage and direct economic costs.
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- On top of that we have the incalculable opportunity costs
of the foregone uses of the resources used in rebuilding. Then we have
the $100 billion plus that government deigned to suck out of the private
economy, under the guise of rebuilding and "stimulating" the
economy, just like the burglar stimulates your finances by stealing your
silverware.
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- By the end of September, unemployment claims soared to
520,000, which is higher than during the last recession, and 250,000 more
layoffs were reported. This doesn't just hit the working class. Morgan
Stanley will cut 200 highly paid investment bankers. Credit Suisse First
Boston will axe 760, or 20 percent of its worldwide investment banking
staff. Sun Microsystems has announced 3,900 layoffs, the first ever for
that company.
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- Airlines, which have lost at least $5 billion, have cut
80,000 jobs, and flight schedules have been slashed by 20 percent. Moody's
has downgraded credit ratings for 10 of the companies. Airlines aren't
buying new planes. In fact, Boeing, which is laying off 30,000 employees,
reports delivery cancellations on 32 planes. The Congressional aid package,
meanwhile, does nothing but permit them to lose money for longer than they
otherwise would, at the expense of other businesses and the public.
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- American car makers are in a panic mode with offerings
of 0.0 percent financing and dramatic cuts in marketing budgets. The hope
is that the losses can be sustained until the market turns around, but
this is highly speculative. Already GM will make 50,000 fewer cars this
year than last.
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- Because people's entertainment spending has taken a dive,
revenues for restaurants and retail outlets are tanking, as indicated by
the decline in sales of Coke, which is reducing its volume growth forecast.
In Las Vegas, hotel occupancy rates have fallen from 90 percent to 50
percent,
and plans for new hotels and construction have been scrapped. In Orlando,
Florida, home of Disney World, already-low occupancy has fallen from 62
percent to 45 percent.
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- Revenue at Bloomingdale's and Macy's New York were 40
percent lower in the two weeks after the attacks. We face the prospect
of first declines in Christmas sales in decades. People whose business
it is to predict these things are expecting the worst fourth quarter retail
earnings since 1991. Revenue at clothing and furniture stores is already
down by $6 billion since early September.
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- In finance, there are no money-making IPOs. Wall Street
revenue is expected to fall by 10 percent. Citigroup expects some $700
million in lost earnings. The falling stock market has reduced the market
value of computer stocks by $75 billion in only a few weeks. Compaq and
Gateway now admit they will miss profit margins by a huge amount. In the
insurance industry, loss estimates range between $40 and $70
billion.
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- One might think that these would be good times for media
and entertainment, but in fact the networks, after the attack, had to
forego
$700 million in commercial time and some 10 thousand commercials on six
networks. Fishing for ad revenue nowadays is not easy, with so many
businesses
cutting back in marketing.
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- Oil revenue has fallen with falling demand. Drilling
has dropped 10 percent. Experts say another 200 rigs will fall idle by
the middle of next year. The continued recession in air travel will further
reduce demand. Internationally, Zurich Financial Services says it expects
$900 million in claims, while Swissair Group grounded its planes for lack
of any operating revenue.
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- Meanwhile, we have the awful political response, which
has amounted to doing what politics does best: regulating, spending,
inflating,
controlling, and waging war. Anyone who believes this is good for the
economy
is living in another universe (which sadly means most business-page
reporters
these days).
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- We've got a Federal Reserve that has chosen the way of
the Japanese Central Bank, even though the Japanese economy remains mired
in a ten-year recession with interest rates only a hair above 0 percent.
It is gunning the money supply at 168% annualized. This endangers the US
banking and financial system, not to mention the value of our
savings.
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- If you want good news, the future of the military
industry
looks bright, just as the pyramid business never faltered in ancient Egypt.
To be generally optimistic about the economy, however, means that you
expect
the political class to slash taxes, lower trade barriers, cut wage and
other regulations, and axe public spending, while keeping money sound.
Any takers?
-
- Llewellyn H. Rockwell, Jr., is president of the Ludwig
von Mises Institute in Auburn, Alabama.
- Link
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http://www.rense.com
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