In the Boston area, the credit crunch manifests itself in the lack of work. I've never, in forty years, seen a job market this tight, and it has been pretty bad for decades. The manufacturing industries left New England years ago, and what is left are jobs in government, medical services, and (you guessed it) financial services. Personnel in financial services here are largely those peddling insurance, retirement plan instruments, etc. I've spoken with several strangers who happen to be buying job search aids in the past month or so and they're all from the financial services sector. I've spoken with construction workers as well, and they seem to be doing just fine. People are still repairing their homes (and they're borrowing to do it) so the Boston area construction trades still have plenty of work. Perhaps "repair" is the right word, because having spoken with friends at Home Depot, I hear sales are down sharply. My guess is that people are "repairing" and less investing in home improvement. Which is understandable.
As of yet, this is largely a Wall Street crisis, and hasn't bled over onto Main Street. Employment figures for the next few quarters will tell the tale on how much this largely accounting panic translates into a business crisis.
I'm in no way qualified to judge the depth of the banking crisis, but though ordinary people are concerned, they're being prudent, so far they haven't panicked here in eastern Massachusetts. "It Can't Be Just About Us"--Frank Schnittger, ETian Extraordinaire
Maybe the Boston area's a bit of a clone for one or two of the European countries less affected by the gathering storm so far.
But I think the US also has Main Street analogies for UK, Spain and so on, where the situation is maybe not so relatively unaffected as it is, say, in France. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
A pleasure I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude
Like I say, the clearest indication of trouble in my area is the loss of employment in the financial services sector here, which has been one of the only really active parts of the job market here since 1990 or so.
I just spoke with someone who keeps up with housing values in Massachusetts. On Cape Cod, housing prices have tumbled from their sky-high levels, but that's vacation housing, so the second-home market's soft. It was overpriced anyways, and this is just a normalization. In metropolitan Boston, however, home prices have declined only slightly.
As far as Main Street in the Boston area is concerned, the bailout seems (read "feels") totally unwarranted.
Like I say, I'm in no position to judge, though just for the hell of it, I took a tour through the NYT archives for stories about consumer debt. Since the 1970's, some economists have worried enough about the "lifestyle financing" phenomenon for it to be a recurring theme in the NYT.
I notice that the rise in consumer credit coincides nicely with the for-all-intents-and-purposes death of the labor movement in the US. A conservative politician or economist might applaud the weakening of labor's political strength as well as the spread of participation in economic activity (represented by the entry of credit-card issuers into everyday purchases made by ordinary people) and the potential for the concentration of vast amounts of capital, even if it is only a balance-sheet entry for monies owed. (Many will, no doubt, earn their doctorates examining the thesis of the political-economic policy interplay of the events we're witnessing. But in the light of my NYT search, I feel history will write this off as a credit bubble decades in the making. You heard it here first!)
I'm not an economist, accountant or a businessman. I have no idea what the GAAP rules are for entering monies owed (though I'm told they fall under accounts receivable assets - right under cash - with categories for long and short term as well as collateralized and uncollateralized instruments), or how this kind of balance sheet affects a company's valuation. My sense of the situation is that it was inevitable, especially in our largely unregulated environment and after decades of defunding the American consumer through union busting and job export. "It Can't Be Just About Us"--Frank Schnittger, ETian Extraordinaire
Average sale is down about 7%, but overall, sales are down from plan only 3%. I'm talking small ticket sales, not homes, cars or major appliances requiring financing.
