Meanwhile, courtesy of Calculated Risk, Hotel News Now reports on an upsurge in defaults and foreclosures in hotels in California, and goes on to say:
Initially, the wave of distress in California was seen by the smaller, non-flagged hotels in secondary and tertiary markets. As the hotel economy worsened, we have seen it impact all property types. The properties range from the luxurious St. Regis Monarch Beach Resort in Dana Point to the more economical Extended Stay and Red Roof Inn chains.
No market or brand is immune in this downturn. In reviewing the hotels in default or foreclosed on, we found that over 75% of the loans originated from 2005 to 2007. During this period, over 2,500 California hotels either refinanced or obtained new purchase loan financing. Unfortunately, based on today’s market values, we estimate that none of these hotels have any equity remaining. (Emph. added)
Meanwhile, while the Establishment tries to pretend that there has simply been a little disturbance, Simon Johnson of The Baseline Scenario has a nice summary of the alternative point of view, to which EBR subscribes, that a more fundamental problem caused the recent problems and needs a more thorough solution than that proposed by Team Obama; see What Next for the Global Crisis?
One of many examples of how wrong the consensus opinion is about what is wrong and what needs to be done is found in a post by Mish today, in his post Embrace Deflation- It's The Cure, Not The Problem. He references the current deflation in Japan in another article and quotes from it:
“Profits fall, then wages come down, then consumers stop shopping,” said Junko Nishioka, chief Japan economist at RBS Securities Japan Ltd. in Tokyo. “And because people aren’t shopping, companies lower prices. That’s the process that we’re starting to see. It isn’t easy to break out of.”
OK so far. What does he quote (from a different article) as the solution?
The Organization for Economic Cooperation and Development this week urged the Bank of Japan to keep pumping cash into the economy “until underlying inflation is firmly positive.” Since it cut the key interest rate to 0.1 percent in December, the central bank has been buying corporate debt and increased government bond purchases from lenders to revive growth.
Yes, the "solution" is to print money. The problem is clear from the first quote. The problem is inadequate profits. Once profits are inadequate (absent?), an economy has problems. The solution that the occupying power has imposed is the Western one, which is to pump up the financial community by giving it more business, selling and buying debt. One doubts that this is a traditional Japanese custom.
The same "solution" is occurring in the U. S., where the people have largely lost the equity in their homes, where over-leveraged corporations are going under and thereby creating a second round of work for the same financiers that sold them the debt on ridiculous terms to begin with, and where the Bushbama Establishment overall solution is the same hair of the dog approach that has been tried unsuccessfully here and has failed in Japan (and Zimbabwe).
Perhaps March 2009 was equivalent in a deflationary manner to fall 1974, with a cyclical rebound due; but the major trend then was down for 8 more years adjusted for inflation. Even if one accepts the unprovable, which is that stocks will remain in the rising channel adjusted for inflation that they are alleged to have been in for 200 years in this country, they are only in the middle of that channel, the bottom being Dow 4000. Consumer prices would therefore have to double for the current stock market to then be at the bottom of its long-term uptrend.
When we finally consider that the stock charts of many countries do NOT show a rising channel, and we consider the relative decline of the American empire, the conclusion here continues to argue for strategies focused on preservation of capital and income.
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