“It’s the economy, stupid!” said Bill Clinton during one of his campaigns. Since that revelation, the economy has been in a buoyant cycle of boom broken up by intermittent and relatively benign busts.
The economy right now is more than a bump in the road, and even a non-genius like me knows that the biggest problem lies in the banking sector. Investment bank Bear – Stearns is being grabbed up by J.P Morgan at fire sale prices of $2.00 per share. That’s a big drop for a stock that was traded well over a hundred bucks per share. I mention it only because it’s symptomatic of the soft underbelly of the banking industry.
Financial firms will sag all across the world as international investment communities try to figure out how deeply their feet are sunk into debt instruments.
I think the bottoming out is here or coming soon, however. Unless there are other shocks on the way. What other shocks could be on the way in the U.S.?
A combination of tax increases and the erection of protectionist barriers to trade (a la Barack Obama) could complete the economy tragedy.