My notes as I explore various business and financial topics


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Tuesday, May 18, 2010

Artificial Economy Hits Reality?


Another dismal week for Wall Street.  Has the Artificial Economy finally met up with reality?

Christopher Thornberg, a speaker at the Los Angeles Economic Forecast Conference and a founding principal of Beacon Economics, attributes last years economic growth to government intervention and not due to economic fundamentals.

"The fundamentals are still bad, and are creating a new set of imbalances," he said. " . . . how we got into this mess was that we had trends that made no fundamental sense."

The HAMP program, FHA program, low interest rates, Hope for Homeowners, housing tax credits, "government intervention is preventing the fundamentals issues from being fixed and has created its own set of potentially serious problems for the economy."


 Also consider these factors:
  •  the increase in consumer spending responsible for corporate profits in some sectors, such as automobile sales, are not in line with their income
  • the banking sector still has massive amounts of bad debt that will take years to work through
  • 12 million homeowners are underwater on their mortgages
  • Federal Reserve Bank of San Francisco does not see the economy humming until 2013, at the earliest (SBA newsletter May 2010)










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